With compliance deadlines fast approaching, banks and payment service providers (PSPs) must work with increased urgency to enable messaging over the ISO 20022 standard. However, as our expert panelists explained in a discussion at Volante’s 2023 EVOLVE conference, ISO isn’t just a mandated international messaging standard, but a vehicle for innovation, providing financial institutions with an incredible opportunity to harness data as a product and introduce new services to their customers.

Here are some brief takeaways from the panel, including the strategic opportunities that arise from ISO 20022 integration, as well as the difficult but critical truth about the risks of falling behind the adoption curve.

Leveraging ISO 20022 Data Strategically

While the standardized messaging provided by ISO 20022 is revolutionary on its own, integration of the standard will also open up access to up to 30-40% of additional data for banks and PSPs to leverage to their strategic advantage. When asked about exactly how this data can be utilized, and why financial institutions would be wise to view ISO integration beyond mere compliance, our panelists identified at least three strategic opportunities.

First, ISO 20022’s enablement of richer, more comprehensive, and standardized data can allow banks to build out and significantly improve customer-centric services. After using this data to gain deeper insights into customer behavior, transaction patterns, and market trends, these insights can be leveraged toward personalized banking services, targeted marketing efforts, and the creation of an overall more rewarding customer experience.

Secondly, ISO integration can be viewed as a vehicle for introducing new products and services and, in turn, creating entirely new revenue streams. For example, this might be an anti-money laundering service that leverages ISO 20022 data to detect suspicious transactions. Such a solution—and truly any novel reporting and/or analytics service—could then be marketed to other financial institutions, their corporate customers, and other regulatory bodies.

Finally, the technological changes implemented by banks for ISO integration set them up for broader innovation and the optimization of their overall digital transformation journey. For example, these upgraded systems can be leveraged to accelerate the path to real-time payments and API-enabled open-banking capabilities, both of which are becoming particularly important in today’s modern and open financial environment.

Understanding the Implications of Noncompliance

Throughout the discussion, our panelists frequently warned banks about the dangers of being unprepared as deadlines for ISO-readiness approach, however they also stressed that the repercussions of noncompliance go far beyond those handed down by regulatory institutions.

As one panelist pointed out, not being ready for ISO 20022 means an inability to send and receive high-value wire transfers, which would naturally result in a massive disadvantage for virtually any financial institution. Moreover, banks need to consider that falling out of line with an international standard as far-reaching as ISO will give rise to a number of additional interoperability challenges, and frankly may prevent banks from transacting overseas or even maintaining their core operations.

“The interoperability challenges would be significant,” added one panelist. “If you want to transact at all with other financial institutions that are already on ISO, you’re not going to be able to do that, and this will become especially important in the context of cross-border payments.”

Although this might seem like a hard pill to swallow for institutions who have yet to embark on their ISO journey, or who find themselves only at the very beginning of implementation, it can also be taken as a source of encouragement when considered alongside the possibility of capturing the aforementioned strategic opportunities. And while such institutions will need to appreciate the urgency of the situation, the most important thing is to first “take a step back into that strategic mentality,” as one panelist put it, taking into account the advantages that can be gained by tapping into ISO 20022 data, as well as what that looks like in the context of your operation.

For more information on ISO 20022 messaging, stream our webinar, “ISO 20022: The future of payments.”