Leveraging payment data to drive tangible revenue growth and enhance business operations through informed decision-making is a well-established practice within the payments industry.
With ISO 20022 going live on the SWIFT cross border network in March 2023, Financial Institutions are currently navigating a 32-month coexistence phase for ISO 20022, leading up to complete industry migration by November 2025. This transition is driving transformative shifts in the financial services sector, and embracing it early can result in significant savings in time, money, and resources for businesses.
Insights from the initial 8 months underscore the pivotal role of data quality as the primary factor distinguishing successful transitions to ISO 20022 from challenging ones.
This includes critical issues such as missing or truncated data, when a payment message is translated to MT from an equivalent ISO 20022 payment message i.e. pacs.008 <>MT103.
Leveraging a fully structured Swift ISO 20022 Cross-Border Payments and Reporting (CBPR+) and HVPS+ standard opens the door to enhanced and superior payments data quality requirements.
Use cases are moving rapidly from a focus on tactical compliance and operational use cases towards enabling a range of new client-facing initiatives. ISO 20022 rich and structured data is becoming an increasingly important driver of these activities.
Enterprises are integrating data from various, isolated silos to harness the data into business intelligence that can drive vital decision making and improve internal processes.
An ISO 20022 Data Fabric
The ISO 20022 message standard delivers benefits to all users throughout the payments chain. In High-Value Payment Systems (HVPS) the benefits are realized by the financial institutions and their corporate clients who send and receive these messages. Over time, customers are expected to benefit from data-rich payments, more efficient and lower-cost payment processing, and enhanced customer services such as improved remittance services.
This implies multiple systems within a financial institution and a corporate will have to be upgraded to consume ISO 20022 data. This creates a direct dent in the budget as these updates will be in line with the global ISO 20022 plans.
Nucleus, listed by Swift for ISO 20022 CBPR+ readiness enables banks to migrate to ISO 20022 standard and store rich information without forcing large-scale change and disruption. It is specifically designed to manage large and complex data sets in the cloud, integrating and enriching diverse data sources along with the payment processes.
A highly responsive and reliable data platform, flexible across multiple cloud providers and delivering both the compliance that regulators demand along with the agility to enable financial institutions to build new services and data models.
To leverage value from the large-scale external changes being implemented by SWIFT and other Market Infrastructures, financial institutions need to be able to
- Internalize the ISO 20022 data language and definitions.
- Update systems to be able to receive data as per ISO 20022 definitions.
- Capture payment metadata from payment messages.
- Extend rich contextual payment data to existing organizational systems that are not ISO 20022 native.
Without the right tools and data platform, it can be exceedingly expensive and complex.
Nucleus ISO 20022 Data Fabric is the future of a Data-centric and Low-Cost approach to organizational message enrichment.
Nucleus is designed to store the data in ISO 20022 native format, enabling financial institutions and corporates to not only create paths for the new standard but also open opportunities for organizations to assess how to unlock the value of new, higher-quality payments data. This provides opportunities for more transparency, automation and new services — all fueled by the richer intelligence encased in the ISO 20022 format.
Here are a few ISO 20022 use cases:
Data transformation can be challenging, especially when handling diverse data formats. Legacy systems often struggle with ISO 20022 data sets, leading to spatial constraints and necessitating additional data storage. In some cases, this misalignment results in data loss and truncation.
Truncating payment messages and losing ISO 20022 data present significant issues, disrupting interoperability and introducing complexities in data exchanges. This can lead to inconsistencies, errors, and inaccuracies in transaction data, impacting financial operations and decision-making. Non-compliance with regulatory mandates may result in legal consequences. Automation initiatives are hindered, processes slow down, manual intervention increases, and operational efficiency diminishes. In extreme cases, it may prevent a bank from participating in a payment scheme. ISO 20022 often includes crucial security-related data, and its loss can compromise security measures, making systems more susceptible to fraud.
In both scenarios, vital information becomes inaccessible to the payment engine, rendering it inadequate for essential processing tasks like AML checks, fraud detection, sanction checks, reconciliations, and matching. Managing and sharing this data with downstream systems becomes more intricate.
Nucleus was purposefully designed to seamlessly handle ISO 20022 messages. Its data structure aligns with the latest ISO standard, featuring specific configurations for each payment system to ensure the preservation of original data sent and received. This preserved data in ISO 20022 format remains readily available for payment processing and downstream system utilization, including core, KYC/sanctions screening, and reporting systems. The incorporation of additional fields and information by all these systems underscores ISO 20022's comprehensive and impactful role in day-to-day banking. This native approach guarantees the maintenance of data integrity and accessibility throughout the entire payment lifecycle.
In older systems, ISO 20022 fields undergo translation into the engine's proprietary fields, impacting downstream systems, integrations, user interfaces, and users. This complexity requires additional guidance and interpretation for banks to accurately utilize the data.
Building translators/mapping tools within an integration layer between payment systems, payment engines, and the bank's applications becomes a challenging task. The inclusion of these mappers often requires the procurement and installation of additional software, leading to high licensing costs. Banks, leveraging existing middleware for high throughput, also need trained personnel to handle the added complexity, incurring further expenses.
Therefore, the optimal strategy involves adopting a native ISO 20022 canonical format as the fundamental framework for all aspects within the payment engine. Nucleus Payments stores instruction data following ISO 20022 naming conventions and structure, ensuring a minimal memory footprint through efficient data transmission protocols while retaining the original presentation of payments. Nth Exception owns, maintains, and updates the ISO 20022 representation, guaranteeing ongoing compliance with the standard.
This approach streamlines integration efforts and significantly contributes to standardization and simplification within the bank's infrastructure.
ISO 20022 not only offers detailed payment messages but also accommodates various message types for purposes such as trade and securities. Worldwide financial systems increasingly adopt these diverse message types, but integrating them into existing systems can be costly and time-consuming. Vendors often neglect support, leaving banks to seek alternative solutions or forgo new message types.
Instant payment messages, such as pain.001.001.03 or pain.013, exemplify this challenge. If the payment engine cannot accept these messages, a separate service is required, exacerbating payment stack complexity and demanding integration with the existing payment system.
Nucleus is purpose-built for all ISO 20022 payment messages across Swift CBPR+, regional HVPS+, and instant payment schemes, including Request to Pay.
Merely acquiring and storing messages is insufficient for banks; effective business logic is also required. Inconsistencies in support levels for new messages often limit a bank's ability to capitalize fully on enhanced formats. Nucleus addresses this by defining the structure of a message, making it accessible through public APIs, and seamlessly integrating with configurable Instruction Flows. Clients can define and maintain business processing logic and lifecycles, reducing dependency on vendors for building and maintaining these processes.
This integration facilitates sophisticated interactions with messages, introducing novel capabilities for customers within a short time and with minimal effort.
The benefits extend far beyond compliance. While standardization will make payment infrastructure more efficient, better data will deliver notable benefits across the global economy.
An Ideal foundational data platform for payments transformation through IBM Watson / Azure Applied AI and AWS Sagemaker services. Federate data to legacy (non-ISO 20022) environments.
Bridge the gap between legacy data platforms and ISO 20022 with the inbuilt translator is designed for FIs to accelerate value extraction from ISO 20022.
