Next year is an important year for ISO 20022, with several of the world’s major market infrastructures, as well as SWIFT, planning to migrate to the new standard. SWIFT is slated to introduce ISO 20022 messages in the correspondent banking space in November 2022, for legacy formats there is a coexistence period until November 2025. By this date, all financial institutions (FIs) must be able to send and receive ISO messages.¹

While migration of SWIFT messages to ISO 20022 is only mandatory in the interbank area, corporates will also feel the effects of the overhaul of the global payment infrastructure. However, so far “there is less attention paid to what it means for payment users and in particular the cash management processes of corporates”, as Christof Hofmann, Head of Corporate & Payment Solutions at Deutsche Bank pointed out in his blog post Let’s ISOfy it! What’s next on corporate treasurers agenda in May 2021.

According to a new whitepaper Everything enterprises need to know about ISO 20022 published by Treasury Intelligence Solutions (TIS), a software provider for managing corporate payments, corporates will eventually need to be capable of sending and receiving the new format for both payments and account information. “SWIFT is not requiring corporates to convert by November 2025. They want instead to educate companies on the benefits and advantages of moving to ISO 20022,” the authors state. While this may result in short-term pain for corporates, the paper points out, the move to the new standard will also unlock significant long-term benefits.

The paper cites Kerstin Schoenwitz, Global Formats Senior Product Manager, Corporate Bank, Deutsche Bank, who strongly feels that “corporates need to know about the migration impact now and plan accordingly in regard to connectivity to their banks, SWIFT, and their back-office systems“.

She stresses that, “Deutsche Bank will continue to support MT101/MT94x message types, however, we are closely watching the position of SWIFT and other market infrastructures, especially with a view to the structured ISO postal address.” By November 2025 at the latest, the use of structured postal address details will become mandatory – which has led to discussions of how information on the beneficiary address will be provided. This is one example outlining how ISO 20022 migration will require banks, corporates, Enterprise Resource Providers (ERP) and Treasury Management System (TMS) providers to work together to address key challenges corporates are facing due to the migration.

So, what are the benefits of using ISO 20022 messages for corporates? The TIS white paper names several, to mention just a few:

• Reconcile more easily and increase Straight-through-processing (STP) rates;
• Simplify and automate processes using standard formats and in turn allow APIs to easily pull needed data from the cloud, making APIs more effective; and
• Take advantage of account proxies / proxy payments to help in the avoidance of fraud and cybercrime.

The full white paper can be downloaded here.

If you want to learn more about how market infrastructures around the world are preparing for ISO 20022 migration, as well as how the new format will be used in the end-to-end payment journey, we also recommend our recently published Guide to ISO 20022 migration: Part 4 that can be downloaded here.

Sources

¹ See also Guide to ISO 20022 migration: Part 4