By 2022, Most Payments will Migrate to ISO 20022, a Standard for Electronic Data Interchange between Financial Institutions, According to Payment Components

    The team at Payment Components, a UK-based firm that’s empowering Open Banking with agile PSD2 and API frameworks (developing solutions for banks, corporates, and developers including BaaS while supporting Fintech payments), notes that with the introduction of new regulations and payment systems, managing a bank’s payment infrastructure is “becoming increasingly complex.”

    Bank institutions have to integrate with new acquisitions, localize their proprietary technology stacks to the countries they move to, while also having to keep up with standard payment integrations. If banking platforms don’t complete these tasks, then their payments messaging “becomes siloed and causes system delays, errors, and increased costs,” according to Payment Components.

    The Payment Components team asks how smaller banks and e-money institutions can “efficiently keep up with the constant stream of new releases?” The Fintech firm states that it has created a solution that lets banks manage all their payment flows “within the same system.”

    The company explains:

    “Each country has its own domestic payment service and each bank and group may have its own messaging system. So far, the dominant messaging standard used for the last decades has been SWIFT MT. But this international standard has reached its limits as the industry needed a messaging protocol able to carry more data and requiring fewer manual intervention.”

    They added:

    “The demand for instant payments is growing. In the UK, the use of Faster Payments has seen an increase with double digits quarter on quarter. And growth is similar all over the world.” 

    Big Four auditing firm Deloitte reveals that real-time payments have helped with increasing and providing easier access to working capital. They’ve also improved the efficiency of the financial system by enhancing financial inclusion, while lowering the overall cost of payment systems. According to Payment Components, it should be clear that the trend is “moving towards instant payments and ISO 20022 is the messaging standard that can be used for all types of financial communication.”

    The payments firm further noted:

    “There are a huge number of benefits to managing payments with a new protocol such as the ISO20022. Firstly, it can transfer a lot more data and therefore enable banks to build informational structures and make data-driven decisions. Secondly, it offers long term benefits for the economy as it allows for more flexibility and innovation in the financial sector.”

    Payment Components explains that it’s a protocol that serves as an “enabler” since it provides a more organized way to take care of payments messaging. Two of the primary features are that messaging components are reused instead of having to be created “from scratch” for each message, and the format (syntax) is separate or distinct from the semantics. This reportedly makes it a lot easier to understand messages wherever they might be coming from, the Payment Components team noted.

    They also mentioned:

    “ISO20022 is there to help improve communication, understand messages from other institutions, and enhance cooperation. The vast majority of the payments around the world will have migrated to the ISO20022 by 2022.”

    The Fintech firm continued:

    “SEPA, the EURO area payment integration initiative, also utilizes ISO20022 to offer low-value transfers at minimal cost and real-time payments throughout the SCT Inst scheme. That’s why the best strategy is to implement a system that can manage all types of payment protocols.” 

    They further noted that it’s one that manages to stay up to date with new releases, and can also integrate with ISO20022, SWIFT MT, SEPA and proprietary payment protocols. With an Internet-based end-to-end solution, banks and financial institutions may add digital payments to their core system in “a simple plug-in application.” They also mentioned that the upfront time and investment required to install it is “minimal,” and the system is “specifically built to integrate seamlessly with different banking core systems.”

    Payment Components claims that being able to stay up-to-date with the latest releases and payment infrastructures does not have to be costly and time-consuming. We also don’t have to work with fragmented legacy systems, because with payment systems such as aplonHub, your bank may use the same technology that Fintech firms use and take advantage of the latest payment standards “without creating more siloes,” according to Payment Components.


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