3 Ways ISO 20022 Will Change Financial Services

Payments are changing. ISO 20022, a new standard aiming to optimise the data exchange occurring within money transfers, promises to shake up the financial industry. 

One thing most, if not all, institutions rely on is data. It sits at the heart of most digital transformation projects as these organisations become ever more data-driven. 

Payments data can bring tremendous value in helping institutions from banks to insurance brokers serve their clients better.  

From enhancing payment security to having the potential to deliver strong returns on investment (RoI), discover three ways ISO 20022 will change the way financial institutions approach customer transactions. 

ISO 20022 and Payment Security

ISO 20022 establishes a common language which banks and other financial institutions can use to communicate. In itself, this improves fraud detection as the way transaction information is sent and received will be identical between institutions, often across different markets.

Institutions will no longer be constrained by different languages used by their legacy systems to facilitate transactions. Instead, a shared language will increase confidence in transaction authenticity and improve anti-money laundering (AML) processes by making transaction screening simpler.  

This standardisation is essential if institutions are serious about reducing the amount of money laundered each year, which stands at €1.7-4trillion worldwide. Some institutions have reduced the number of transactions processed manually to 1% of their total by implementing a shared data exchange language, enabling fraud prevention resources to be distributed more effectively.  

Managing Data with ISO 20022 

Data: the watchword of financial institutions across the world. In recent years, institutions have found news ways to leverage data to learn more about their customers and optimise their internal processes, as well as bolster their data analytics capabilities.

This has required a monumental effort by some institutions, taking data out of silos and placing it into data lakes to create actionable intelligence from hundreds, sometimes thousands of datasets. For example, HSBC is bringing customer data, transaction history, market information and other data sets together to form an Intelligence Hub, with the aim of automating processes; enhancing real-time fraud analytics with fewer false positives; reducing customer-level risk and reward models for optimised pricing; and creating real-time dashboards to deliver better insights and accommodate improved decision making. Lloyds Bank, in its latest annual strategic report, similarly places its focus on data, expecting a 50% RoI from Year 1 investment in advanced analytics.

Return on Investment

ISO 20022 not only offers improved security and better data leverage but can also deliver positive business results. Through ISO, in combination with wider financial services digital transformation efforts, institutions can create more dynamic products which immediately respond to customers’ needs, in turn having a positive effect on RoI.

Consider an insurance broker who has access to information about industrial or retail equipment usage derived from payments data. Using this information, they can more easily forecast damage to equipment as well as predict claims amounts. A real-life example of the dynamism offered by the common language of ISO can be seen in Commerzbank’s prototype for a ‘pay-per-use’ loan. The solution uses sensors embedded into capital equipment to automatically adjust loan terms based on actual usage.

ISO 20022 opens up the potential for the greater security and enhanced data management of payments. But this is dependent on institutions being able to maintain this security and - significantly - manage their data correctly. 

Sound challenging? Critical Software can help your institution avoid the mistakes of managing data and increase its bottom line. Take a look at our white paper on Data Consolidation to find out more.

Ready to know more? Get in touch with Christian Schultz, our Business Development Manager for Finance, and see how Critical can help you realise digital transformation in your institution.