ISO 20022 is designed to
address multiple challenges and is becoming the global language for financial
messaging. As a result, market infrastructures around the world are migrating
to this new standard.
SWIFT responded to this
change by announcing a migration of cross-border payment messaging, starting in
November 2021 with a coexistence period, and completing by November 2025.
Following community feedback, particularly following the Covid-19 pandemic, the
migration will now start in November 2022 (the planned completion date of
November 2025 is unaffected). In addition, SWIFT is introducing a
Transaction Management Platform (TMP) that will assist migration.
5 Capabilities of the
New SWIFT Transaction Management Solution
i. End-to-end
transaction management
ii. Instant and frictionless cross-border
payments
iii. Payment pre-validation
iv. Data and financial crime services
v. Solutions for SME and consumer sectors
ISO 20022 migration is
happening across multiple payment infrastructures around the world and the complexity of managing multiple migrations, many of which are happening in the
same timeframe, should not be underestimated.
Before
and during the coexistence period, most high-value payment systems will migrate
to the HVPS+ standard of ISO 20022 at different points in time. CHAPS in the UK
will be one of the first market infrastructures in mid-2022 followed by Target2
and Euro 1 who intend to synchronize their migration with the enablement of MX
messages on the SWIFT network in Nov 2022. The US payment system, Fedwire and
CHIPS will follow a year later.
Many other systems might only migrate at the end of the migration period or might even elect to stay on MT messages should cross-border payments in their local currency play only a marginal role.
Banks that participate in multiple markets will need to actively monitor the migration plans for each market, particularly as it is expected that there will be changes during the coexistence period.
The multiple changes to payment systems give participants a number of challenges. They might receive payment orders in MX but need to convert the incoming message and data elements into the local format, which might not have the same data richness. The subsequent truncation and loss of data fidelity are likely to lead to issues for some of the banks in the payment chain.
To address these issues early on, banks need to engage with their community, HVPS operator and SWIFT and explore ways to mitigate any data issues, including options associated with the new Transaction Management Platform. While local transactions can be conducted in a legacy format, any excess data can be made available via the TMP and this will allow a bank receiving the payment order in legacy format to access this for screening purposes.
However, it needs to be recognized that this bifurcated process can cause delays in applying the credit to the beneficiary or create operational risks in the screening process.
Here is the HVPS+ Global Migration Plan.
The table provides -
- Adoption approach by MI,
- Migration Strategy
- ISO 20022 Version
- Will the MI implement Structured remittance? Yes / No
- Will the MI implement
Structured Customer Data? Yes / No
- Market Requirements for Cross Border
payments
- HVPS+ Compliant (Yes/No) (1)- if No,
how will MI address interoperability with X-Border Market
