Filed Under: Money, Payment systems, Payments

Financial Services messaging standard at the heart of new payment infrastructure in UK

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This June, the Bank of England launched a six-week consultation on the adoption of ISO 20022 as the single message standard for payments in the UK. In conjunction with the New Payments System Operator (NPSO) and the Payment System Regulator (PSR); the Bank of England has published ‘ISO 20022 consultation paper: a global standard to modernise UK payments’. In this document the commitment to the standard is clear:
 

‘The Bank and NPSO as payment system operators, and the PSR, as economic regulator of payment systems, are (therefore) committed to pursuing an effective UK-wide adoption of ISO 20022, and will use all the tools at their disposal to ensure that this is achieved.’

 
ISO 20022 is a multipart standard produced by ISO Technical Committee 68 (Financial Services). Way back in September 2005 ISO approved the first ISO 20022 compliant messages: a set of four Customer-to-Bank Payment Initiation messages. In the 12 years that followed the compliant messages have grown to number more than 400.
 
One of the first widespread implementations of ISO 20022 was in the introduction of Payment messages for the Single Euro Payments Area (SEPA) Direct Debit/Credit Transfer scheme. SEPA DD/CT used the ISO 20022 payment messages and created a framework document (Rule Book), detailing the way that these messages were to be used within SEPA. SEPA DD and CT have been mandated for Euro area countries since 2014 and Euro denominated payments in non-Euro countries since 2016. The take-up of ISO 20022 word-wide is now growing. In real-time payments, ISO 20022 has launched in the US and Australia. Indeed, such is the take-up of ISO 20022 Payment Messages for real-time-payments that there is now a group set up under the ISO 20022 umbrella with the objective of documenting a harmonised and consistent view of ISO 20022 business processes, message components, elements and data content for Real Time Payments.
 
In late 2016, Payments Canada announced that ISO 20022 would be rolled out across all its systems as part of the mission to modernise the Canadian payments system. In the U.S. the wire systems – FedWIRE and CHIPS will adopt ISO 20022 beginning in 2020. The number of countries implementing ISO 20022, particularly in payments is growing at a fair rate.
 
As mentioned at the start of this blog, the standard will be adopted in the UK across CHAPS, Faster Payments and BACS, the three main interbank payments systems, which together process over 8 billion payments per year, with a total value of over £90 trillion.
 
Moving away from their legacy message formats will give all UK Payment schemes opportunities to enhance their messages with additional data that can be carried in ISO 20022 messages. This will give users better insight into the message content, for example by including invoice data. It will also give fraud engines more data to work on and enhance the ability to detect financial crime. The Bank also proposes that the CCM should use of the Legal Entity Identifier (LEI) within a dedicated field. This will enable clear and unique identification of legal entities participating in financial transactions. It is proposed that this becomes the universal identifier in the UK economy and will be applied to all business extending its use among medium and small business.
 
Additionally, if uniform structures and data formats are utilised across all payment platforms there is the potential to channel payments between schemes to boost resilience of the payments system as a whole.
 
The implementation of the ISO 20022 CCM will be using XML as its ‘syntax’, the language that is used to convey the message content. However, with much innovation being based on the use of APIs, ISO 20022 is not resting on its laurels. In November 2017 23 countries including China, Singapore and the UK decided to focus effort and pool resources to develop the first ISO standard for APIs in financial services’ and ISO 20022 .
 
Things move slowly in the world of international payments standards but now the rate of ISO 20022 deployments is accelerating, and it has a firm place at the heart of the UK Payments Infrastructure. Rest assured Consult Hyperion will be there to help guide you through the interesting times to come.

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