B2B Payments

Europe and Africa Are Ahead On ISO 20022 B2B Payments; U.S. And Canada Lag

If adopting the ISO 20022 universal financial messaging system for B2B payments is a chicken-and-egg problem, SEPA seems to have cracked it in Europe. Messaging providers have gone live in at least 11 European countries under the Euro zone’s Single Euro Payments Area initiative, according to a new report from SWIFT.

But in the U.S., the Federal Reserve, NACHA and other big players are still in the process of assessing the business case for ISO 20022 for payments. Ironically, that go-slow approach is taking place as both the Fed and NACHA are pushing for real-time payments in the U.S., something that ISO 20022 would help enable.

The ISO 20022 Adoption Initiatives Report, which was issued by SWIFT in its role as the ISO 20022 Registration Authority, lists information on 36 efforts to implement the standard for payments. (ISO 20022 also covers other kinds of financial messaging, including securities, foreign exchange, trade services and cards.) In most cases, the ISO 20022 message formats replace multiple local or regional formats for low-value and high-value payments.

Of the 36 payments projects, 25 have already gone live — and 20 of those are in the Euro zone, eastern Europe or Russia. Not surprisingly, most of the European projects are tied to SEPA requirements.

Exactly how much of an impact the new message formats are having is hard to gauge, because not all the projects provided that information for the report, and usage varies widely. For example, a service provider in Slovenia reported 12 to 14 million transactions per month, while one of several Belgian service providers reported an average daily volume of 4 million transactions, or about 120 million transactions per month.

The remaining five already-live services include two in the U.K., one in India, one in South Africa, and SWIFT itself, which operates an ISO 20022 network that connects banks in 27 countries.

The remaining 11 payments projects are at various stages of development. Four are in Europe, including Switzerland (scheduled to go live in July 2015) and the European Central Bank’s own ISO 20022 service, which is set to start operating in November 2017.

In Africa, the 15-nation Southern African Development Community is scheduled to roll out an ISO 20022 EFT payments system this month with 96 banks. The SADC is also planning a mobile payments system scheduled to go live in September 2015. South Africa also plans to add an additional ISO 20022 provider in mid-2015.

The Bank of Japan plans to add ISO 20022 capabilities to its BOJ-NET network that will go live in October 2015. Australia’s central bank plans to have an ISO 20022 service for low-value payments ready by the start of 2017.

But of the two remaining projects — in Canada and the U.S. — neither has a realistic date for going live. (Banks in both countries have the option of using SWIFT’s ISO 20022 services if they’re connected to that network.)

In Canada, where ISO 20022 is expected to replace three different financial messaging standards that currently handle well over a billion transactions per year, the Canadian Payments Association officially reported a launch date of January 2020. But it added that the date was “randomly chosen,” because the project is nowhere near ready to have a firm time line.

And in the U.S., the Federal Reserve Banks, NACHA, the Clearing House, and the ANSI X9 Financial Services standards committee are officially still in the process of determining “whether or not a business case exists for U.S.-based financial institutions, payment clearing and settlement infrastructure providers, and corporate customers to adopt ISO 20022 payment messages.”

How far along are they? The regional Fed Banks commissioned a consultant to analyze that payments business case. The consultant’s report concludes that “building new infrastructure is the optimal solution” — and according to the Fed, that new infrastructure won’t be profitable until 2025.



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