The impending migration of crucial clearing systems, national banks, and SWIFT to ISO 20022 seems to be a decisive step towards a true global standard for payment transactions. And it’s only a matter of time before corporate participation will be required.
’Standardisation’ and ’migration’ are terms that have become virtually inseparable from the field of payment transactions. Over the years, payment systems have seen an incredible range of initiatives aimed at establishing uniform standards for payment transactions, at least within sub-areas – some more successful than others. Now, however, the impending migration of crucial clearing systems, national banks, and SWIFT to ISO 20022 seems to be a decisive step towards a true global standard for payment transactions.
At first glance, it may seem as if the effects of the migration are limited mainly to banks and the payment systems themselves. And at least with regard to the basic technical and infrastructural aspects, this is actually the case. However, before long, prompt and comprehensive participation will also become a necessity for corporates.
A long and winding roadmap
The benefits of ISO 20022 migration are obvious: greater transparency, increased reliability, lower costs, and a higher degree of automation for all market participants involved. However, there is still a long and, in some places, rocky, road ahead before all these advantages can be enjoyed.
When viewing the initiative from a global perspective, it immediately becomes clear that the various payment systems all have different approaches and timetables as to how and when to carry out the migration. For example, Europe’s largest clearing systems, TARGET2 and EURO1, are implementing their migration with a ‘big bang’ in November 2022. Although SWIFT is also launching its migration at the end of 2022, it is planning a transitional period lasting until 2025. Several other systems have yet to designate a timeframe for the migration.
Implementation will be accompanied by technical and procedural challenges – especially for globally active corporations – and will also involve corresponding difficulties with co-ordination. Given these factors, combined with the migration not being mandatory, most potential participants are dragging their feet.
That said, it would be ill-advised for companies to assume that they are safe just because there is no obligation. Sooner or later, these standards will also become the new standard for the client-bank relationship through a variety of ways. This fact is clearly demonstrated in the case of Germany, for example, where the ISO 20022 migration is also being made mandatory for companies through amendments to the data transfer agreement (DFÜ-Abkommen).
Be proactive
A comprehensive end-to-end implementation by all participants is ultimately essential if all stakeholders are to benefit from the migration. This also means that companies need to act to address not only their processes and the format migration itself but also the accompanying changes regarding the structuring and generation of their data.
Some measures must be planned proactively. Even if the direct instructions and migration requirements for client-bank communication are downstream, or delayed relative to the migration of interbank communications to ISO 20022, time is of the essence. Companies should begin communicating with their banks early enough to understand their plans and the resulting corporate requirements.
The expense and impact of migration should not be underestimated, which is why it is all the more important to have a professional partner to provide optimal support for the corresponding analysis as well as implementation.
Flexible solutions
Fides offers extensive capabilities and possibilities to guide companies in making the necessary adjustments, and provides targeted support for client-side migration activities. We provide optimal support for new developments and offer flexible, individualised solutions:
Depending on the status of a company’s internal enterprise resource planning (ERP) systems and treasury management systems (TMSs) adjustments or even a major release may be necessary. Fides can provide support by working with a business and its third-party providers to plan and implement the adjustments optimally within the overall business context.
Roman Müller
COO, Fides Treasury Services
Müller is COO of Fides, the global leader in multibank connectivity and communications. He is responsible for overseeing the maintenance and development of front- and back-end processes, supporting the company’s growth and strategic development, and managing the company’s day-to-day operations.
