ISO 20022: full steam ahead?
The UK payment industry’s leap towards a world-leading payment architecture and the introduction of initiatives such as Open Banking have had a boost, thanks to the favourable feedback received in response to the introduction of ISO 20022 compliant messaging. The feedback comes following a six week consultation period earlier this year and has been published by the Bank of England, Pay.UK and the Payment Systems Regulator.
What is ISO 20022?
ISO 20022 is the move towards a new common global messaging standard, called the Common Credit Message (CCM), to be used by all payment service providers and banks. This standard will be used across the three main interbank payment systems of CHAPS, Faster Payments and Bacs, who operate the Direct Debit system. As our previous blog post has explored, by adopting this common standard it is envisioned that data can be enriched in payment messages, and compatibility across technology platforms will be improved to create more opportunities for collaboration and innovation in the sector. In addition, data formats will become more flexible and so it will promote domestic interoperability and harmonisation across countries. Lastly, by having more structure in place there will be greater and easier automation in the future.
How do PSPs feel about ISO 20022?
36 payment service providers responded to the consultation, and the responses have been published in a paper. There was near unanimous support for the CCM, with 97% of respondents agreeing to the approach. When looking ahead to the benefits of the system, 80% envisaged improved efficiencies in processing and 75% saw benefits in having richer data. There was also consensus on aligning the standard with existing messages such as card scheme standards, and existing ISO 20022 standards used across other commercial organisations. It has been recognised, however, that it will not be possible to align with all of them. When asking about the fields in the CCM, there was broad agreement, but some additions to the UK-specific addressing convention were requested and will be adopted. When looking to the costs and risks of introducing the CCM, most felt that it was not possible to predict them all fully, due to the need by some to implement globally rather than just in the UK, and the costs were dependent on how large the organisation was and whether there was ISO 20022 capacity already. The greatest risks identified were considered to be operational, followed by impacts on industry capacity.
What’s next in the implementation of the CCM?
The next step for the roll-out of the CCM is the setting up of a Standards Advisory Panel (SAP) by the Bank of England and Pay.UK to gain strategic input and advice, and working groups will be initiated once the panel is in place. The SAP will help to develop a range of market guidance, and will also feed into the global ISO 20022 Registration Management Group which the Bank of England and Pay.UK participate and engage in.
SmartDebit will continue to review and implement changes to our award-winning Direct Debit service as required, with the introduction of initiatives such as ISO 20022 in the payment industry. To talk to us and find out more about our recurring payments service, get in touch.