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In December, the National Bank published a project on the implementation of the ISO 20022 standard in the payment infrastructure of Ukraine
In March last year, the National Bank of Ukraine announced the gradual implementation of the international standard ISO 20022, which will become part of a large-scale initiative to transform the Ukrainian payment market.
As the regulator reported, the project provides for the transition of the Electronic Payments System (BOT) of the NBU to modern and relevant international standards for the exchange of financial messages. This will allow:
In December, the National Bank published an overview of the project on the implementation of the ISO 20022 standard in the payment infrastructure of Ukraine. It notes that the main difference between ISO 20022 and pre-existing standards is the availability of a methodology for the design of technologically neutral exchange schemes and electronic message formats. This provides a high level of interoperability between automated systems that process different messages.
The result of the application of the ISO 20022 methodology is the construction of a formalized description of business processes and the receipt of formats and schemes for the exchange of electronic messages that ensure the implementation of business processes.
ISO 20022 was approved in 2004 and 280 different message types have been designed based on its methodology over the years. The standard is constantly and actively developing, the presented models are being improved, reflecting the growing needs of market participants. Formalized models of the following subject areas have been built:
According to the ISO 20022 methodology, modeling is carried out by structuring the objects of standardization and data about them according to the principle "from top to bottom" or "from general to particular". In modeling, four main stages are distinguished (overview, conceptual, logical and physical), corresponding to four different levels of detail at which the objects under study are considered.
The authorized body for registration and maintenance of the ISO 20022 standard is SWIFT. At present, the standard is being gradually introduced by the participants of the world financial community. By 2021, banks in Europe will switch to ISO 20022 standards, followed by the United States.
In Ukraine, the action plan for the implementation of a new standard for electronic data interchange consists of the following stages:
According to Christian Westerhaus, head of cash products and cash management at Deutsche Bank, global banks will be most affected by the transition to the new standard. Since the new format will affect all stages of the payment chain - from the processing of structured information about payment participants at the initiation stage to the provision of statements after the payment is made. As a result, these banks will need to develop a global project and assess what impact the transition will have on their business model and local structures.
The impact on the payment chain of regional banks, according to the expert, will be no less serious. Those banks operating outside Europe will have more time and flexibility to complete the migration to ISO 20022.
With the move to ISO 20022, corporations will retain the ability to use various other formats to initiate payments. However, this does not mean that they are not preparing for the transition, because this is not just another banking project. Regardless of the format chosen, the content of the corporate account information will change. An ISO 20022 incoming payment will contain even more information such as structured data about the money transfer and details of the main parties. Once received, new information must be entered into the account statement, which could affect the speed of automatic reconciliation and could potentially lead to manual transaction processing in exceptional cases.
Therefore, companies must engage in industry discussions and engage in dialogue with banking partners and ERP providers to understand how their payment products and account information might change. They may need to invest in their solutions to make sure they meet the demands of the new format.
In March last year, the National Bank of Ukraine announced the gradual implementation of the international standard ISO 20022, which will become part of a large-scale initiative to transform the Ukrainian payment market.
As the regulator reported, the project provides for the transition of the Electronic Payments System (BOT) of the NBU to modern and relevant international standards for the exchange of financial messages. This will allow:
- harmonize the Ukrainian payment space with the global one,
- expand payment details with additional information,
- improve the level of service and the efficiency of payments,
- to increase the functional content of payment instruments in favor of banks and their clients,
- increase the level of payment automation.
In December, the National Bank published an overview of the project on the implementation of the ISO 20022 standard in the payment infrastructure of Ukraine. It notes that the main difference between ISO 20022 and pre-existing standards is the availability of a methodology for the design of technologically neutral exchange schemes and electronic message formats. This provides a high level of interoperability between automated systems that process different messages.
The result of the application of the ISO 20022 methodology is the construction of a formalized description of business processes and the receipt of formats and schemes for the exchange of electronic messages that ensure the implementation of business processes.
ISO 20022 was approved in 2004 and 280 different message types have been designed based on its methodology over the years. The standard is constantly and actively developing, the presented models are being improved, reflecting the growing needs of market participants. Formalized models of the following subject areas have been built:
- Payments and settlements
- Operations with securities
- Service of trade operations
- Bank cards
- Operations in the foreign exchange market
According to the ISO 20022 methodology, modeling is carried out by structuring the objects of standardization and data about them according to the principle "from top to bottom" or "from general to particular". In modeling, four main stages are distinguished (overview, conceptual, logical and physical), corresponding to four different levels of detail at which the objects under study are considered.
The authorized body for registration and maintenance of the ISO 20022 standard is SWIFT. At present, the standard is being gradually introduced by the participants of the world financial community. By 2021, banks in Europe will switch to ISO 20022 standards, followed by the United States.
In Ukraine, the action plan for the implementation of a new standard for electronic data interchange consists of the following stages:
- Development of a regulatory framework governing the application of the ISO 20022 standard methodology in the payment infrastructure of Ukraine, as well as amending the current regulatory legal acts
- Development of electronic payment documents and financial messages created in accordance with the ISO 20022 methodology for the payment infrastructure of Ukraine
- Implementation of electronic payment documents and financial messages, created in accordance with the ISO 20022 methodology, in the BOT-4 and in the PC of market participants.
What banks should prepare for
The move to ISO 20022 lays the foundation for greater efficiency in payment processing and interaction between market participants, improved customer service, simplified procedures and the ability to provide new services. The transition to a new standard is a truly large-scale event, it will not happen overnight, and market participants need to prepare for this.According to Christian Westerhaus, head of cash products and cash management at Deutsche Bank, global banks will be most affected by the transition to the new standard. Since the new format will affect all stages of the payment chain - from the processing of structured information about payment participants at the initiation stage to the provision of statements after the payment is made. As a result, these banks will need to develop a global project and assess what impact the transition will have on their business model and local structures.
The impact on the payment chain of regional banks, according to the expert, will be no less serious. Those banks operating outside Europe will have more time and flexibility to complete the migration to ISO 20022.
With the move to ISO 20022, corporations will retain the ability to use various other formats to initiate payments. However, this does not mean that they are not preparing for the transition, because this is not just another banking project. Regardless of the format chosen, the content of the corporate account information will change. An ISO 20022 incoming payment will contain even more information such as structured data about the money transfer and details of the main parties. Once received, new information must be entered into the account statement, which could affect the speed of automatic reconciliation and could potentially lead to manual transaction processing in exceptional cases.
Therefore, companies must engage in industry discussions and engage in dialogue with banking partners and ERP providers to understand how their payment products and account information might change. They may need to invest in their solutions to make sure they meet the demands of the new format.
