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- The Future of Payments: How ISO 20022 Will Transform the Industry
Any TMS morning starts with updating and reconciling the cash positions across accounts by a daily upload of electronic bank statements (MT 940, 942..). This financial reconciliation focuses on balances and net credit and debit movements across the accounts and helps treasurers build an image of liquidity and dealing capital and other requirements for the day. By contrast, ERP systems have to operationally reconcile and this needs more detailed information, like transaction references, remitter identification and remittance information delivered by the payment networks and banks. The operational reconciliation is traditionally conducted separately, applying different reconciliation logic to the debits versus the credits on a statement. Payments reconciliation recognises that a payment run could be a controlled activity against which there's a transparent record within the ERP of what debit amount should appear on the statement and on which date. Which is therefore quite straightforward. But, statement credits, from incoming payments and cheques, present a tougher challenge. Additional remittance information may arrive by separate means (free format MT 199), and even at different times than the statement. Obtaining a 3-way match between statement credit entries, remittance information and open invoices is labour intrinsic, time-consuming and infrequently requires advanced technologies for auto reconciliation which bring a brand new set of challenges. To summarize, t he key challenges with the operational account reconciliation for a bank or corporate treasury process fall into four main categories: Can ISO 20022 fix all of these? ISO 20022 offers great potential benefits for cross border payments and global trade because of, amongst other reasons, the numerous amount of transactional and remittance data passing between the various parties, which incorporates an ERP or treasury management system at both ends. With over 400 message types covering all aspects of banking and financial services, some are specific to a specific industry body, others more generic and more widely accepted. Messages are grouped into business domains and groups like Trade Services (tsrv), Cash Management (camt), Securities Trade (setr) and Payments Initiation (pain). Beyond the message formats themselves, ISO 20022 sets out the usage and business process flows, between the varied actors in business scenarios. With 1500+ fields, camt.053 can solve the challenges highlighted earlier. It is a message sent by the account servicer to an account owner or to a party authorised by the account owner to receive the message. It is used to inform the account owner, or authorised party, of the entries, booked to the account, and to provide the owner with balance information on the account at a given point in time. It can be used for various end-of-cycle statement reporting - Daily, weekly, monthly, yearly. The top 3 benefits will be Enhanced Data Exception items, requiring manual reconciliation, are greatly reduced which allows daily and month-end bank account reconciliation deadlines to be met, this is because each of the transaction details is mapped into an XML tag which enables Straight Through Processing. Few examples. E2E identification (invoice reference, Shipping date..etc) has a specific field which enhances auto-match capabilities at both sending and receiving parties end. Fees charged on transactions can be mapped with details against deducting party and adjusted accordingly in the internal accounts. For cross border transactions, including counter currency code, original currency amount, spot transaction rate, FX spot contract number. These values can be mapped to automatically calculate realized FX gain/loss on the transaction, eliminating the need for manual reconciliation. Enhanced risk management Structured data supports more effective compliance through comparisons to watch lists which in turn helps organisations meet expanding risk management, regulatory and compliance. We expect standardised compliance to Legal entity identifier (LEI) and merchant IDs to transactions. Enhanced Structure Enhanced bank account balance and transaction summary values which includes opening/closing ledger with balances, a summary of transaction details. Statement Pagination provides a page number of the statement. The electronic sequence number allows easy recognition of statement order. Copy Duplicate Indicator to identify an additional statement from the original. Reporting source allows the account servicer to add details of account and Dept. (Several mandatory and optional fields are not covered in this article, refer the User Hand Book) Understanding camt.052, camt.053 and camt.054 - camt.052 – Bank to Customer Account Report This is intraday information, provides the customer with a nearly real-time view of their account(s). It will replace the MT942. camt.053 – Bank to Customer Statement This is previous day statement, provides the customer with detailed and structured information on all entries booked to their account for the previous day. The camt.053 will replace the MT940. camt.054 – Bank to Customer Debit / Credit Notification camt.054 provides the customer with specific account debit and account credit information, it will replace the MT900 (Confirmation of Debit) and MT910 (Confirmation of Credit) messages Initial challenges will be around the learning curve and implementation period, during the coexistence period old and new formats will have to be processed. TMS / ERP systems may require development programmes, instead choose middleware applications. Simply put by ABN AMRO Arguments for choosing the CAMT.053 