In this episode, our guest Joe Guerrero from the Foreign Exchange division at ION will be discussing the ISO 20022, a global messaging standard for financial transactions.
Ali Curi: Markets ConversatION is an ION podcast where we discuss topics of importance to capital markets participants with product owners, subject matter experts, and industry leaders.
Joe Guerrero: ISO 20022 is another standard from ISO. It provides a common global standard language. For financial transactions, it uses the XML syntax and offers richer, more structured data to be shared by our standardized messages.
Ali Curi: Hi everyone and welcome to Markets ConversatION. I’m Ali Curi. On today’s episode, we’re discussing the ISO 20022, a global messaging standard for financial transactions. The ISO 20022 replaces the widely used ISO 15022 and addresses some of the current limitations by enabling a new messaging language and protocols for the exchange of electronic data between financial institutions, market infrastructures, and other parties involved in payments processing.
Ali Curi: Our guest today is Joe Guerrero from ION’s Product Management Team, and he will discuss with us the features and advantages of this modernized messaging system. We’ll take a closer look at how this newer ISO implementation will make it easier not only to include additional information about transactions such as payment purpose or remittance details, but also how it can improve transparency among financial institutions, and payment processors, which can help reduce the risk of fraud and other types of financial crime. Let’s get started. Joe Guerrero, welcome to the podcast.
Joe Guerrero: Hi Ali. Thank you very much for, uh, inviting me on.
Ali Curi: Well, we’re very excited that you’re here, Joe. Let’s start with some background on ISO 20022. What is the ISO 20022 messaging standard and why is it important for payments processing?
Joe Guerrero: Before I go into ISO 20022 and what it is, I think it might be useful to get a sort of quick explanation of what ISO is in general. Yeah, so ISO stands for the International Organization for Standardization. It’s uh, an organization that was founded in 1947 in London, after the Second World War. So it’s been around for a long time.
Joe Guerrero: And the goal, or the aim of this, uh, organization is really to promote international cooperation and standardization to facilitate international trade, yeah? So it’s now currently based in Geneva. It’s a non-governmental independent organization. It develops and publishes international standards for all sorts of different industries, from technology to engineering, to manufacturing, and of course finance.
Joe Guerrero: It has a membership of over 116 national standard bodies all over the world. For example, ISO 4217, which I’m sure you are very familiar with, uh, is, um, this is the currency codes, yeah? So it’s a standard on currency codes, which are used all over the world. So it’s not coincidence that when any financial institution is trading, regardless of where they are in the world, they’re using the same currency codes, USD for US dollars, GBP for Sterling, they’re all using those codes, so, so these standards are vitally important to, well to any kind of industry, but also to to finance. And ISO 20022 is another standard from ISO. It provides a common global standard language for financial transactions. It uses the XML syntax and offers richer, more structured data to be shared by a standardized messages.
Joe Guerrero: ISO 20022 is not new. It’s been around for a number of years. I think it was back in 2004 where it was introduced by ISO. It’s been used by several systems and services around the world, even today. What’s happening now is that several of the payment and realtime growth settlement systems are, are migrating to this new standard. This is initially for payments and cash management messages, but the outlook is that it’ll eventually, look to support all different types of, uh, of financial messages, including like customer confirmations.
Ali Curi: And what can you tell us about how ISO 20022 is different from the current ISO 15022?
Joe Guerrero: ISO 15022, the MT messages that we know so well and love. They’ve been around for a long time. They’ve been around since the mid nineties and they were fantastic really to increase our efficiency and increase straight through processing rates. More automation. It has been found to be limited. Uh, there’s a number of free text fields that are used differently by different parties, different regions services, asset classes, and they try to retrofit their requirements into these message types. So what ISO 20022 provides is a more detailed and structured information about the financial transactions, which can improve, further improve, straight through processing and automation, reducing errors. And with that, obviously making the whole process more cost efficient. It also allows for greater flexibility and customization. It’ll make it easier for organizations to adapt to the changing business requirements. You know, if we move on to other message types or other asset classes. And by having more structured message formats, it makes it easier to identify the parties.
