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5 strategic considerations in meeting ISO 20022 compliance

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Tareq Shaheen, PDM Director, Payment Solutions at Eastnets

 

ISO 20022 significantly improves the quality of data across the payments ecosystem. It offers richer, structured, meaningful data and will enable new client experiences, while improving compliance and efficiency.

Tareq Shaheen

And 2022 will be a big year for ISO 20022 adoption. As of November, SWIFT will enable ISO 20022 messages for cross-border payments and cash reporting. This gives any financial institution the option of sending ISO 20022 messages.

ISO 20022 messages that will be active on SWIFT are defined by the Cross-Border Payments and Reporting Plus (CBPR+) specification, which explains how ISO 20022 messages will be used on the SWIFT network and which message categories are included. CBPR+ scope includes categories 1, 2, and 9: used for customer payments transfer; financial institution transfer; and cash management status messages and bank statements. The ISO 20022 messages included in CBPR+ will completely replace category 1, 2 and 9 MT messages by November 2025.

As ISO 20022 on the SWIFT network is not mandatory, an FI can continue to send SWIFT MT messages to their counterparts, after November 2022. However, every SWIFT member institution must be able to receive and handle ISO 20022 messages defined by CBPR+. This caveat means that all FIs must be prepared for ISO 20022.

 

The ISO20022 journey: from SWIFT MTs to ISO 20022

Some financial institutions have already started their ISO 20022 journeys. But the financial sector is heavily regulated, and successful implementation of new or updated standards and regulations means that it is vital to have a robust compliance strategy in place. Having the right strategy for ISO 20022 fulfillment facilitates compliance with the evolving requirements for ISO 20022.

Being ISO20022 compliant is not just a tick-box exercise. It has benefits for any FI that meets ISO20022 requirements.

Five considerations when developing an effective ISO20022 strategy
When developing a robust ISO20022 strategy you must consider several key areas that are impacted by the standard. Below, we discuss five of the most important factors to consider:

 

Comprehensive translation solution

A comprehensive solution for translation between legacy message formats and ISO 20022 is a vital foundation stone of ISO2022 implementation success. Look for the following baseline functionality when choosing this type of solution:

• Legacy formats will persist for some time: CBPR+ only covers three categories of SWIFT messages (1,2, and 9). Other categories will continue to use the MT format. Whether it is payment networks or internal applications, not all will be ready for ISO 20022 prompt adoption.

• Ideally, the solution will offer ongoing interoperability across the different payment networks that will use ISO 20022 implementations, i.e., national (RTGS, ACH), Regional (SEPA in Europe, BUNA Middle East), and Cross border payments (SWIFT)

• As ISO 20022 continues to evolve, the solution must be future proofed for ISO 20022 changes as they occur (e.g., CBPR+ annual update)

• An ISO20022 native solution will make it easy to adopt new ISO 20022 requirements as they are published.

The translation solution should have ready message definitions and mapping libraries for different ISO 20022 specifications to avoid tedious messages and mappings definitions.
Gradual adoption and familiar experience
Business users have used legacy formats, such as MT format, for decades. MT format is well-known by end-users and it will take time to get used to ISO 20022. This situation has been built into the SWIFT strategy that allows for three years of coexistence period between MT and ISO 20022. Therefore, it is important to provide end-users with an interface that shows original and converted messages clearly and unambiguously, while providing functionalities that realize the value of ISO 20022 rich message fields.

 

Here are some important solution functions:

• Support for familiar user experience – like MT messages, at least in the early adoption stages.
• Offer different display options for ISO 20022: simplified display, expanded form, MT equivalent view.
• Flexible search criteria: structured and free text search on a string in the body of any ISO20022.
• Work, seamlessly, with live and archived ISO 20022.

 

Risk Mitigation

As with similar major initiatives, FIs should consider mitigating risks associated with such a change. Risks include:
• An ISO 20022 message has extended rich data compared to MT; therefore, expect and mitigate the effects of data truncation by using a long-term solution to preserve truncated data with zero loss. This is important for audit, compliance, and reconciliation.
• Assess your payments duplicate messages detection solution readiness for ISO 20022 messages.