format You wish to see the full reference and description as 2 separate fields in the reporting. This may be an advantage in the case of automatic reconciliation. You need to see underlying details of batch payments. The CAMT.053 format informs you of the total amount of the batch and the details of the transactions. You benefit from receiving all feedback in one file. You can optimize your processes and systems on the basis of the XML format. This can help to reduce maintenance and simplify the processes. Arguments for retaining the MT940 format It is sufficient for you to have details about batch payments at a principal level only. Your systems are unable to process the larger data volume of the XML format. The delivery deadline of the MT940 reporting better suits your follow-up processes. MT942 or CAMT.052? For intraday reporting you may choose which format to use. The arguments to choose for one format or the other are the same as for end-of-day reporting. Opportunities Not limited to, but additional and significant value can be unlocked in the financial supply chain through the expanded and consistent use of ISO 20022 message standards for payment processing and compliance requirements. Summing-up Payments Standardisation will bring new opportunities and treasuries should consider the new standard, take time to analyse payments and identify opportunities for improvement. However, allow enough time to work with your technology partners to understand the need and size of implementation. You may want to update the ERP systems or just use a translator because legacy systems will exist for your banking partners. ISO 20022 is a journey, not a destination. Nth Exception is a specialist payments technology and consulting firm assisting financial institutions and corporates introduce, operationalise and process-optimize next-generation payments journeys and systems. Specialists in SWIFT messaging, ISO 20022 and alternative payment methods, we work with customer organizations globally, helping them navigate around complex messaging standards and the detailed requirements of different schemes and market infrastructures, enabling them to better manage uncertainty, improve business connectivity and continuity, reduce operational costs and eliminate barriers to profit, in the fast-changing payments world. Speak to us
- The Future of Payments: Data-Driven Strategies for Success
Data is an increasingly important part of the payment industry. It is collected, analyzed, and used at various points during a payment transaction, and plays a vital role in making sure the payment reaches its intended destination. Data is also at the core of customer security and system innovations. The payments sector is fast evolving, and we expect data will play a key role in this evolution. Changes in the sector are being driven by a variety of market, technological, end-user, and regulatory factors that have data at their core. Technological changes: Technological change is leading to payment data being collected, processed, shared, and used in digital form at lower costs and on a larger scale. The ability to access increasing amounts of data offers potential market opportunities such as business models based on collecting and processing data. This is all driven by increasing computing power, affordable storage, and software that can analyze large data sets to gain new insights. Digitization (i.e. capturing, storing, and using increasing amounts of digital information) has transformed the sector, the obvious impact of digitization in the payments sector is the increase in the type and amount of data that PSPs, PSOs, and third parties collect. Organizations such as regulators, central banks, and government departments are following the same trend. As more people and businesses shift from cash to digital payment methods, the rapid digitization of the payments sector is expected to continue. And as the costs of collecting, storing, and analyzing data decrease over time, data could be collected and analyzed on an ever-larger scale. End-users: The people and organizations that use payment systems – are also changing the ways they pay for goods and services, with an increasing reliance on non-cash methods. These all generate payment data. And as the volume of electronic payments has increased, so has the volume of data. Regulatory Developments: A number of regulatory and policy developments affect how data is collected, processed, and used in the payments sector. These include: - The Open Banking Standards Initiative was introduced following the CMA’s retail banking market investigation. - The second European Payment Services Directive (PSD2) - The GDPR and the Data Protection Act 2018 Market opportunities created by data: Organizations are interested in how they can use digital technologies and data to create revenue and improve business processes. This is generally known as digitalization. In the payments sector, existing providers, as well as fintechs, are developing business ideas that rely on payments data as a critical input. For example, Google Pay collects data (e.g. transaction and account data) from users to facilitate the provision of advertising. In turn, advertising helps to keep the service free for users. Few PSPs use payment data to provide insights into their customers’ spending habits. What Is Payments Data? In providing payment services to customers, PSPs, and other entities (such as third party providers or AISPs) can capture and hold a range of information about their retail and corporate customers. Payments data can be collected through the use of core payment services such as: - Debit and credit transfers - Card payments - Mobile payments - Digital wallet payments - Cheques - ATM transactions Types of information