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The U.S. bank has launched a one-stop-shop online resource center to help financial institutions prepare for the adoption of the new message standard that is going to be mandated in major economies within the next couple of years.
BNY Mellon has launched an online resource center called ISO 20022 - Transition and Readiness aimed at supporting its clients in preparing for the adoption of the new message standard.
ISO 20022 is a global messaging standard that enables the exchange of data-rich messages in a future-proof structure.
Many leading payments infrastructures are updating to the standard, while it is increasingly a standard design choice for new payments modernisation initiatives. As the standard becomes increasingly ubiquitous across the industry, it is creating a major challenge for banks to update their own systems to support it.
BNY Mellon believes “the most pervasive and impactful changes are driven by a broad migration of payments and cash management related messaging to the ISO 20022 standard.”
It expects that the migration of payment infrastructures to the ISO 20022 standard over the next couple of years will have a material impact on all financial institutions globally, and will “require extensive planning and preparation that extend well beyond purely technical changes.”
The Bank of England will be the first to begin the migration in CHAPS in June 2022. The UK will be followed by the eurozone’s TARGET2 RTGS system and SWIFT in November 2022.
Plans for migrating to ISO 20022 have also been announced in the U.S., with the Federal Reserve and The Clearing House both planning to migrate their respective large-value payment systems Fedwire and CHIPS in November 2023.
The adoption is partly driven by regulators of high-value payment systems who are mandating migration.
However, many of the benefits of ISO 20022 adoption are likely to be realised once banks also support the standard across their retail payment systems.
ISO 20022 offers financial institutions the opportunity to enrich existing services and develop new ones. It provides a comprehensive and standardized description of all business processes surrounding payments. Not only does it improve the ability to provide straight-through processing by aligning and integrating the messaging standard with bank and corporate core systems, additional data in the message can support automated reconciliation, better data insights and greater resilience.
It also has the potential to both improve and lower the cost of compliance procedures. For instance, the data-rich structure can reduce false alarms and improve sanctions screening, as well as anti-money laundering, and fraud monitoring.
With the migration deadlines just around the corner, BNY Mellon advises its clients to create a timeline for a series of actions they need to take in preparation. Therefore, financial institutions should first master and apply the new payments messaging standards, then understand how the change will affect future business strategies, and finally, redesign and implement infrastructure changes needed to support adoption.
“It’s important to understand that the transition to ISO 20022 won’t happen automatically and will require a considerable investment of time and resources to come to fruition,” the bank stresses.
