The UK payments industry is moving to a global standard commonly referred to as ISO 20022. This standard will create a common language for payments data across the globe. It is hoped that standardised and more data rich payment information will deliver significant long-term benefits to companies, government and citizens.
THE CONSULTATION PAPER
The Bank of England, PAY.UK and the Payments Systems Regulator (authors) issued a consultation paper in June 2018. The purpose was to look at the impact of introducing a Common UK Credit Message (CCM) that would harmonise messaging across CHAPS, Faster Payments and Bacs based on ISO 20022 messaging standard. This would have the added advantage of aligning with emerging international consensus on the ISO 20022 credit messages used by high value payment systems.
The CCM involves shared data definitions, structure and formats, and a consolidated approach to governance and maintenance. It would also harmonise the use of a number of fields, which do not currently exist in legacy messaging standards.
These fields include:
- Better information on the ultimate originators and beneficiaries of a transaction
- Information about all the intermediaries involved in a payments chain
- Structured name and address fields
- Legal Entity Identifiers (LEIs) and other organisational identifiers
- Personal identifiers
- Purpose codes
- Better structured remittance information
RESULTS OF THE CONSULTATION
The results of the consultation paper submitted in July 2018 by over 70 organisations were announced last month. Key message from the consultation and feedback are as follows:
- Enhanced data – additional payment information could increase fraud liability and impact GDPR compliance. (The authors have agreed to work with the industry to provide detailed guidance.)
- Benefits case – the main areas were payment processing efficiency (80%), reduced fraud and economic crime (70%), and improved operational resilience (65%)
- Extension of CCM – benefits of aligning CCM with Open Banking APIS and CREST cash-only-transactions. (Both Open Banking Ltd and the operator of CREST have agreed to consider the CCM in design of the standards they use in the future.) There are no plans to fully align with card scheme standards though there is work to define an ISO 20022 message standard for card payments.
- New and additional fields – agreement on alignment with High Value Payments Scheme+ which will link to TARGET2 and Fedwire Funds Service and also with SEPA.
- Timetables – Given the separate timelines for the RTGS Renewal and NPA programme, there will be some differences in when information and exact dates for migrations are provided
- Governance – A Standards Advisory Panel is being set up to advise, support and challenge the Bank of England and Pay.UK in promoting, encouraging and ensuring consistent adoption of ISO 20022 for UK payments. This will be supported by working groups being set up in 2019.
- Legal Entity Identifiers (LEI) used in payments – some benefits – especially between financial institutions agreed but mixed views on its use on a wider range of payments. It would need more widespread issuance of LEIs to small and non-financial institutions first before it could be used more widely.
- Purpose Codes – some benefits (e.g. identifying and prioritising time-sensitive payments, and mitigating fraud) but some concerns over the assignment of genuine codes by the inputter.
- Remittance information – the use of structured data would ease straight through processing and reconciliation. However, there was some concern over the costs incurred.
- Migrating CHAPS to ISO 20022 in 2022– respondents preferred a single cut-over weekend to parallel running (which was felt to increase operational risks).
Feedback from the consultation is broadly aligned with the plans of PAY.UK, the PSR and the Bank of England. Adapting to ISO 20022 will take time and investment – principally by the banks and the payment system vendors. However, for corporates looking to upgrade their payment related infrastructure (such as their ERP, customer and policy admin systems) it will be important to keep one eye on these developments to ensure that the benefits can be realised once they become available in the next 3-4 years.