that can be collected through end-user use of these payment services include: - Personal or identity details of the payers such as their names, telephone numbers, and email addresses - Sort codes and account numbers for the payers and the payees - Reference information for the payment - Date and time of the payment - Primary Authorization Numbers (PAN) for card transactions In providing payment services, PSPs and other payment entities can also capture additional information that is not always necessary to process the payment. It includes: - The location where the payment was made. - Information regarding the channel through which the payment was made. - Specific information regarding the devices through which the payment was made (for example, mobile device identification numbers, IP addresses, and cookies for online payments). - Usage data such as the frequency with which consumers log on to their online/ mobile banking or payments accounts. Payments Data as a whole can be primarily classified into two important classificatory distinctions: The identifiability of the data subject (and the distinction between personal and non-personal data), and the degree of aggregation of the data (and the distinction between individual and global transaction data). Role Of Payments Data In Emerging Technologies: Financial services are driven by data. The way data is leveraged has an unimaginable impact on the bottom line and customer satisfaction. In the context of payments, a large majority of international payments are processed straight through, requiring no manual intervention. However, the small proportion of payments that require manual processing often does so due to incomplete or inaccurate data relating to the end beneficiary. The ensuing inquiries and delays can take a disproportionate amount of time and resources to resolve. SWIFT is working to eliminate these to provide a better customer experience by providing the financial community with smarter tools like the gpi that improve the quality of the underlying workflow. Improving the quality of the data enables the industry to drive value more easily from emerging technologies like Artificial Intelligence (AI) and DLT, further driving automation and preventing the illicit use of the global financial system. This is already taking shape in the compliance space, for example, where advanced data analytics capabilities are enabling banks to improve their screening algorithms and reduce the number of false positives when trying to detect fraud. Despite expected benefits and the abundance of available technological advancements applicable to various elements of the value chain and operations in the financial services and insurance industries, institutions are yet to fully harness the potential of AI. The main reason for that is the complexities of organizing data that feeds intelligent machines. More Data, More Structure, Richer Insights International payments often contain unstructured and ambiguous beneficiary account data, causing unnecessary delays and delayed processing. To remedy this, we need to capture richer data in a more structured way. This transformation is already ongoing, with the widespread adoption of ISO 20022 across major market infrastructures around the world and the industry-wide move to the new standard within the payments space. ISO 20022 provides rich and structured data that is suited to the needs of regulators, market overseers, and reporting firms that rely on unambiguous data for meaningful analysis. Increased use of mandatory and structured data will further enable the automation of reconciliation processes and greatly improve the visibility of cash positions for beneficiaries. The standard also provides a common data dictionary, agnostic of syntax, and technology choice. This will support new services through the use of APIs, and provide quality data for the application of artificial intelligence, enabling banks to offer innovative services to meet their clients’ changing needs. Nucleus ISO 20022 Data Hub is a revolutionary solution for financial institutions and corporates looking to implement a low-cost and data-centric approach to message enrichment. With its ability to store data in the ISO 20022 native format, Nucleus empowers organizations to embrace the new standard and unlock the full value of payment data. By providing access to richer intelligence, Nucleus enables increased transparency, automation, and the development of new services. This is not only beneficial for compliance purposes but also for driving growth and efficiency across the global economy. Nucleus is the ideal foundational data platform for payments transformation, with seamless integration with IBM Watson, Azure Applied AI, and AWS Sagemaker services. Its inbuilt translator allows for an easy federation of data to legacy platforms, bridging the gap between non-ISO 20022 environments and the new standard. With Nucleus, financial institutions can accelerate value extraction from ISO 20022 and stay ahead of the curve in the rapidly evolving payments landscape. Nth Exception is a specialist payments technology and consulting firm assisting financial institutions and corporates introduce, operationalise and process-optimize next-generation payments journeys and systems. Specialists in SWIFT messaging, ISO 20022 and alternative payment methods, we work with customer organizations globally, helping them navigate around complex messaging standards and the detailed requirements of different schemes and market infrastructures, enabling them to better manage uncertainty, improve business connectivity and continuity, reduce operational costs and eliminate barriers to profit, in the fast-changing payments world. Speak to us Image source - respective owners.