Joe Guerrero: When you start moving away from like identifiers, like a swift bit code or a legal entity identifier, you start to use name and addresses to identify different parties, and that can be tricky to pinpoint who’s involved in the transactions. This message type makes it more efficient. To be able to screen against payment messages for sanctioned or embargoed entities, politically exposed persons, money launderers, any kind of fraudulent activity by allowing screening systems to extract richer data from free text messages.
Joe Guerrero: You know, there’s a lot of a lot more structured data which allows that and also the future. You know, there’s an additional features that ISO 20022 can, can offer us, like attachments and images, which may be useful in areas of trade finance.
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Ali Curi: And Joe, what are some examples of how ISO 20022 messaging standard improves the communication between different payment systems?
Joe Guerrero: Well, the aim really is for ISO 20022 to provide a unified approach to all of the financial messaging. What it will do is it’ll replace a multitude of different message formats that are currently used today. So several of the payment and RTGS systems, including Fedwire, don’t use the standard ISO 15022 formats.
Joe Guerrero: So, It looks like these payment systems and RTGS systems are looking to migrate to ISO 20022, so it’ll make it easier to onboard new systems or services, asset classes, message types if all of these services are on this platform.
Ali Curi: Now, you mentioned ISO 15022. What are some compared to ISO 15022, what are some improvements for payment tracking and reconciliation?
Joe Guerrero: Swift had already done a lot of work with the MT ISO 15022, um, messages with the introduction of GPI, which is the global Payment Innovation. So this was used to speed up and improve traceability and transparency of cross-border payments. What ISO 20022 introduces the number of new message types that you can consume to identify where the payment is at any point during the payment chain. So as messages are acknowledged, whether they’re, you know, rejected or negatively acknowledged, you’ll be able to, I identify e exactly where that payment is and why that payment has has failed. So they use messages message types like the pacs.002s and pacs.004s to, to be able to inform all these settlement systems of where the payment is at any given time.
Ali Curi: Joe, the customer experience is a high priority for any industry. How will this transition to ISO 20022 affect the customer experience when it’s adopted?
Joe Guerrero: As I mentioned before, we went live last month on the 20th of March with our European clients for Target two, and what we try to do at ION is try and make it as seamless as possible. From an end user perspective, we haven’t really changed how their back office settlement systems work. It’s business as usual, really. What what we wanted to do is obviously when they go, when they drill down, the system will automatically identify which message types need to be on ISO 20022 formats, and the system will automatically transform those and deliver them downstream.
Joe Guerrero: When they drill down into those message types, they’ll see a different format than they’re currently used to. Currently they’re used to seeing the ISO 15022 MT formats. But now there’ll be a completely different look and feel to those. But from an end user perspective, we didn’t want any, any, um, impact for, for our users and the initial migration from a sort of overall project perspective, it’s pretty much a like for like, you know. Currently any data within the MT messages we’re generating is any unstructured data will continue to be unstructured data for the ISO 20022 messages. We have, where wherever we could enrich we, we did. But obviously if the reference data is still in an unstructured, unstructured format for our clients, it’s gonna continue to be so.
Joe Guerrero: But one of the next step is to intro, introduce structured data, especially around the addresses and remittance information. And that’s, that’s something that’s gonna come and it’s gonna be something that will be mandated by the different payment systems. I know that Swift are looking to mandate more structured information by November, 2025 when their coexistence period ends. So Swift, um, have a, a coexistence period. Where will the, they will support both MT and MX ISO 20022 messages from March this year till November, 2025.
Ali Curi: And also, can you share with us just how are financial institutions and service providers preparing for this adoption and this transition?
Joe Guerrero: The payment services are taking different approaches.
