ISO 20022 demands a significant amount of attention from those involved in the payments industry. Originally developed by ISO and SWIFT, ISO 20022 is becoming the de facto standard for a wide range of financial transactions, including payments, securities, trade finance, and more. It supports a wide range of use cases, including payments, cash management, securities, trade finance, foreign exchange, and more. (If you are new to ISO 20022 or missed our introductory blogs, you can find them here.)
While the financial messaging standard is growing in popularity, the majority of ISO 20022 related conversations are focused on the implementation deadlines for banks and the payment rails. While these bank ISO 2022 migrations are important, corporates have found themselves wondering how this new global standard will impact their operations and what they need to do to prepare.
ISO 20022 Offers Numerous Benefits for Corporates
As ISO 20022 gains momentum across the payments industry, it is becoming increasingly attractive for corporates to adopt this standard as well. Even though corporations are not up against strict timelines to complete their migration efforts, those early adopters will be sure to reap the following benefits.
- Improved data quality
ISO 20022 messages provide rich, granular data, with more detail than legacy formats. This helps streamline reconciliations, enhances reporting, and reduces overall errors and exceptions.
- Reduced manual efforts
By standardizing financial messaging, ISO 20022 reduces manual intervention and processing times. This helps speed up financial operations, reduces costs, and permits more efficient use of internal resources.
- Superior visibility and control
ISO 20022 provides better visibility and control over financial data. By enabling the exchange of more detailed and standardized data, corporates gain greater insight into their financial flows and optimize cash management.
How Should Corporates Prepare for ISO 20022?
As the financial services industry migrates towards ISO 20022, corporates should consider updating their systems and processes so they can send and receive ISO 20022 messages. Corporates can use the steps below to evaluate their overall organizational readiness to prepare for an ISO 20022 migration.
1. Assess current systems and processes
Corporates should assess their current payment systems, messaging platforms, data flows, and reporting capabilities to determine their readiness for ISO 20022. ISO 20022 involves processing much larger data volumes compared to conventional legacy formats, so organizations must ensure all systems and databases are capable of processing these volumes.
2. Develop a migration plan
Corporates should develop a migration plan for adopting ISO 20022. This includes identifying the processes in scope, assessing the impact on their existing systems, tracking resource availability, scheduling a target date for migrating to ISO 20022 and finally identifying a technology partner to power their migration efforts.
3. Engage with financial institutions and strategic partners
Corporates should engage with their financial institutions and strategic partners to understand their plans for migrating to ISO 20022. This includes identifying any changes to payment formats, messaging protocols, or reporting requirements and ensuring that their systems and processes are compatible.
4. Complete implementation efforts
A successful implementation will require resources, budget, and expertise to ensure a robust and seamless migration to the ISO 20022 standard. A trusted and experienced technology partner can work alongside the IT department to ensure systems, technology, use cases and teams are well aligned as the business moves from legacy formats to the new data rich format.
5. Test and validate
The final piece of the puzzle is complete when corporates have successfully tested and validated that their ISO 20022 message flows are working smoothly. This step is imperative and includes detailed end-to-end testing, issue resolution related to data truncation, and ensuring that the data is complete and accurate.
Next Steps for Corporates
Unlike banks, there is no set migration deadline for corporates. They can proactively adopt this new standard, or they can reactively adopt once business impacts start to outweigh benefits. Not every ISO 20022 implementation is the same, and not every organization is prepared to take on a project of this size. Therefore, it is important to understand which approach best fits your long-term strategy.
The chart below showcases some of the areas most impacted by a proactive or reactive adoption. For the purposes of the below chart, we are classifying proactive adoption as any implementation efforts before 2025 or a bank-imposed deadline, whichever comes first. Reactive adoption would be classified as waiting until 2025 or a bank-imposed deadline.
Rely on the Industry Experts at OpenText Business Network
While the shift to ISO 20022 can present challenges for corporates, it also offers significant benefits in improved data quality, enhanced straight through processing, and greater visibility and control. By preparing for ISO 20022 migrations and engaging with financial institutions and strategic partners, corporates can take advantage of these benefits and mitigate any unnecessary fire drills in the future.
With OpenText™ Business Network, corporates can seamlessly outsource all ISO 20022 migration efforts to a trusted leader in the financial services space. With years of ISO 20022 experience, our robust team of industry experts will ensure your migration efforts are conducted both seamlessly and securely.
If you are unsure where to start when it comes to your ISO 20022 implementation, let’s talk!
Check out our ISO 20022 solution webpage here.