- Exploring the Capabilities of ISO 20022 for Payment Investigations
In an average payments operations department, two to five per cent of all payments, are made on any particular day, resulting in an enquiry with value going up to billions of USD. To improve the competitive position of their cash management offerings, financial institutions are putting increasing pressure on their payment operations. While many processing units achieve impressive straight-through processing (STP) rates, it has become clear that the cost of handling each enquiry resulting from payment is multiplied by the total payment cost. Managing exceptions and investigations remains one of the most labour-intensive activities for a financial institution, largely because it blocks increased automation. The reason for this is the widespread use of free-format messages combined with a lack of industry rules. And as these are primarily manual processes, in a best-case scenario, exceptions can consume a minimum of 6 working days to resolve. In response to increasing regulatory and competitive pressure, financial institutions are looking at implementing activity-based pricing and invoicing their payment services separately from the processing. This approach is designed to generate additional revenue. However, it requires a high level of service, supported by standardised customer reporting. With the migration of ISO 20022, Exceptions and Investigations (E&I) will be redefined. The fact remains, that improving customer service levels through the fast and efficient resolution of problems is a key differentiating factor for customer retention. Understanding exceptions and investigations A case is created each time an exception and investigation process is needed. A case is a file that records the progress of the investigation. This file can be paper-based (a physical folder) or electronic (a database table). As the process is internal, the party creates and organises a case file in its own way. The assignment of this case and the exchange of messages between collaborating parties must respect a set of rules, and these steps can either be manual or automated. An exception or investigation process starts when a problem occurs in the normal execution of a payment transaction. The exception is typically related to problems detected with the processing environment of the case creator, whereas an investigation is related to an issue identified in the payment chain that will lead to the failure of the processing. The problem can be one of the following: - Payment needs to be cancelled due to a processing error or a decision by the party instructing the payment - Payment must be modified due to a processing error or a decision by the party instructing the payment - Payment is received but it is incorrect - Payment is received but some information is missing, preventing its proper processing - An expected payment is not received - An entry in the statement cannot be reconciled with the initiating party Exception and Investigation processes are covered under 4 standards. Claim Non-Receipt A claim-non-receipt message is sent when a party that expects a payment does not receive it or when an agent is missing the cover for received payment instruction. Unable to Apply An unable-to-apply message is sent when insufficient or incorrect information prevents the processing of a payment instruction, for example, the account number is missing or incorrect, the account is closed, the name and account do not match or the final agent is missing. Processing of a payment instruction covers both the execution of the instruction and the reconciliation of the instruction. Request for Cancellation The instructing party requests the cancellation of a payment instruction. Request for Modification The instructing party may request a modification of a payment instruction. It can eventually entail an Additional Payment Information message that may be sent by the account servicing institution to the creditor or beneficiary. We are committed towards client-centric payment services and leading the path for other global payments innovation (gpi) initiatives. Nth Exception is a specialist payments technology and consulting firm assisting financial institutions and corporates introduce, operationalise and process-optimize next-generation payments journeys and systems. Specialists in SWIFT messaging, ISO 20022 and alternative payment methods, we work with customer organizations globally, helping them navigate around complex messaging standards and the detailed requirements of different schemes and market infrastructures, enabling them to better manage uncertainty, improve business connectivity and continuity, reduce operational costs and eliminate barriers to profit, in the fast-changing payments world. Speak to us
- Exploring the Benefits of ISO 20022 Rich Data