Joe Guerrero: So for example, target two went very much a big bang approach where you know, from the 20th of March, 2023, they no longer supported the ISO 15022 formats. And it, you had to be on ISO 20022, so that was a big bang approach. Swift, for example, for cross-border payments and reporting, plus had this coexistence period, and some of the other payment systems also follow that, that approach, which is to support both the MT and the MX messages for period, and then eventually, swift, for example, November, 2025 will no longer support ISO 15022. From our clients and the financial institutions, some are looking at a per system, uh, approach, which is every system will generate their own, you know, ISO 20022 messages, some extracting data and have a consolidated transformation layer. Our solution at ION, for example, is a very powerful mapping and workflow management tool that allows the client to send data from any upstream system, any upstream source, and the solution will convert this into either an ISO 20022 or, or whatever target format they need.
Joe Guerrero: So for example, the one of our European clients that went live, uh, on target two last last month takes MT messages from, uh, a number of their upstream systems and pushes those into the ION solution to transform them into an ISO 20022 format. So they’ll take something like an MT202 payment message, and the, is the, the ION solution will transform that into pacs.009 and push that down.
Joe Guerrero: And these, these upstream systems can be anything from an in-house system, and one of them actually is a well-known competitor of ours. So, yeah, so, you know, different clients have taken different approaches to, to how they manage this, uh, this new transformation.
Ali Curi: And what about potential challenges, uh, potential challenges or barriers to the adoption of ISO 20022? What can you share with us?
Joe Guerrero: Yeah. I think right now one of the challenges that we’ve had or that clients are having is the fact that the, that not all message types are migrating. So they’re, they’re still, you’re still confirming transactions using the old ISO 15022, and then generating the payments using a completely different format.
Joe Guerrero: And especially when you start moving away from unstructured to structured, you are confirming in an unstructured way and then paying in a structured way. There’s a problem there where you need to almost like maintain two separate sets of static or reference data to be able to under identify, you know, I’ve, I’ve confirmed the trade, I’ve matched that trade. I know the details, the financial details and the settlement details are correct, and then I’m generating the payments and having to, to manage both sets, and maintain both sets of data. That has been a challenge, but the biggest challenge for our clients is really when they move on to structured data and being able to, to support that. At ION, we already support the structured data, but when you look at the clients, you know, they have to ma ensure that you know all of their legacy systems, some of which can be very old, need to be updated. Middleware solutions, all types of different settlement solutions, need to now support, um, structured data.
Joe Guerrero: And of course, you know, their centralized static database or, or Golden Source will need to be updated not only to support these new fields, but also to migrate existing data which may be in an unstructured format, and now have that migrated to a structured format and be able to feed that into all of the downstream settlement systems.
Joe Guerrero: There’s a massive challenge there for all of our clients really.
Ali Curi: And Joe, which countries are leading the adoption of ISO 20022, and what timeline are we looking at in the US for its adoption?
Joe Guerrero: Well, as I said, you know, we went live last month on Target two and the beginning of the CBPR plus migration period.
Joe Guerrero: But to name some chaps, which is the Sterling RTGS is going live on the 19th of June this year. Fedwire, the Fed Federal Reserve have, have delayed it a number of times, and that looks like it’s gonna go live in March, 2025. So different, different, um, payment systems and RTGS systems have their own timelines, but they’re all sort of looking to be ready before November, 2025 when SWIFT no longer support the ISO 15022 formats.
Joe Guerrero: So that’s the plan.
Ali Curi: Now, alternative payments are increasingly popular. What can you tell us about how ISO 20022 messaging standards can address some of the challenges associated with integrating traditional financial systems with say, crypto and mobile payments?
Joe Guerrero: Yeah, so obviously cryptocurrencies are not linked, currently not linked to a country or a government.
Joe Guerrero: So they’re unable really to use the ISO 15022 formats to generate payments. They don’t even have an iso, an official ISO currency code. So this needs to, as you know, to get an ISO currency code, The, um, ISO 4217, which I mentioned before, um, this needs to be requested by a central bank. So, so they don’t have an official, uh, currency code.
Joe Guerrero: There was some changes made to the confirmations last, last year, the MT 300 types for ISO 15 0 22, where you could confirm a cryptocurrency trade by introducing a currency code of xxx. And then there was a separate field where you defined the actual cryptocurrency that you’re trading. But from a payments perspective, there’s no payment message that you can use to, to actually pay a, a cryptocurrency.
