The Federal Reserve is pushing for adoption of the ISO 20022 global payments messaging standard, a move industry analysts say could streamline B2B payments, especially cross-border. Reports on Friday (June 17) by the Association for Financial Professionals (AFP) said the Fed recently provided an update on its progress to encourage ISO 20022 adoption.
Speaking at the AFP’s Treasury Advisory Group meeting, Minneapolis Fed Senior Vice President Claudia Swendseid highlighted some challenges in getting ISO 20022 to really gain traction.
According to reports, the biggest challenge is the ongoing lack of understanding around the messaging standard; the Fed has created a guide to help educate financial institutions and corporates on ISO 20022 in response.
Still, there is progress, Swendseid said.
“The U.S. has now created a roadmap, and it’s moving forward,” she said. “The wire infrastructure will be the first infrastructure to abandon its propriety formats and move to ISO 20022.”
One of the biggest hurdles in efforts to promote the adoption of ISO 20022 is NACHA, which has yet to decide whether it will implement ISO 20022 for ACH payments. Reports said NACHA has created a working group to explore the decision, however.
Swendseid said she is confident that, once wire payments move to the ISO 20022 standard, ACH payments will soon follow.
“This could create opportunities for global companies to streamline some of their processing with their bankers,” the Fed official explained,. “Because if you’re an international company, there are lots of processes that you could streamline. Banks could do all sorts of transactions for you, but they charge you for that and rightly so.”
According to AFP Manager of Treasury and Payments Magnus Carlsson, the ISO 20022 adoption efforts will be instrumental in other payments initiatives presently in the works, like the Fed’s Faster Payments goals and The Clearing House’s own projects.
“Anything new that comes out will almost certainly be with this standard,” Carlsson said of ISO 20022.