The payments modernization game is changing, and the advent of ISO 20022 is largely responsible.

Banks and financial institutions worldwide continue to reconsider their payments infrastructure and turn their attention to ISO 20022, a global financial messaging standard that improves and streamlines the communication and transfer of financial data.

When different banks adopt different standards, the subsequent losses can be staggering and swift. Rejected payments, costly investigations, and a worsened customer experience: These are just a few possible outcomes related to poor bank-to-bank communication and the butchered transfer of financial data.

Diverse factors typically inspire a payments modernization initiative. Per KPMG, market forces include regulatory compliance and evolving privacy regulations; the drive to increase operational efficiency; a competitive landscape among fintech providers; and increased customer expectations.

While instant payments and real-time payments might have increased customer delight 10 or 15 years ago, they’re old news now. In an increasingly digitalized society, customers hold higher expectations for their banks’ payment capabilities. Accordingly, banks are searching for new ways to keep and attract clients. Many customers also use multiple payments platforms, so improved bank-to-bank communication becomes key.

Per PwC, banks can use ISO 20022 to better understand customer behavior: “With instant payment rails powered by ISO 20022 – a structured, data-rich message format that is becoming the global standard across banks and corporate clients – banks can realize enhanced payment insight and analytics for both institutions and customers, and increased operational efficiencies, straight-through processing and error reduction.”

Presently, payments modernization initiatives are largely focused on global adoption of ISO 20022, as the uniform language offers a number of benefits to both banks and customers. These business benefits include the following:

Richer, more structured data
Greater interoperability
Fewer investigations and inquiries, resulting in lower costs for banks
Enhanced reconciliation
Innovation achieved through data-driven customer insights
More remittance information available to customers
Greater transparency surrounding conversions and additional fees associated with cross-border payments
Better risk management supported by increased transparency

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