The technical documentation for the implementation of ISO 20022 published by Pay.UK is another harbinger of serious technical changes. Their implementation can be spread over time using a flexible solution: a message broker.

The introduction of the international ISO 20022 Financial Services standard has brought about significant changes in the banking sector and also in the UK. The newly introduced New Payments Architecture (NPA) will not only make it easier for many companies and clients in the UK to control their transactions, but will also open many innovational opportunities.

In early July, Pay.UK released the first set of technical materials for organizations implementing ISO 20022 and transitioning to the Next Generation Standard for UK retail payments. For banks and financial institutions, this is the last call to start working on changes in their IT architecture.

Requirements are complex, as expected

The ISO 20022 standard is an increasingly used format for payment messages. Based on the XML structure, it is already used by payment systems in over 70 countries. The introduction of ISO 20022 will have a huge and profound impact on the data carrying capability of payment systems, fundamentally changing the way payments are made and financial information is transferred.

The documentation published by Pay.UK is the first set of industry standardization materials, containing a list of technically difficult changes, as expected. Although preliminary, it is an important step on the way to global standardization of high-value payments. Based on the published guidelines, banks that are not direct participants of CHAPS can begin conducting initial impact assessments of the scheduled changes in internal processes and day-to-day operations. Pay.UK will require the same changes from its partners as required for members of the CHAPS system, although in this case the deadline is not June 2022, but March 2023. All in the hopes that the end customer avoids any negative impact of the changes.

Pivotal changes require a proper approach

The scope of changes that banks will need to introduce and then test to avoid negative impacts on customers and operations is huge. In fact, it is broader than any regulatory project in the last 10 years, including SEPA. Therefore, preparation for migration to ISO 20022 will require an experienced IT team, including analysts with in-depth domain knowledge, as explained by my colleagues in this article.

There is some skepticism in the UK as to what opportunities the NPA will eventually bring. Recently, a key stakeholder group raised concerns about the costs, timing, and difficulties of migrating to ISO 20022. In February 2021, the payment systems regulator issued a consultation paper, seeking the views of the banking industry on the best approach to reduce the risks associated with the NPA implementation.

There are several ways to upgrade the banking IT architecture to accommodate the ISO 20022 standard. A ready-made solution can be deployed as soon as the software vendor launches it, or banks can develop their own solutions in-house. There is also a third option: a communication standards converter as a cost-optimized solution with more long-term benefits, and our proprietary system, Payres, can be used as one.

Message standard converter that acts as a time shield

Payres supports back office applications that do not support the new format, fully or partially. Our message broker also allows automated processing of transactions exchanged between back office applications and external networks.

Our application not only “translates” messages, but also enables automated use of data exchanged between the bank’s core system and other systems.

Payres can be used for advanced reporting purposes or trigger a variety of business rules that take effect in external systems. As a result, information that so far has only been processed in a two-dimensional way is leveraged in a number of dimensions and creates added value for your bank.

Need a budget cushion? Say no more!

It may take some time for the NPA to be fully implemented. It is possible that all necessary changes will not fit into an annual budget or any single financing period. With Payers, you can distribute these costs over several such periods, even over several years. If you need support in preparing for the upcoming changes, feel free to contact us.