With a new migration date set for November 2022, Swift’s community must be prepared to adopt the data-rich ISO 20022 for cross border payments in under 24 months. The deadline delay proves just how challenging this project has been for financial institutions across the payments landscape.
While financial institutions are widely being encouraged to view the migration as an opportunity to improve efficiencies, banks are not equally prepared nor equipped to manage this substantial project.
Petia Niederländer, head of retail and corporate operations at Erste Group Bank, highlights the challenge that migration from Swift MT standards to ISO 20022 presents for smaller firms operating in the space. Niederländer observes that “European banks are working very hard to meet the 2021 deadline [however] I think the deadline is quite challenging, especially for the smaller banks.”
“There are technical challenges such as migration mapping, changing legacy systems, and the changing architecture of banks and corporates. Particularly for regional banks the business challenges means a decision has to be made about approaching the change as a compliance demand or a business opportunity.”
Mid-size banks must re-evaluate their correspondent banking processes - just one example of the potential governance challenges these firms will face as a result of the migration. Niederländer adds that this will prove costly and very complex to continue serving regions independently within decentralised infrastructures.
She contends that these banks will be forced to reconsider how many entry points their network provides, how to optimise their technology base, how they store data and the compliance processes related to ISO data collection. This is a tall order for smaller firms.
Saqib Sheikh, global head of the ISO 20022 Programme at Swift advocates the advantage of early adoption of the standard to Finextra Research: “We encourage institutions to look at ISO 20022 strategically - as a new data model that will yield efficiencies and improvements in compliance and customer experience…the rich, structured information it enables will improve the quality of data between sending and receiving customers - significantly improving their over-all experience.”
While the extension of Swift’s migration deadline may provide some reprieve for institutions battling to implement their transition strategy, smaller institutions will be challenged to leverage their small talent, financial and infrastructure resources to reap all the possible benefits promoted by Sheikh.
Paula Roels, head of market infrastructure & industry initiatives at Deutsche Bank highlights to Finextra Research the sheer size and complexity of the migration. She argues that despite most banks having already begun the implementation process, “many of them are only now realising the complexity of the necessary changes.”
From conversations with clients and peers, Roels adds that while most banks have commenced their projects for migration, “we see European markets leading with the implementations driven by the clear timelines set by the market infrastructures. Most banks in these markets are using the opportunity to prepare for the migration in the correspondent banking space in parallel.”
Roels emphasises that cooperation across the landscape is critical to the project’s success and that the migration cannot be considered in isolation: “We need to work closely together within industry bodies - such as PMPG, the Wolfsberg Group and others - and pay close attention to recent developments. Banks cannot overcome the challenges alone, we expect service providers to support their clients in this migration too.”
Swift has been engaged by a number of the large payment banks and key intermediaries to provide workshops and webinars to provide detailed coaching for the ISO adoption process.
Sheikh concludes that Swift “also continues to engage with our whole community and are tracking this closely to ensure they are preparing properly.”
Discover more in-depth coverage of the ISO 20022 transition here.