Joe Guerrero: But what they can do by using ISO 20022, they can benefit from standardized messaging formats and this can improve that interoperability and reduce the errors, um, on these um, transactions. It is thought that cryptocurrencies, if they become compliant with ISO 20022, could be assigned official ISO currency codes.
Joe Guerrero: This could lead to the adoption of, of cryptocurrencies by the centralized banks. I know that the, it’s big right now. It’s quite big that, you know, central banks are looking to, to have their own digital currency. So that’s something that is definitely in the horizon. But with a Bitcoin and Ethereum and these other types of cryptocurrencies will, will also be included.
Joe Guerrero: That’s something that we’ll have to wait and see.
Ali Curi: Joe, before we close out, let’s talk about career advice. What is some advice you wish you had had earlier in your career?
Joe Guerrero: Okay, that’s a good question. Um, well, um, I think, uh, It’s very important to, to always try and improve yourself. Always try and learn.
Joe Guerrero: Keep learning whether you know, both at work, from your peers, from your clients, but also outside of work. You know, whatever courses and that can benefit how you work and give you, sort of more tools in your toolbox. I think I always try and strive to be a better version of the person I was yesterday, and that’s, that’s sort of the, the approach I take.
Joe Guerrero: Even if I have a project that’s finished and, and it’s been successful, I always sort of reflect and try and see how I could have improved it and do something a little bit better the next time. Also one of the things that I learned, and may sound silly, but No, no, there’s no such thing as a stupid question. You know, especially at the beginning of your career, when, when you are, you’re a novice, you’re new, you are, you’re in meetings with, with people around you that have a lot more experience. You may be a little bit afraid to ask a question, but you should never be afraid to ask a question that’s gonna help you understand what you need to understand to get your goal, you know, to, to achieve what you need to achieve in whatever you are doing. So, and you know, and whenever I found the courage to ask these questions, I always find that the people in the meeting pretty much would’ve asked, wanted to ask that same question. And you can see in their faces that they’re, they’re happy that someone, uh, uh, raised it.
Joe Guerrero: So, yeah, that’s one of the things that I would say is, is, is important.
Ali Curi: And Joe, like many people, you’re a busy person and you’re juggling multiple responsibilities. Can you share with us what is your go-to productivity hack?
Joe Guerrero: What I do is every day I, I prepare a list of my priorities. So I need to have a list of priorities I need to focus on, and if you are clear of what those priorities are, then you will achieve greater effectiveness.
Joe Guerrero: I agree. I obviously agree my priorities with my manager every week, but every day I, I sit down at the beginning of the day, I put down all my priorities, and the premise is, is this. My top priority is anything that has the, a direct impact on the company. So any, whether it’s economical, whether you know, make money or, or potentially lose money or whether it’s reputational.
Joe Guerrero: So that’s my top priority. Then I look at the next priority is anything that needs any kind of collaboration from a third party, whether that third party is one of my colleagues or a different department, or even my client, anything that I need feedback on that could be a bottleneck, I wanna make sure I get that out and get them working on that so I can get that feedback.
Joe Guerrero: And then the next priority is everything else. Yeah. So making sure that you have that, those priorities and that you work on those. Another thing that I’ve learned, and I guess this could have been answered in the previous question, is multitasking doesn’t work. Maybe it’s just me, but I find that multitasking doesn’t work.
Joe Guerrero: Block time to work on your priorities. Focus on what’s the top priority, get that done. You know, focus on the most strategic projects, get it done, then move on to the next one. And, uh, and make sure that you get those done because if you’re juggling too many balls, what I find is that you end up dropping all of them and, and nothing gets completed in the way that you wanted it to be done.
Joe Guerrero: So, so yeah. So focus on, on one priority at a time and get it done.
Ali Curi: Joe Guerrero, thank you for joining us today. It’s been a pleasure having you on the podcast. I hope you visit us again.
Joe Guerrero: It’s been a pleasure. Thank you very much for having me.
Ali Curi: And that’s our episode for today. You can follow ION Markets on Twitter and LinkedIn.
Ali Curi: Thank you for joining us. I’m Ali Curi. Until next time.
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