How to migrate to ISO20022 without touching your core systems
As the ISO20022 migration is approaching, banks and payment institutions are now rushing to upgrade their core systems. The new messaging protocol offers great opportunities for Electronic Money Institutions (EMIs) and banks to make payments more efficient. However, the transition does come with large costs of upgrading core systems, as well as the challenge of managing multiple messaging protocols. How can institutions and banks migrate to ISO20022 without completely redoing their core system? In this post, we cover the hurdles of migrating to ISO20022 and a solution to make the upgrade easier.
The migration to ISO20022 using CBPR+ is part of an initiative to create a global standard for payments. This ISO20022 standard enables payments to transport richer data, including enhanced analytics, tracking, and automation. Payment Service Providers (PSPs) can then use this information to offer a better payment experience to their customers and improve the efficiency of their operations. It also brings opportunities for value-added services, as well as faster and more reliable compliance checks and fewer false positives and investigations.
The challenges with upgrading
However, migrating to ISO20022 does not come without its challenges. EMIs and financial institutions will need to migrate their systems to ISO20022 all while maintaining the quality of their data and remaining efficient.
Moving to ISO20022 is not just another IT project, since the new ISO standard completely changes the way some institutions will work. For example, many messaging components will need to include additional fields, a new field length, and new characters. Bank infrastructure will need to be able to deliver larger quantities of data as well as process transactions, compliance checks, and fraud checks at a much faster rate. These changes will impact not only the payments system but also the core, the Anti Money Laundering, the web banking, the accounting and reconciliation, the liquidity, the trade finance, or even more systems and applications depending on the size and the activities of each institution.
But no institution can simply dismiss or keep delaying the ISO20022 implementation.
Financial Institutions and Payment Services Providers need to prioritize the migration in order to maintain a competitive advantage and meet new regulations. According to SWIFT’s new approach to ISO20022, PSPs will have the option to send and receive messages in either MT or ISO20022 format but the MT messages will be decommissioned in November 2025. In parallel, all major Market Infrastructures such as Target2 and EURO1 in Eurozone, Bank of England, and Fedwire, are adopting ISO20022. The clock is ticking, and many payment institutions and banks want to ensure the transition goes as smoothly as possible.
A simple solution to a complex problem
The obvious thing to do for each Bank and EMI is to get their systems ready. While some Banks have already made great steps towards modernizing their technology there are still a significant number of bigger or smaller institutions that rely heavily on legacy technology or don’t have the necessary resources to change all their existing infrastructure at this point of time.
In this case, adopting a proven third party solution to help them handle the ISO20022 migration by integrating different messaging protocols, transforming the data and linking with the existing infrastructure is the way forward.
This approach proves to be with the least operational burden while it is also the most cost effective. Implementing such a solution allows banks and EMIs to collect all the relevant data while maintaining their existing infrastructure. This allows banks to meet the ISO deadlines on time, while progressively they upgrade their internal infrastructure to meet the needs of the new messaging system. It's low impact, high speed, and cost effective solution to a complex problem. This is what aplonHUB is all about. A solution that allows banks and EMIs to accept ISO20022 messages without upgrading their entire core system. With aplonHUB banks and payment institutions can meet the ISO20022 deadlines keeping disruption to a minimum.