VIDEO | Implemented, but not fully adopted across the industry – that’s the current state of ISO 20022. At the PostTrade 360° Nordic 2024 conference, the session titled “How markets should adopt ISO 20022 in securities services” examined the common barriers to implementation, how adoption can be encouraged, and best practices for migration. The recommendations were based on the findings published in a paper titled “Market considerations and ISO 20022 migration approaches for securities” by the ISO 20022 Working Group set up by the International Securities Services Association (ISSA).
First developed in 2004 as the successor to ISO 15022, ISO 20022 is certainly not new. Yet, 20 years after its creation, adoption status for the messaging standard remains “ongoing”. Christine Strandberg, head of investor services banks product management at SEB suggested that this was the consequence of not having a deadline set for migration for securities. It has allowed the sector to never properly start, hence “never get to the finish line”.
While the securities sector dallies with adoption, the payments industry already has its sights set on a deadline: November 2025. As ISSA CEO Colin Parry pointed out, the securities industry “actually generates a large amount of payments traffic”. Whether the sector should move on the same timeline as payments to ISO 20022 is thus a question ISSA’s paper seeks to answer.
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Not quite out with the old
One of the main obstacles to a greater uptake of ISO 20022 is that “from a securities point of view, ISO 15022 works,” said Parry. And it works well not just alone, but also in tandem with ISO 20022 – to the point where the concepts of co-maintenance and coexistence are paramount when talking about the two standards.
Karin De Ridder, head of the standards development team at Swift, described coexistence as “having different standards for the same business processes existing together”. This is the current status quo of ISO 15022 and ISO 20022. Migration isn’t as clear cut as simply moving one market to the newer system at a time, because no market is “an isolated island”. Additionally, there will be “impacts on other markets across borders”, which necessitates keeping both standards alive.
Co-maintenance is the synchronised maintenance of both systems. “Whatever change we make to ISO 15022, whether it’s for a new regulation or a new business requirement, we do the same for ISO 20022, at least for corporate actions,” De Ridder explained. “The two standards are kept in sync, which is an advantage if you need to translate from one standard to the other, but at the same time there is also no incentive for migrating, because you have the same functionality in the two standards.”
The debate now is whether maintenance should only be done on ISO 20022 to encouage migration. Swift is holding back because the strategy might encourage workarounds or going back to bespoke messages which, as De Ridder stated, “is the opposite of what we want to achieve”.
Too many cooks
Further adding to the complexity is the presence of variants within ISO 20022. “The idea was that in order to have coexistence between ISO 15022 and ISO 20022, there should be co-existent variants,” Strandberg revealed. “We have two different variants of a number of ISO 20022 messages and people implementing it have to choose which one to implement.” This means that on the surface, two institutions could be migrating to the same standard – ISO 20022 – but not to the same variant of the standard.
Making the right moves
Alex Dockx, executive director of industry development at JP Morgan, shared a few recommendations for successful migration. He described the consultation phase as “arguably one of the most important stages”, as it create a business case for using ISO 20022 – or determine if the messaging standard is even the right solution.
Migration should not be so aggressive that it leaves the rest of the market behind, as an isolated move would not “generate benefits for the market”. Since co-existence works to a certain extent, rushing to fix what isn’t broken would only encourage a move backwards.
Finally, the preference should be for moving to the latest standards, not “interim truncated versions” or “half versions of what the real thing would be”. This is particularly important for international investors and international banks.
Panelists:
Karin De Ridder, Head of Standards Development Team, Swift
Alex Dockx, Executive Director, Industry Development, JP Morgan
Christine Strandberg, Head of Investor Services Banks Product Management, SEB
Moderator:
Colin Parry, CEO, International Securities Services Association (ISSA)
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