With about 200 initiatives around the world that have either implemented or are planning to implement, ISO 20022 across payments, cash management, securities, trade finance, and treasury domains.

ISO20022 is the biggest harmonization project run in the Global payments industry with three basic principles - 1. Share Information between FMIs 2. Adhere to global market practices and contribute where applicable 3. Strict release management to assist FMIs in classifying the change into a. No Impact b. Mandatory Impact or c. Unclassified Impact. 

APAC Review

Along with the in-country clearing systems and the array of RTGS systems, many low-value real-time schemes in APAC are either ISO 20022 compliant or working to become so. 

Adoption of ISO 20022 is a key measure within the 10 member ASEAN Group’s ASEAN 2025 Vision, so we can surely expect more schemes to come in. 

Why ISO20022? 

ISO 20022 in cross border payments is a seismic shift in cross border payments as it provides a common language for five crucial financial business domains: payments, securities, trade services, cards and foreign exchange. Provided the implementation timelines of 2025 are met, SWIFT will account for 79 percent by volume and 87percent by value.  
One key reason to implement the standard is that the age-old MT messaging just cannot support the amount of data needed to comply with the global regulatory requirements. Other than this, other benefits are 

1. Data-rich content allowing FIs to apply analytics and leverage the information.
2. Ability to meet consumer expectations of real-time payments.
3. Improved Automation and STP cost.
4. Inter-Operability among payment systems
5. Superior payments tracking

Banks and FIs that have not planned the migration will face some serious disadvantages including penalties incurred due to non-compliance with AML and Sanctions requirements. Given that ISO 20022 is already in motion, financial institutions that have yet to start preparing should do so now. 
To start, they need to bear in mind that the migration is not limited to payments, but will affect sanctions screening, liquidity management, securities, and trades. This means infrastructure should be ready to handle humongous amounts of data in real-time. 

The next step is to choose one of the two options to enable ISO20022 messaging. 

1. Use the SWIFT's translator.
2. Implement a native solution.  

Application by application up-gradation will not only take a considerable amount of time, but it will also repeat the cycle of removing ‘old’ siloed applications with new ones. To avoid this, have a clear impact analysis: 

i. How many applications will be affected and how many messages are processed by them?
ii. How many back end and front end processes will be affected? 
iii. How many of these applications can support the ISO20022 requirements, what are the up-gradation costs and are these long term? 

Not to forget, SWIFTs translator can have its own limitations 

a. Message truncation resulting in loss of data.
b. Reduced ability in screening correctly. 
c. Reduction in STP rates or just floating on current ones. 
d. Unable to exploit the rich message data. 

Choosing option 1 i.e. using SWIFT’s cloud-based translator is a good option for smaller institutions, long term solutions should be focused on in-house platforms for both small and large institutions.