SECTOR REPORT: CARDS & PAYMENTS
Alla Gancz
Joanna Forman
Conversion will impact payment initiation, client information, payment channels and payment processing
banks have to use static data tables to build the payment status report, but with ISO 20022, banks will no longer need to maintain these tables, said Accenture’s Agarwal and JP Morgan’s Byrne. Instead, clients will receive payment confirmations through their phones or across multiple email addresses. ISO 20022 also holds the potential to offer real-time data to customers via payment dashboards that banks offer to their customers currently, according to a report by Accenture. The kicker is that the accuracy and quantity of the data offered are expected to radically expand once the guidelines come into effect. Agarwal and Byrne also believe that the enhanced data available in an ISO 20022 payment instruction will “provide banks an opportunity to better understand every transaction on the standard.” “The structured name and address details for both sender and beneficiary has the potential to unlock improvements for AML and KYC practices, which should in turn enable more efficient and error-free screening processes,” Agarwal and Byrne wrote in a joint report on ISO 20022 migration. Finally, banks have the opportunity to identify potential cross-selling opportunities to customers based on data at hand. “For instance, it could give mortgage providers greater insight into originations and
refinancing opportunities,” Agarwal and Byrne said. EY’s Lucas, Gancz, and Forman agreed that the significant improvements to the payment procedure and newly added insights from the ISO 20022 enriched data will provide notable monetisation opportunities for banks. “Robust data provided by ISO 20022 standards enables banks and nonbanks to better identify customer trends and provide improved services to their clients,” the experts said. Navigating choppy waters Whilst the standardisation had been a long time coming for the financial industry, the transition would still be a big challenge for banks, who face navigating varying countrymandated timelines. “Banks need to balance an array of timelines and custom requirements across each market. This is especially challenging, as there is not a one-size-fits-all approach to managing system upgrades across the ecosystem to be compliant,” EY’s Lucas, Gancz, and Forman pointed out in their report. In particular, EY noted four challenges that its clients faced while migrating to ISO 20022 standards: global prioritisation and resourcing; consistent interpretations of data; length of time before benefits are realised; and operational impact. Migrating to ISO 20022 standards requires banks to invest heavily.
Sulabh Agarwal
Ciarán Byrne
“Prioritising which jurisdictions, products and services should be migrated first will create a competition for global funds and resources to manage the project. Because ISO 20022 return on investment (ROI) tends to be long term due to migration effort complexities, banks will need to evaluate their business case to determine when cost savings will take effect and strategically communicate the benefits to program sponsors,” EY said. Whilst standardisation of messages will be more beneficial for payments processing in the longterm, conversion to one standard will affect the whole cross-border payment processing, especially for clients, who will have to familiarise with a new process. “Conversion will impact payment initiation, client information, payment channels and payment processing. [It] will require careful consideration and time to reflect the new standard,” EY noted. This lead time will further require internal rework and delay the benefits related to customer journeys. Banks and companies will need to factor in the impact to their internal systems that do not share the same migration priorities as their core processing applications. In particular, EY said that those used for accounting, reconciliation and liquidity management may require legacy tech to be retrofitted. “To establish a seamless transition to ISO 20022, banks should focus on building interim solutions that support business continuity, while simultaneously focusing on updating legacy systems,” it said.
Migrating to ISO 20022 requires banks to invest heavily
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