The reconciliation process is a challenge for Corporates today, as legacy message formats often do not provide data that can automatically reconcile incoming payments with outstanding invoices for goods previously delivered or services already provided to their customers. With ISO 20022’s rich data and structure that can carry invoice information, Corporates can benefit from easier reconciliation of outgoing and incoming payments, saving time and resources while also maintaining accuracy. Enterprise Resource Planning (‘ERP’) systems that are ISO 20022 compliant will make short work of reconciling bank statements to accounts receivable or payable. Because ISO 20022 provides consistent standards for messages across the payment chain, from payment initiation to cash reporting, reconciliation of incoming payments and outstanding invoices by ERP systems can be automated, combining what would otherwise be multiple steps into a single unified process. Automated reconciliation of incoming payments with outstanding invoices can potentially enable Corporates to reduce their ‘days sales outstanding’ ratio by allowing for faster conversion of receivables to cash. Because Corporates cannot use incoming cash until it is reconciled, faster reconciliation also means cash can more quickly be used to further business objectives. Ultimately, a streamlined reconciliation process will allow Corporates to spend additional time on revenue-generating efforts while ensuring that cash and receivables records are also in order. While most corporate professionals focus more on commercial activities than the underlying payments, a ‘bad’ payment can ruin a commercial experience. As technology develops, payments have become more closely aligned with the underlying commercial activities. This includes embedding payment methods with clients’ ERP systems through APIs, and e-commerce platforms and leveraging wallets to create seamless online purchasing experiences. However, when looking at the payment market infrastructures to which banks are connected, there are stark differences between payment systems and market practices from country to country. Supporting a seamless cross-border payment experience is a highly challenging task. The information required for payments differs by country and by market infrastructure, which is part of the reason why payments rarely move freely from one country to another. Traditionally, banks have had to re-format the data exchanged with customers to fit the requirements of each local infrastructure, and then re-format the data back into SWIFT format, creating the possibility for data corruption or truncation. Oftentimes, banks will need to ‘repair’ a payment by inserting data based on the bank’s proprietary knowledge of local requirements or by asking clients to provide additional information, which causes delays, at others, there is sometimes the loss of payment information. A number of leading payment infrastructures around the world have already adopted ISO 20022 and retired their proprietary formats. As major market infrastructures such as TARGET 2, CHAPS, Fedwire, and CHIPS and SWIFT user-to-user participants adopt the ISO 20022 messages over the next few years, cross border payments should no longer require banks to reformat or supplement additional payment information before converting them to another currency or sending them to another country. With richer and more structured payment information and more unified requirements, payments will travel more seamlessly from sender to end receiver. Reconciliation should be greatly facilitated, regardless of the currency or country. As richer payment data that is ISO 20022 structured and standardized is adopted across the universe of payment infrastructures, and information can flow seamlessly from one nation to another without alteration, banks will have a greater opportunity to harness the power of data in the payments ecosystem. This payment information is not only valuable from management information and compliance perspectives but can also provide insight to help banks understand their clients’ behaviours and counterparty interactions. Banks can then develop refined products and services supporting their clients in the generation of further commercial opportunities. Compare how fintechs, through the expansion of services, have become increasingly relevant and have even become integral in their customers’ day-to-day lives like a ride-share company that subsequently introduced an e-wallet to complement their application. Another example is how emerging fintechs have created closed-loop ecosystems and use the power of data to gain insights into their customers’ behaviours using various data aggregations including Artificial Intelligence (“AI”) to anticipate client needs, proactively recommend services to their clients, and customise offerings to provide white glove-like services to grow customer loyalty. The continuous iteration of data augmentation allows fintechs to expand into adjacent services and further develop their platforms. Similarly, the standardization of data flows in the banking ecosystem will provide opportunities to identify trends, remove new friction points and invigorate the development of new solutions. Nth Exception is a specialist payments technology and consulting firm assisting financial institutions and corporates introduce, operationalise and process-optimize next-generation payments journeys and systems. Specialists in SWIFT messaging, ISO 20022 and alternative payment methods, we work with customer organizations globally, helping them navigate around complex messaging standards and the detailed requirements of different schemes and market infrastructures, enabling them to better manage uncertainty, improve business connectivity and continuity, reduce operational costs and eliminate barriers to profit, in the fast-changing payments world. Speak to us
