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  5. ISO 20022 — Look Past the Payments Bias

ISO 20022 — Look Past the Payments Bias

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23 February 2023
Colin Kerr

Earlier this year my colleague, Gareth Lodge, published research about the adoption of ISO 20022 around the world. The requirement for Swift banks to Migrate to ISO 20022 is perhaps the single biggest payments transformation mandate in decades. Ready or Not, Here it Comes: There’s no Hiding from ISO 20022 is a fascinating read and delves into the preparedness of banks connected to the Swift network.

However, it isn’t just about payments. One company’s payment is another’s receivable. Banks have culturally tended to focus more on outbound payments initiation and clearing (perhaps with good reason) than on associated information reporting and receivables data. That’s unfortunate, because the richer data available in the ISO 20022 standard can deliver benefits for any client-facing solutions where transaction data is the underlying product capability – whether or not the client uses Swift or ISO 20022. This applies to traditional information reporting and receivables products, but also the next generation of solutions that rely on AI and advanced analytics to deliver the “intelligent treasury” experience of insights and recommendations.

Client-facing solutions that rely on timely, reliable data are at the mercy of upstream processes. Specifically, for data and insights shared with clients, any upstream processing issues or data irregularities manifest themselves in the client experience of the information reporting products. From a client impact perspective, this is where the proverbial buck stops.

The first step in creating more intelligent working capital solutions is to recognize and fix any upstream limitations that prevent rich, quality data from flowing reliably. Or, stated more positively, to build a better data supply chain. Corporate Client Data Renaissance: New Tricks for an Old Dog provides banks and vendors with recommendations on how to rebuild data supply chains to support next generation client solutions, including the use of ISO 20022 and canonical data models.

For banks that approach ISO 20022 strategically, it is a once in a generation opportunity to rebuild and simplify aging client data supply chains used for information reporting and receivables, and that can support forecasting and advanced analytics. The homogeneity of ISO 20022 data should not be treated as a mere format but as an architectural element of reporting and receivables. The richness and structure of ISO 20022 data can enhance:

  • Client information reporting and cash forecasting
  • Receivables automation
  • Enhanced matching rates and reconciliations
  • New AI-based solutions that require rich, high-quality data
  • Working capital insights and recommendations

Although payments initiation, clearing, and settlement messages will naturally be the priority for banks, they also have an opportunity to leverage the ISO 20022 program to beef up receivables and information reporting data supply chains. Unfortunately, as highlighted in Gareth’s research, the majority of responding banks have been constrained in how they can approach ISO 20022 migration or have chosen to do the bare minimum for compliance. However, the opportunity for create more value remains.