In the coming year, the way payments are processed in the UK is set for a major transformation, thanks to the implementation of the ISO 20022 message format. This shift will impact all organisations handling payments, from corporates to banks and other financial institutions.
While the shift to ISO 20022 may appear to be a technical upgrade, it is much more than that. It represents the most significant change to the infrastructure of the banking system in over 30 years, and the scale of its impact cannot be overstated.
One of the biggest effects of ISO 20022 is its demand for extensive changes in payment and statement data requirements. Additional data will need to be included in payment messages, some of which may already exist in current systems, though much of it will not. Organisations will need to source this new information and consider how they capture and store it.
Additionally, the format of existing data points is also set to change. For instance, addresses will need to be structured in a specific format rather than allowing for unstructured or freeform input. This shift impacts how information is processed – both incoming as well as outgoing messages.
These increased data requirements will make it easier for companies to detect financial crime and stay compliant with sanctions and screening regulations. But it’s not just the risks that ISO 20022 will create – it will also provide greater opportunities for more straight-through-processing. It can lead to:
So it’s possible to consider ISO 20022 as a tool to increase sales without increasing credit risks and to improve the flow of liquidity into business operations.
We need to change how we talk about ISO 20022 and encourage a dialogue that demystifies the subject
To grasp the scale of these changes, consider a typical bank statement. Today, it might include a 16-character reference for each transaction. In the future, statements could feature an unlimited amount of reference information—potentially hundreds of lines describing the purpose of each payment. This signifies the level of data growth organisations need to prepare for.
Despite these sweeping changes and the timelines involved, discussions around ISO 20022 have been surprisingly quiet. Banks have had many years to prepare their systems for the changes coming and have started having conversations with corporates. And many organisations have already (invisibly sometimes) migrated over to the new XML format. However, there is a lot to do, and limited time to get ready and it’s important that treasurers and businesses are aware of the scale of the work required in their own organisations.
About the author
Anish Kapoor is the CEO of AccessPay. With a career spanning technology, finance and consultancy, Anish Kapoor’s journey to the helm of AccessPay has been diverse and dynamic. After completing his computer science and accounting degree, he trained as an accountant at Coopers and Lybrand (now part of PwC) before founding pioneering data centre operator TeleCity in the 90s, becoming one of the youngest FTSE 250 directors at 25 years old. He led TeleCity to a successful IPO and global expansion. After TeleCity, Anish pursued VC-backed ventures in voice and internet technologies, leading multiple SaaS businesses and raising over $150M through funding rounds and IPOs. Drawn to Manchester-based AccessPay’s potential, he initially served as an adviser before becoming CEO in 2014.
