ISO 20022: No Panacea, but a Worthwhile Endeavour
Implementation in Canada
The Canadian Payments Association (CPA) has been prioritising the modernisation of Canada’s payments system over the past several years, and a key focus of that has been implementation of ISO 20022. Drawing on lessons learned from other jurisdictions, the CPA is attempting to transition to ISO 20022 as smoothly as possible.
Tom Morrison, director of treasury operations for Suncor Energy, has been party to discussions regarding ISO 20022, which gathered stakeholder input. However, the actual implementation plan may still be a long way off. “There’s no definitive roadmap,” Morrison explains. “There was discussion around activities in 2015 to get to the go-forward strategy. They’re actively talking to the various stakeholders and seeking input into requirements.”
Stakeholder input is essential to getting a standard right. However, it can also create a case of “too many cooks in the kitchen,” which has been the case for ISO 20022 during this gradual global rollout. “Every stakeholder seems to want their own little nuance of that standard,” notes Magnus Carlsson, director of treasury and payments for the Association for Financial Professionals (AFP). “But of course, when you do that, that’s not a standard anymore.”
This can create issues for corporate treasurers who make regular payments to all corners of the world, Carlsson continues. “If you want to sign onto this as a corporate, you would want to know that this is a standard; that this is not going to change,” he says. “You’re not going to change your systems and make all of these investments if this thing is going to change.”
Carlsson relates the situation to Europe using ISO 20022 for the Single Euro Payments Area (SEPA). “Within the different countries, there are different nuances of the standard,” he explains. “They’re already encountering issues there.”
The CPA has had in-depth discussions about which parts of the standard need to be just that—standards, from which there can be no deviation—and optional components which are aligned with ISO 20022 messaging formats but allow some flexibility. As of now, there are no clear answers. “Do you make remittance details optional? Are the only things you make mandatory the core payment details—value date, dollar amount, currency, etc.? And even within that, how rigid do you make the standard? That’s the challenge we have,” Morrison says. It is expected that a number of these questions will be answered when the CPA publishes its new standard, anticipated in early 2016.
Morrison, whose organisation just went live with SWIFT’s Alliance Lite2 this year, has faced some issues with using ISO 20022. “Every country seems to be slightly different,” he says. “They each have a version of the standard; it seems to be more of a guideline. It’s different by country, it’s different by bank— it can be quite a challenge to implement globally.”
However, Morrison was also quick to point out the benefits of using the standard, which was a key factor in Suncor’s decision to implement SWIFT. “At least we are starting with a common set of terms across jurisdictions rather than completely different standards,” he says.
Currently, a U.S. stakeholder’s group, consisting of the Federal Reserve, The Clearing House, NACHA and X9, is in the process of soliciting views from the corporate world on ISO 20022. Although the research is still going on, Carlsson expects to hear that corporate practitioners want to see remittance data included in the standard. “Some might see the remittance portion as optional but if corporates are going to sign onto this, they are looking for a complete, ready-to-go package,” he says. “And that includes the remittance information because going forward, you want to facilitate straight-through processing.”
A key concern for Morrison and other Canadian treasurers is what happens to the old standards with the advent of ISO 20022. “Do we go from a current environment with multiple standards and add in ISO 20022, which means corporates have to support an additional standard in implementation?” he asks. “Or do we have a plan to migrate from the previous standards and go with a single standard globally? There’s no clarity on that at this point in time, but in Canada the CPA is considering the implications of an additional standard. Although as a corporate, until there is more clarity, it’s tough to make decisions about where you direct your investment in technology.”
The good clearly outweighs the bad when it comes to ISO 20022; there are just some kinks that need to be worked out in Canada and other regions. Once they are, Morrison and Carlsson expect the process to run a lot smoother.
“The standard positions us as an organisation for future development,” Morrison says. “I look at it as modernising our infrastructure. So even though some of our banks can’t support the standard to date, that’s the direction the world seems to be going. Having that already developed eases the on-boarding of new banks onto that platform, rather than having multiple point-to-point interfaces that all follow a different standard.”