Challenges in Payment Digitisation


The most urgent and relevant challenge facing the digital banking sector today is the roll-out, adoption and implementation of new standards.

We are seeing an accelerated propulsion in migrating global and regional digital banking systems with an emphasis on remaining relevant to the pace and evolution of user interactions, technology advancements and the mitigation of risk and security developments.

The creation of mutualised facilities – as opposed to services procured by institutions separately – as well as the higher demand in cross-border solutions, additionally require adaptive technology.

Africa, for instance, is actively advancing regionalisation of the banking sector. This can be seen across financial markets and trade and payment ecosystems. The SADC Banking Association (16 member states in Sub-Saharan Africa) is a prime example of this drive.

In 2018, a decision was made to move cross-border and correspondent banking from SWIFT MTs to ISO 20022 by November 2025.
The ISO 20022 is a messaging standard.
It is increasingly being established as the de facto global language in payments messaging (already being used by 70 countries). Developed to deliver data-rich payment formats in a structured and extensible messaging standard; it in turn translates to high-value, meaningful reporting and creating and delivering a better customer experience via multi-currency platforms.

The strength of this standard lies in the development of a common language and model for payments, both of which improve the quality of the data.

This ensures that institutions can share information across a variety of financial services and empowers the development of digital overlay applications.

The ISO message type is relevant to Customer Transfer Messages, Bank Transfer Messages and associated Reports.

Business operations are more streamlined as ISO 20022 allows for improved straight-through processing (STP) rates. It also assists banks by reducing manual investigations.

The data-rich processing improves fraud prevention and supports a more robust compliance with anti-money laundering (AML) regulations. Moreover, its global footprint ensures that, among a multitude of benefits, matters such as sanction screening, payment controls and translations services are also covered.

This is being structured around the usage guidelines provided by the CBPR+ (Cross-border payments and Reporting Plus) group of experts. The working group, made up of a panel of international payment experts, has formulated global market practice, wherein the usage guidelines and translation rules form the integral foundation of the ISO 20022 migration.

Adoption of ISO 20022 will commence at the end of 2022. There will be a three-year coexistence period with legacy SWIFT MT standards. This coexistence period will end in November 2025.

Challenges of Migration:

Given the enormity of the adoption of the new standard, it goes without saying that is a significant undertaking for any financial institution.

Aspects such as routing, resiliency, security, capacity and scalability need to be addressed during its implementation.
The typical migration timeline can run between nine to twelve months, and will encompass anything from defining mapping rules to coaching staff on its use.

The realisation of this new project has a distinct set of requirement specifications. Over and above in-depth technical and business expertise, financial institutions need a high-level design, a budget, and a resource and project plan.

On the upside, the development of the standardised global approach can lower the cost of implementation.

Operational financial institutions will want to protect their existing legacy engine and the multitude of back-office systems.

These, which include back office transaction processing, payments middleware, reconciliation structures, screen interfaces and even core banking systems, may all be impacted.

Because of the enriched data, operational and business processes may also be affected.

The sector is also facing the challenges of managing and leveraging the rich ISO data.

The success of the integration of ISO 20022 relies heavily on a cohesive strategy and roadmap.

This strategy should allow the migration to occur as a transition, as this will mean smooth, controlled and low-risk navigation around challenges.

Paralleled with that, interested parties would be required to build the necessary capacity and expertise.

Whether or not ISO 20022 is integrated into an existing enterprise, it will need to contend with the global shift. This will still have an impact on its correspondent banking business.