Long reads

ISO 20022: Only 15% of messages have migrated, will JP Morgan change the tide?

Madhvi Mavadiya

Madhvi Mavadiya

Head of Content, Finextra

In conversation with JPMorgan’s Masayuki Tagai, managing director, industry issues, payments, and Ciaran J. Byrne, executive director, global head of product payments, global clearing at Sibos 2023 in Toronto, Finextra explored how ready the world is for native adoption of ISO 20022 and how the bank is working towards implementing the standard across the board.

Are banks ready for the November 2025 deadline?

During the opening plenary, the newly elected Swift chair Graeme Munro revealed that only 15% of outgoing messages are in the new, ISO 20022 standardised format, MX. Speaking about this statistic, Byrne explained that “this was talking about the payments aspect of CBPR+ as opposed to the reporting. Payments has gone live with CBPR+, so what the statistic is referring to payment volume.

“15% of outgoing messages are in the ISO 20022 form and we’re in what’s called an interoperability period where both MT, the traditional type of message and MX, the new format message are going to exist until November 2025. In March 2023, when cross border payments went live, institutions had the ability to send an MT or MX, but we have seen relatively slow adoption [of MX].”

He added that JP Morgan “made the bold decision to go native ISO 20022, meaning that every message we receive, regardless of if it’s initiated in MT or MX will send out an MX format. Of the 15% of the market, we represent about half of that today and the reason we did that was we wanted to embrace and adopt the benefits ISO 20022 can bring.” 

How long does it take to migrate to ISO 20022?

Byrne didn’t shy away from the fact that this is a multi-year implementation that is being discussed, and ISO 20022 is most definitely not something that can be switched on overnight. He shared that while migration requires “real organisational buy in from every area – from customer services, operations, sales, technology, legal, compliance – but we have been live for over 150 days now.” He added that JP Morgan also released a document that included all the lessons learnt to help others in the market adopt over the next few months.

Tagai agreed and said that “given that it is quite a longer-term undertaking, it’s not that you prepare for a few months and then execute over the next year. It really takes multi-year planning and multi-year resourcing.” Further to this, what Tagai believes is happening is that while individuals within the banks had the strategic foresight, they may not necessarily still be there to execute.

How can banks ensure that the biggest benefits of ISO 20022 are being reaped?

In Tagai’s view, “the true value of moving to ISO 20022 is being lost in the transition.” For large intermediaries like JP Morgan, the key benefit is transparency. All banks want is to identify who is paying who. The problem that ISO 20022 solves is that “if everything is bundled into Swift MT, you really lose that visibility.

“From JP Morgan perspective, even if it takes us five years, seven years, or 10 years, the underlying message has been that if we stay on MT for long, the business will not be able to survive. MT obscures the transparency. We want to make sure we get to the granular, rich data structure first and then provide the transparency throughout the chain. Structured data is not a nice to have thing, it’s an essential thing to manage the risk of your payment today.”

Tagai advised banks to make sure end-to-end transparency is conserved and not rely on the way they act today. Continuing to use unstructured data will mean that banks must translate rich MX messages that they receive back to MT, so their existing processing won’t be impacted. The best way forward is to be native MX and even if MT messages are received, they are translated to MX. “This is a very difficult undertaking, and while we have done it, it is a challenge that every bank will face towards 2025.”

What is CBPR+?

Cross-border payments and reporting plus (CBPR+) is a workgroup of payments experts whose mission it is to create global ISO 20022 practice and implementation guidelines to ensure a common implementation of the standard by banks.

According to Tagai, CBPR+ can be referred to as a message derived from a “base message available at iso20022.org; a universal message that anybody can use but nobody can use for specific purposes without adaptation. CBPR+ messages are also synonymous with Swift MX messages and are a derivative of the base message that everyone is trying to implement if you’re a payment bank.”

Byrne expanded on this point and said that the real reasoning behind CBPR+ is what he refers to as “the syntax and the semantics. To make data more structured, we can understand the information in theory, but the semantics will explain the meaning behind the data. Right now, it’s quite obscure and we squash all the information we want in the field, but we have a limited number of characters and a limited number of fields.”

With ISO 20022, the world will be a bank’s oyster. Purpose of payment dropdown options will provide insight into the reasoning behind a payment, as well as more benefits around financial crime screening. “Looking forward, when all that data gets populated and we start seeing the enriched data in all the messages, there’s going to be a tonne of opportunities understanding client behaviour and understanding trends that we’re seeing in different payment types. This will lead to meaningful opportunities and meaningful cocreation with clients,” Byrne continued.

Will banks meet the mandatory ISO 20022 requirements?

There have already been a few date changes in recent months, but as we approach the 2025 deadline, Swift will have to take a view on where banks are. Byrne believes that “the number of market infrastructures to go live will see an uptick, but to go from 15% to 100% in two years, it’s going to be a challenge. All the financial institutions that we speak to certainly have a plan in place to get there, but as we have done, a lot of lessons need to be learned for the industry to succeed.

“We need all our peers and clients to adopt it.”

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