ISO20022 — The Payments Revolution

by Gareth Lodge, April 30, 2015
Industry Trends


ISO200022 is a game-changer for the payments industry.

There are events that are seismic in impact, that redefine the landscape. Think about how the Internet combined with mobile technology has altered our expectations to wanting “everything, everywhere,” whether at home or at work. The events that are most impactful are those where change has previously been rare and unexpected. It’s not hyperbole to say that the payments industry is going through exactly that at the moment with ISO20022. Europe was at the epicenter, but the shock waves are spreading rapidly. The question is no longer if ISO20022 will impact you, but when.

The purpose of this report is, first, to provide insight into what ISO20022 is — and isn’t. A number of markets are close to adopting ISO20022, most visibly Canada, but the US appears to be close behind. Yet a study in 2012 showed that only 9% of US respondents were aware of ISO20022. The second purpose is to educate banks that have adopted ISO20022 about key challenges and opportunities they will face.

Previous ISO20022 implementations have been small scale, measured in the millions of transactions. SEPA sees all ACH transactions in all euro countries start to use ISO20022 messages. That means billions of transactions a year are being processed. As a military strategist once said, “No plan survives contact with the enemy.” Only now have some of the challenges and opportunities started emerging.

As an XML-based message, ISO20022 is extremely flexible, and can carry as much — or as little — information as the scheme wishes. As a result, many banks need to ensure that they have chosen a solution that can manage the potentially significant increase in the size of the payments message. That’s not just the processing, but what is then done with the payments. Increasingly banks need to access the payments data for reporting purposes. A data warehouse may not be sufficient; banks need to be able to curate the messages to ensure access at speed and with flexibility.

“Banks have long assumed that only software built for banking is suitable for banking. Yet many other industries have also had to address challenges around data. In particular, the telecom industry has very similar challenges: high volumes of transactions, priced in very different ways, that need to be itemized on bills at a later date,” says Gareth Lodge, a senior analyst with Celent’s Banking practice and author of the report. “Elsewhere in the bank, this connection has been made, with many of the recent billing implementations in banks and processors utilizing solutions originally from the telco industry. The same applies for price optimization tools. Banks ought to be looking to high-volume data businesses to see what those organizations are doing, and see this as an opportunity for improvement, rather than simply a task that needs fulfilling.”

This 22-page report contains 2 figures and 2 tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary


ISO20022 — The Future of Payments?



Of Payments and Standards



What Is ISO20022?



Where Is It Being Used, and How?


The Case for ISO20022 Is Clear



Remittance Data



Global Interoperability



Lower Cost of Ownership


There Are Some Adoption Challenges to Address



Awareness and Understanding



Traditional Business Cases Are Hard to Build



Not All Standards Are Standard



Greater Infrastructure Demands


Implications for Banks



Plan for Message Size Growth



Plan for Accessing Messages



Not Storage, But Management


Path Forward


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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