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Speaking a new financial language: ISO-20022

08.04.2022 | By SymphonyAI team
 

Maybe it’s my nationality – I’m Belgian, born and bred – but I’ve always had something of an affinity for languages. Totting them all up, I’d say that I speak three well, three more that I understand, and there’s a further three that I can read and understand pretty well. This, however, is my first blog in English – after nearly 20 years with this company there’s always a first time for everything!

My language skills have helped me navigate my personal and professional lives in ways too numerous to list here. But I was thinking about how we communicate and the importance of clear understanding as I was looking through the latest developments concerning ISO-20022, which is an international standard for exchanging electronic messages between financial institutions.

This system – actually, let’s call it a language because that’s what is – was first introduced way back in 2004. Fast forward to today, though, and the global payments industry is now moving at pace towards its widespread adoption. Why is this the case?

Payment accepted

Taking a step back for a moment, let’s just explain what ISO-20022 actually means on a day to day basis.

The next time you make an online payment – be it retail, a bill or paying a friend – you click a mouse or scan a card and, once it’s cleared, you’re likely not to think anything more of it. But because more than 70 countries have already adopted ISO-20022, this means that many of us have already been impacted by it, often without even realising.

Created to give the financial industry a common platform, it uses a modelling methodology, a central dictionary, and a set of XML and ASN.1 design rules. Rather than managing multiple market systems that speak different languages, ISO-20022 uses structure and dedicated fields for payment details, with the formatting standard creating far greater communication efficiency.

But it’s not just about greater efficiency. One of ISO-20022’s strengths is that it highly flexible and this helps generate more competition and innovation in the financial sector. In addition, because it is used across so many payment systems, it enables by greater re-routing of messages if there is an outage – thereby boosting resilience. Throw in more data being able to be carried and less need for banks to make manual interventions (helping reduce delays for the customer), it is clear there are plenty of accelerating factors fuelling ISO-20022’s rise.

But that doesn’t mean there aren’t challenges woven into its adoption. Just last month, for example, the US Federal Reserve opted to delay the implementation by two years to 2025. So what are some of these problems?

Storm clouds brewing

For starters, since last November, SWIFT has begun to phase out the first MT message types, which is why most banks have accelerated their preparations for when MT is no longer used in a couple of years, with 2025 being the current target date.

ISO-20022’s new range of fields also structure the data differently than in the well-known SWIFT Message Types (MT), which law enforcement officials and investigators are very familiar with. While new detection configurations will need to be created, the data itself – while supposed to be structured – can actually remain quite unstructured in reality, and which can lead to many false positives in MT screening).

The screening issues don’t stop there either.

Unlike MT messages, no direction of the payment is clearly available, rendering efficient screening more difficult. Inbound and outbound messages should be screened differently, and since there is now no clear indication of direction (depending on the source system), it is now hard to apply the correct detections.
There are other practical issues arising from the shift from MT messages to MX – which are the XML-based replacement that are compliant with ISO-20022 standards. Unfortunately, The XML structure can vary greatly depending on the message type. Some blocks (sender/receiver) are still there but the elements they appear under (and thus the location) can be very different – again making the task of law enforcement far harder.

Enter Sensa-NetReveal®

The good news is that investigators can call on Sensa-NetReveal®, our risk, fraud and compliance solutions suite used by major global banks, insurers, government departments, and law enforcement agencies to provide intelligence, help combat criminal threats, and enhance competitive advantage.

I’ve been working on these solutions for more than 17 years and our application includes protocols for any message type – including SWIFT MT and MX – while also offering full support for ISO-20022. Sensa-NetReveal will seamlessly convert everything to a generic payment format to allow for an easier transition from MT to MX – meaning that investigators should not even need to care about the original payment message format.

Now that’s the kind of language fluency that anyone should aspire to – myself included!

A common language and model for financial messages is now taking root around the world. Ben Princen spotlights ISO-20022, explaining why it is gaining traction and revealing how Sensa-NetReveal® is ready for challenges it might generate

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