A recent survey from the International Securities Services Association (ISSA) shows ISO 15022 remains the most widely used standard in the securities services industry. Respondents to the survey claim to be struggling to form a clear business case for adoption of ISO 20022 and it seem the securities industry is not alone.
According to the ISSA, the securities industry is struggling to form a clear business case for adoption of ISO 20022. The industry needs to understand the barriers to activation between capable players in more depth, and what it takes to see some leadership activate the use of ISO 20022 communication exchanges among firms that have this capability.
They are not alone, according to Naresh Aggarwal, Associate Director, Policy and Technical, Association of Corporate Treasurers, UK. “We are not seeing everyone running toward a deadline but a natural evolution of the standard,” said Aggarwal. “It will pick up pace as more people understand how to implement it, and as more systems and migration tools will become available. For a lot of treasurers, ISO 20022 is just too conceptual. As it becomes more widespread and recognised, people will not want to be behind the pack. But adoption will be a bell curve.”
Most members, apart from the financial corporates, do not see ISO 20022 as a priority. “For a lot of treasury teams that have low volume over treasury banking apps, the ability to track and enhance payment information isn’t critical,” he said. “Part of the challenge with ISO 20022, is people have got used to the way payments are. They are used to the delay in the way payments are processed and the attitude is, ‘If it isn’t broke, don’t fix it.’”
While there is growing appreciation for the benefits of ISO 20022, Aggarwal argues most treasurers have a list of more pressing issues. “The cost of implementing is expensive, and people are not keen to touch data systems, because if you get it wrong, you make customers very angry,” said Aggarwal. “People need to be confident they are not going to ruin anything and they are getting something better. I do think it is important to have a degree of education in the corporate space to make sure people are aware of what it is, what the use cases are and the benefits of it.”
A hybrid system, where ISO 15022 and ISO 20022 co-exist, seems likely to be the reality for the next few years. The ISSA highlights the need for co-maintenance, whereby industry changes are made applicable to both messaging formats. The survey reports the securities services industry is unlikely to see any material growth in ISO 20022 in the next five years.
“A lot of organisations have moved to accept payments on the new standard, but in certain aspects they are still generating payments on the old standard,” said John Carey, MD of AArete. “If you look at the securities side of treasury-based capabilities, they have a huge amount of complex product structure. They often have multiple payments legs on the back of them and they will be at the back end of the adoption life cycle.”
The report finds Europe is ahead of other regions in its action around ISO 20022, however questions whether these investments in the EU will prompt other jurisdictions to follow suit – according to the report, custodian banks are not reporting any demand from their end customers.
