The ISO 20022 destinationwhich promises to lay the foundation for greater payment-processing efficiency, improved customer experience and streamlined compliance proceduresremains fixed, but the route for getting there has seen several changes in recent months.

SWIFTs decision to delay its ISO 20022 migration in the correspondent-banking space by a year, coupled with a strain on resources caused by the COVID-19 pandemic, has sparked a response from various major market infrastructures across the world, which have also looked to amend their strategies accordingly.

The migration to ISO 20022 requires an enormous amount of coordination, not only between SWIFT and each market infrastructure but also within individual financial institutions, as each business areabe it operations, compliance or client servicefulfils its role in the wider companys transition.

Despite delays, banks should resist any temptation to take their foot off the pedal.

So, as we embark on this diversionary route to ISO 20022, where do we stand on the journey, and what challenges lie ahead.

Initial project work also indicated that over the coexistence periodscheduled to run from the go-live date until November 2025the industry would need more from SWIFT than a short-lived messaging-only solution and a central translation.

In response, SWIFT revisited its approach and, following approval from SWIFTs board of directors, announced a new strategy in March 2020.

Under the current system, financial institutions must pass all messaging data down the chain, but, during the transaction lifecycle, this data can be modified.

It means that the least rich message format in the chainor the weakest linkdetermines what data the end beneficiary receives.

SWIFTs new platform, however, will hold a central copy of the complete payment data, which will be accessible to every bank in the payment chain.

To accommodate the industrys request for an extension, and also to allow time to build the new platform, SWIFT has delayed its migration by one year to November 2022.

Decisions to delay migration timelines have also been influenced by the global COVID-19 pandemic, which has put pressure on long-term project workthe result of a reallocation of resources in line with more immediate priorities as well as difficulties surrounding the availability of resources due to the home office environment.

Shortly after, EBA CLEARING confirmed that its migration strategy for EURO1 and STEP2 would also be postponed by a year in line with the ECBs timeline.

Following this consultation, the BoE opted for the latter approach, scheduling the go-live for June 2022hoping that this will help participants manage truncation issues prior to SWIFTs adoption of ISO 20022 in late 2022.

This creates potential interoperability issues between SWIFT and market infrastructures that have already migrated, as participants will be able to receive payment messages from customers and correspondents in the MT (message type) format, which may then need forwarding across an ISO 20022-enabled payment system and vice versa.

One way around these issues, as shown by the BoEs new approach, is to initially go live with like-for-like ISO 20022 messages only, meaning that only the data equivalent of an MT message can be used in the much richer ISO 20022 message.

Having to implement the changes for different central-bank systems simultaneously creates a greater risk that banks will be unable to deliver.

Also, the changes to previously published timelines mean that the BoE will now migrate five months earlier than the ECB.

When planning for the deployment of T2 and CHAPS, some banks had planned to leverage their T2 build for their CHAPS migrationmeaning that their migration plans were somewhat dependent on the order not changing.

This will allow ISO 20022 users to send messages using the new standard to all users, including those who have yet to migrate.

But due to the richness of the new format, banks that remain on MT will experience some data truncation during this period.

Given that any translation between the new and old formats will be imperfect, it will be necessary to have access to both the MT and the original ISO 20022 versions of the message for transaction due diligence, such as sanctions screening and anti-money-laundering (AML) transaction monitoringcreating additional challenges for banks that continue to use MT messages.

Iso 20022 Xml Format Bank Of America