- Unlocking the Power of Nucleus on IBM: Streamlining Data Analytics
Banks globally are in the process of complying with the ISO 20022 deadlines primarily because, after forty years, SWIFT MT is beginning to show its age. SWIFT MT was designed at a time when storage and bandwidth cost more than they do today, so emphasizes brevity over completeness or readability of data. It predates the emergence of anti-terrorist financing regulations, which require payments to be screened against sanctions lists, and the development of ‘big data’ technology, which can extract meaningful business intelligence from transaction data. Earlier this year, we introduced Nucleus to the banking community, it taps into the computing power and resources of the IBM z Systems and IBM LinuxONE platform to help drive business transformation and govern critical Governance, Risks and Compliance aspects of ISO 20022 migration. Key highlights of the cloud-native Nucleus platform include: ✓ ISO 20022 messages are stored in a native ISO 20022 & JSON format. ✓ Long-term, permanent, internal archive (7 years) of MX and MT message pairs. ✓ Real-time, always-available access for operational and compliance teams to search, query and report from this archive, across MT and MX message sets. ✓ Transparency and opportunities for automation and machine learning, on MX data. IBM LinuxONE Emperor 4 was launched globally on September 13, 2022, enabling our clients to reduce energy consumption while reaching sustainability targets. We as IBM partners are helping clients in regulated industries build a modern environment that is designed to improve business agility and reduce overall costs. Hybrid cloud approach provides flexibility for the financial services industry Nucleus enables banks and financial institutions to comprehensively enforce ISO 20022 related payments governance through detailed tracking of scheme and message level implementations, mitigating the risk of data loss & truncation as messages pass through multiple channels, thereby complying with the requirements of regulators. Banks and financial institutions can also track the reasons for truncation and aim to resolve the same during migration journeys. IBM’s hybrid cloud approach on IBM z Systems and IBM LinuxONE with Red Hat® OpenShift® allows businesses the flexibility to decide where to deploy workloads, on-premises, on private or public cloud. IBM LinuxONE Emperor 4 According to an IBM IBV study , almost half (48 per cent) of CEOs surveyed across industries say increasing sustainability is one of the highest priorities for their organization in the next two to three years. However, more than half (51%) also cite sustainability as among their greatest challenges in the next two to three years, with a lack of data insights, unclear ROI, and technology barriers, as hurdles. The new IBM LinuxONE Emperor 4 is an enterprise server designed to help reduce energy consumption. Consolidating Linux workloads on five IBM LinuxONE Emperor 4 systems instead of running them on compared x86 servers under similar conditions can reduce energy consumption by 75%, space by 50 per cent, and the CO2e footprint by over 850 metric tons annually.[1] Integrations with energy monitoring tools on the server also enable clients to track energy consumption Built on the IBM Telum Processor, IBM LinuxONE Emperor 4 is a Linux platform that supports data serving, core banking and digital assets workloads. IBM LinuxONE Emperor 4 is a platform of choice for organizations that value sustainability and security. Ecosystem Partners with IBM As a part of the IBM Ecosystem, Nth Exception is helping companies unlock the value of cloud investments by implementing the tools and technologies that can help them succeed in a hybrid multi-cloud world. We are excited to be working closely with the IBM ecosystem to bring new innovations to our clients. Based on Linux, customers can benefit from open standards and an ecosystem that LinuxONE offers including modern DevOps and a variety of popular software. This can also help to remove operational barriers when customers deploy and manage technologies on cloud-native infrastructure. You can find additional resources about IBM LinuxONE Emperor 4 and IBM below: ● Learn more about LinuxONE ● Learn more about Nth Exception's Nucleus ● Learn more about IBM [1] Disclaimer: Compared 5 IBM z16 Max 125 model consists of three CPC drawers containing 125 configurable cores (CPs, zIIPs, or IFLs) and two I/O drawers to support both network and external storage versus 192 x86 systems with a total of 10364 cores. IBM z16 power consumption was based on inputs to the IBM z16 IBM Power Estimation Tool for a memo configuration. x86 power consumption was based on March 2022 IDC QPI power values for 7 Cascade Lake and 5 Ice Lake server models, with 32 to 112 cores per server. All compared x86 servers were 2 or 4 socket servers. IBM Z and x86 are running 24x7x365 with production and non-production workloads. Savings assumes a Power Usage Effectiveness (PUE) ratio of 1.57 to calculate additional power for data centre cooling. PUE is based on Uptime Institute 2021 Global Data Center Survey ( https://uptimeinstitute.com/about-ui/press-releases/uptime-institute-11th-annual-global-data-center-survey ). Due to the technical equivalence, the results are also valid for LinuxONE Emperor 4 Max 125 systems.
