ISO 20022 is a global standard for electronic data interchange between financial institutions. In simpler terms, it is a "common language" for financial messages, designed to modernize and standardize the way banks and other financial organizations communicate about transactions, payments, securities, and other services.
What does ISO 20022 entail?
* Metadata repository: Contains detailed descriptions of messages and business processes.
* Maintenance process: Ensures that the content of the repository remains up to date.
* Design rules: Defines how to convert message models into XML or ASN.1 schemas, which are the data formats used for communication.
Purpose and key benefits:
The main objective of ISO 20022 is to improve efficiency, interoperability, and data quality in financial communications worldwide. Some of its most important benefits include:
* Enriched and structured data: Allows for the transmission of much more detailed and organized information with each payment, such as the purpose of the payment, the ultimate beneficiary, etc. This improves transparency and facilitates fraud detection and regulatory compliance.
* Straight-Through Processing (STP): By having more complete and standardized data, the need for manual intervention is reduced, speeding up payment processing, decreasing errors and operational costs.
* Global harmonization: It creates greater interoperability among different payment systems around the world, facilitating cross-border payments and improving the efficiency of market infrastructure.
* Greater adaptability: It is more flexible than previous messaging standards, allowing for better responses to emerging technologies (such as blockchain, AI) and changes in the market.
* Improved risk management and compliance: The richness of data facilitates sanctions control, anti-money laundering (AML) efforts, and fraud prevention by providing more accurate and complete information about the parties involved in a transaction.
* New service opportunities: The availability of richer data allows financial institutions to develop new value-added services, enhanced analytics, and better liquidity management.
In summary, ISO 20022 is a significant step towards global financial standardization, offering a solid foundation for innovation and greater efficiency in the payments and financial services ecosystem.