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Does ISO2022 mean the death of the Payment Factory?

The adoption of the ISO20022 standard as the format of choice for corporate payments has really gathered momentum.  Kick-started perhaps by SEPA, it is now rapidly being used by the bigger banks for every payment in every country.  Payment factories to a large extent were born out of the formats nightmare faced by large corporates.  Payment solutions were designed to handle that complexity for customers across countries and banks, allowing them to think just in terms of payments and not formats.  So, doesn’t the move to a single standard fundamentally destroy the raison d’être of the payment factory?

It’s correct to say that payment factories historically focused heavily on the challenge of presenting a ‘payments’ view to the user whilst dealing with programming dozens of formats in the background.  But the increasing adoption of the XML standard by corporates definitely doesn’t mean payment factories are dead.  On the contrary, it allows a shift of focus towards some really interesting value creation solutions such as payment risk analytics, payments warehousing to maximize Days Payable Outstanding (DPO) and Payments on Behalf (POBO).  If anything, it finally paves the way for people to understand the real value that payment factories can bring to their organisations.

According to our recent study, 80% of organisations do not have a single, enterprise wide payments process.  The study also revealed that fraud was the top driver for investing in payment factory solutions.  So, aren’t those organisations now looking at the gaps and thinking that the brave new world of a single standard means that all this will be solved by their ERP supplier?

Don’t be fooled that the ISO20022 standard represents a single clean standard. There’s variation from bank to bank and there always will be.  You still need a payment factory to elegantly handle that, especially if you are working across geographies and within a complex back office landscape.


Comments: (2)

Barry Kislingbury
Barry Kislingbury - ACI Worldwide - London 15 October, 2014, 09:51Be the first to give this comment the thumbs up 0 likes

ISO 20022 is a big step towards a global standard, but you are correct that it will not be the silver bullet once hoped for, just take the SEPA example of AOS.

So although a big step forward which will reduce the formats nightmare, we are some way from the perfect standards world, meaning that other strategies to manage formats and the enterprise payments processes needed for better services, fraud and reporting data will be needed for some time to come.

A Finextra member
A Finextra member 15 October, 2014, 13:561 like 1 like

Thanks for the comment Barry.  And I think you're right.  I'm sure I remember reading somewhere that one of the PEACH's had encountered well over 80 variants of the SEPA Credit Transfer message, not even factoring in AOS...There is a growing acceptance that variants will continue to exist and that this is not a bad thing, as long as there is at least some attempt to gain consensus across the participants of that given standard.  Using ISO20022 XML for everything does make this task easier to manage, both from a technology perspective and even just from being able to read the messages easily.

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Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

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