- ISO 20022 and APIs: Driving the Future of Payment Standardization
Cross-border payments involve more than just transferring money from one country to another. They encompass making transactions safe, efficient, and compliant with international regulations. This process includes transferring critical payment data securely. To achieve this, several checks and procedures must be in place before, during, and after the payment moves through the financial system. Improvements in Cross-Border Payments Significant advancements have been made in cross-border payments over the years. Notably, SWIFT's Global Payment Initiative (gpi), launched in 2016, has significantly increased the speed, transparency, and reach of these transactions. However, challenges persist, particularly due to the use of different and incompatible data formats in cross-border payment messages. These issues often lead to communication problems between payment systems, resulting in data loss and the need for manual intervention. The Role of Standardized Data Formats and APIs To address these challenges, the adoption of standardized data formats such as ISO 20022 and the use of APIs are highly recommended. These standards have the potential to streamline, improve, and automate cross-border payment processes. Payments Market infrastructures worldwide are rapidly adopting ISO 20022 as a common messaging standard, highlighting the increasing importance of technology in the payments industry. The Future of Cross-Border Payments As the payments industry evolves, the integration of standardized data formats and advanced technologies will continue to play a crucial role. By enhancing the efficiency, safety, and compliance of cross-border payments, these innovations promise to transform the global financial landscape. Harmonized ISO 20022: A Key to Efficient Cross-Border Payments The Committee on Payments and Market Infrastructures (CPMI) has emphasized the importance of adopting a harmonized ISO 20022 version to improve cross-border payments. This common message format can lead to significant efficiency gains by eliminating the need for workarounds and translations between different systems. This reduction in implementation costs for new Payment Service Providers (PSPs) enhances the capability to achieve fully automated straight-through processing. Consequently, the financial industry becomes more open, cost-effective, faster, and continuously available. The Role of APIs and ISO 20022 in Modern Payment Systems Recognizing these benefits, new payment providers are increasingly using APIs and ISO 20022 to deliver their services to banks and established financial institutions. This approach allows for faster growth compared to directly signing up end-users. APIs enable payment providers to integrate seamlessly with various services, managing different steps of cross-border payments such as sanctions screening, anti-money laundering checks, account validation, and payment routing. Leveraging ISO 20022 and APIs for Enhanced Cross-Border Payments The Synergy of ISO 20022 and APIs When combined, ISO 20022 and APIs offer substantial benefits to payment service providers, fintech companies, banks, corporations, and technology providers. These technologies can: Provide Richer Data: By offering more context, they can send payments with itemized invoices, enhancing the clarity and detail of transactions. Reduce Data Loss: They minimize data loss when payments move between different systems. Increase Payment Visibility: Corporates gain greater visibility into their payments, knowing where funds are and when they will arrive, thus improving cash management. Streamline Compliance Checks: They simplify Anti-Money Laundering (AML) checks, sanctions screening, and Know Your Customer (KYC) processes. Optimize Service Use: Firms can use the best provider for each step in a modular way, rather than integrating all functions into a single complex system. Enhance Automation: They boost automatic payment processing, reducing the need for manual intervention when issues arise. In essence, the adoption of ISO 20022 and APIs is crucial for making cross-border payments faster, cheaper, and more transparent. ISO 20022 Industry Deadlines and Transitions Nth Exception: Your Partner in ISO 20022 Transition If your institution is planning to adopt ISO 20022, Nth Exception, a SWIFT partner, is here to assist. As a specialist consultancy and technology firm, we work with financial institutions globally to implement best-in-class payment solutions. Nucleus: Revolutionizing ISO 20022 Data Management Nucleus, an ISO 20022 Data Fabric, is purpose-built to help banks and financial institutions monetize ISO 20022. It leverages rich ISO 20022 messages categorized by domain, scheme, and message version, and federates this rich data to internal systems, enabling large-scale change and disruption. Out of the box, Nucleus enables institutions to comply with CBPR+ and HVPS+ structured data requirements. Key Features of Nucleus Internalize the ISO 20022 data language and definitions. Update systems to receive data as per ISO 20022 definitions. Capture payments metadata from payment messages. Extend rich contextual payments data to existing organizational systems that are not ISO 20022 native. Key Benefits of Nucleus Bridges the gap between legacy data platforms and ISO 20022. Designed for financial institutions to accelerate value extraction from ISO 20022. ISO 20022 native data store for pre- and post-translation messages: 10 years. Structured address enablement. LEI validation and creation. Automated purpose and remittance codes. Automated, independent truncation management. Advanced analytics. API native. Available on-premise and in the cloud. With Nucleus, your institution can seamlessly transition to ISO 20022, unlocking new efficiencies and capabilities in cross-border payments. Reference Documents - ISO 20022 and JSON: An Implementation Best Practices Whitepaper