The payments industry functions via data. This data is being transmitted between banks, fintech companies, corporates and consumers. It’s through this data that we are able to receive our salaries, pay our bills and make purchases.
However, as Bob Dylan sings, ‘the times they are a-changin’. The recently introduced revised Payment Services Directive (PSD2) is bringing the European payments industry up to speed with the 21st century by creating a level playing field for new payment service providers. This allows initiatives such as Open Banking to take place, meaning that third parties can access an infrastructure that until now has been difficult to access. As fintech and challenger banks innovate to introduce modern methods of payment, the language used between the new systems and the traditional infrastructure also needs to be synchronised. That is why ISO 20022 – a common global “language” or messaging standard – is being implemented.
The Bank of England, along with the New Payments System Operator (NPSO) and the Payment System Regulator (PSR), has launched a six-week consultation, and industry stakeholders are encouraged to participate.
What is ISO 20022?
The New Payment System Operator (NPSO) claims that ISO 20022 will be adopted to improve flexibility with data formats, domestic interoperability and international harmonisation, particularly regarding credit messaging standards.
The Bank of England and the NPSO are preparing for the switch. They are designing a “Common UK Credit Message (CCM)”, which will be a standard message system that will be used across the three main interbank payments systems: CHAPS, Faster Payments and Bacs. Enabling this change to take place is the delivery of two major UK payment infrastructures – a renewed Real Time Gross Settlement (RTGS) for CHAPS payments and the New Payments Architecture (NPA) for Bacs and Faster Payments.
ISO 20022 will enable enriched data to be carried in payments messages, improve compatibility across technology platforms and create opportunities for collaboration and innovation. Further operational benefits will include flexibility, improved analytics, less manual intervention, improved compliance, higher resilience and improved fraud prevention measures.
The International Organisation for Standardisation (ISO) first published ISO 20022 in 2004. The Bank of England press release lists its following key features:
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