For those working in the payments realm, the term “ISO 20022” probably sounds vaguely familiar. As this International Organization of Standardization guideline has not been widely implemented in the U.S. – the Federal Reserve will implement the standard for its Fedwire Funds Service in three phases, beginning in November 2020 and ending in late 2023 – learning about ISO 20022 doesn’t rank very high on our to-do lists. Yet.
But, it should, according to Nell Campbell-Drake. Last month at Catalyst Corporate’s Future Forums, Campbell-Drake, VP of Payments at the Atlanta Federal Reserve, spoke about ISO 20022, outlining what it is, why entities are adopting it and what it will mean for payments in the future.
It’s never too early to prepare for a payment process that will add compatibility, interoperability and more remittance information. For those who weren’t able to attend Nell’s presentation, here’s what you missed:
What is ISO 20022?
ISO 20022 is a global standard for electronic data interchange between financial institutions that targets improving the efficiency of end-to-end communication regarding payment transactions. The standard, which is growing in adoption worldwide, covers payment transactions, securities trading and settlement information, credit and debit card transactions and other financial information.
With most transactions, it’s necessary to send accompanying information with the payment amount, but no standard format previously existed for this information. ISO 20022 aims to standardize data sent through the use of common format fields.
Why are we talking about it now?
Research commissioned by representatives from the Federal Reserve, The Clearing House, NACHA and the Accredited Standards Committee (ASC) X9 indicated that the U.S. needed to move forward with ISO 20022 implementation to remain relevant in the global marketplace.
The U.S. will begin by migrating high-value (wire transfer) payments to the ISO 20022 format, targeting completion by 2023. Low-value payments (ACH) are not currently set to migrate to the ISO 20022 format, but discussions will continue to determine feasibility of a move in the future.
What will it mean for the future of payments?
Credit unions will definitely see benefits of full migration and integration. ISO 20022 will allow for more robust remittance and compliance information without data truncation. Additionally, ISO 20022 creates stability for end-to-end payment tracking, aids with reconciliation and allows for interoperability with cross-border payments.
Credit unions that use Catalyst Corporate’s wire services will see a format change, coinciding with the Fed implementations. Credit unions originating wire transfer payments will want to prepare for use of the new format and ensure their staff members are educated and equipped to support it.
As the Fed’s November 2020 Phase 1 implementation gets closer, Catalyst Corporate will communicate more information regarding what credit unions can do to prepare.
In the meantime, visit the Federal Reserve’s resource center at FedPaymentsImprovement.org for more on this topic.