Recently, Volante hosted a webinar titled “Shaping the Future of Payments: ISO 20022 Adoption and Payment Modernization in the Middle East.” The webinar brought together payment executives from leading financial institutions (FIs) to discuss the benefits, perils, and paths toward adopting ISO 20022 for cross-border payments.

This is the first in a two-part series summarizing the main points of the panel discussion. This article will focus on the immediate impacts of ISO 20022 standardization and how adopting the standard, combined with modernized payment approaches, can provide banks with more opportunities beyond compliance.

The Immediate Impacts of ISO 20022 Standardization

The migration to ISO 20022 will create a common language for payments worldwide via a modeling methodology to capture syntax-independent data. The result will be a standardization and harmonization of payment messages and data across different payment systems and countries.

This standardization will yield several immediate impacts that touch every corner of the payments ecosystem, including:

Standardized messaging

Adopting this common language allows FIs that are party to a transaction to seamlessly exchange information, ensuring compatibility between different systems and reducing friction and error. This will improve the speed of domestic and cross-border transactions as organizations can easily interpret all messages and take action across diverse international systems.

Streamlined compliance

This common model for financial messages enables more accurate compliance processes and operational efficiency by improving the security and governance of payments while reducing manual intervention.

Better support for straight-through processing (STP)

Messaging standardization means improved data accuracy, greater efficiencies, and a reduction of manual processes. This enhances financial companies’ ability to automate payments from end to end, improving straight-through processing (STP) for domestic and international transactions.

Enhanced data streams

Banks will have access to more detailed and reliable information. The ability to paint a more comprehensive picture of transactions and processes allows banks to enhance analytics, make better-informed decisions, engage in more sophisticated strategic planning, create better products, and improve customer service.

Opportunities Beyond Compliance

While compliance is necessarily a driving force in adopting ISO 20022, banks should recognize and take advantage of the massive business opportunities it offers. Beyond compliance, migrating to ISO 20022 can align with strategic goals, enable operational efficiency, drive innovation, and improve the customer experience.

Interoperable data for more efficient payments

The standard breaks down communication barriers, allowing all parties to receive complete information without truncation. Interoperable data reduces the complexity for both domestic and international transactions.

Improved liquidity management

The standard allows for more detailed and structured information to be exchanged between banks, helping them make more informed decisions about cash flow. Additionally, real-time payments capabilities will enable banks to process transactions more efficiently, reducing the frequency with which they need to hold excess liquidity to cover potential payment delays. Instead, banks can redirect attention to improving earnings.

Advanced fraud detection

Since ISO 20022 uses a standardized XML-based message format for financial transactions, which is more secure than traditional message formats, it is more difficult for fraudsters to manipulate or intercept the data. Leveraging this data for real-time applications means banks can monitor transactions as they occur, quickly identifying and flagging any unusual or suspicious activity.

Conclusion

ISO 20022 provides an interoperable standard that is foundational to the modernization of payments and the proliferation of instant payments. The migration toward this standard will supercharge payments across banking systems and corporations with data-rich messaging that can be exchanged among parties to improve their payments services.

As such, ISO 20022 presents significant opportunities for banks in the Middle East and worldwide to improve their payments services and offer their customers faster, more convenient, and more secure payment options.

Stream the full webinar