 

Analyze and learn

It is recommended that organizations have dashboards that visibly differentiate ISO 20022 and MT messages traffic to allow for improvements in the ISO 20022 payments workflow as the ISO 20022 traffic starts to grow after November 2022.

 

Leverage ISO 20022

The previous sections describe how financial institutions can comply with ISO 20022 payments messaging. Whilst this is a mandate from SWIFT and other bodies, a more proactive approach is to leverage ISO 20022 rich data to develop better payments. Achieving this requires a collective effort with the participation of every financial organization. This is a two-step process:

Step one: populate the new fields in the ISO 20022 payments messages with the needed information on the side of payment initiators before sending them to their correspondents. For example, ISO 20022 provides many fields to for debtor details in the credit transfer message (Street Name, Building No, Town Name, Post Code, Private Identification, …) so each FI should fill those fields with the needed information.

Step two: leverage ISO 20022 in the different processes and workflows inside financial organizations such as payments screening.

Screening payment messages against watchlists can benefit from ISO20022’s richer and more structured data format. The elimination of free text blocks and the ability to define fields that can be scanned at a highly granular level will result in the reduction of false positives.

It is important to notice that payment message scanning should be done in its native format and not the translated message to fully realize the benefits. The same applies to fraud detection, where higher quality data messages data will enhance irregular payments detection. A further benefit is the enablement of new services for FI customers, by leveraging ISO 20022 extended data and exposing it through different banking channels.

 

The golden opportunity of ISO20022

ISO 20022 is another major change in the payments arena. However, it offers a golden opportunity to enhance how payments operate. In a world of instant payments and escalating payments fraud, we must take this opportunity and build upon it to reduce fraud, enhance compliance and build a better more robust payment infrastructure.

Banking

E-commerce marketplaces have become more than third-party platforms

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By Luke Trayfoot, CRO, MANGOPAY

 

E-commerce marketplaces have become an essential driver of e-commerce growth. As found by Ascential in their annual Future of Marketplaces Report, by 2027, third-party sellers using marketplaces will capture 59% of global e-commerce sales. A trend accelerated by the pandemic. Marketplaces are helping more brands cater to the ever-changing needs of consumers.

As businesses are continually being challenged to provide a seamless shopping experience, marketplaces can support this venture. Without the added costs of warehousing, supply chain and logistics for additional products, marketplaces can help to alleviate some of those pressures, especially as consumer demand grows.

Now, marketplaces need to further evolve their offering through payments infrastructure, whilst remaining compliant with payment regulations.

 

The marketplace offering – lowering barriers to entry

 Beyond access to the best deals, seamless checkout and quick deliveries, marketplaces also exceed consumer expectations for an intuitive one-stop shopping experience. Through marketplaces, retailers can continue to evolve their proposition, collecting data on what their customers want and need and continually refining their offerings at the right time and in the right place (web/app).

Marketplaces can also support businesses entering new markets or competing with bigger players in their respective fields. Entering a marketplace network allows small businesses to quickly gain influence, benefiting from larger audiences and quickly generating high sales volumes.

With multiple sellers, many with an international presence, implementing a sophisticated payments environment is much more complex than building one for an e-commerce website. Trading globally has different rules and regulations to adhere to per country which means payments environments must be multi-layered, accepting various forms of payments, which can be an inhibitor to businesses scaling at pace. Marketplace’s innate customer-centredness must be maintained end to end, including the purchase journey, so a sophisticated environment is essential.

 

Building the right payments environment

 A crucial part of the customer experience, it is important that merchants provide a choice of payment methods at checkout. As payments have evolved, marketplace operators should consider what options they provide to sellers, and subsequently, their end consumers.

The number one expectation is of course payment security, which is a key step in building a long-term relationship based on trust. Increased control points, however, generally means more friction being introduced into the payment process, so this is a balancing act.

As the retail landscape continues to grow, so does competition and as new players enter the market, businesses must find new ways to innovate, and the creation of payment options is one of the most important avenue to do so.

 

Considering regulation at every step

 Increased marketplace activity has led to the introduction of regulation for the platform economy. In the UK, HMRC has implemented changes to VAT reporting requirements for digital marketplaces and their third-party sellers, especially for overseas sales. Across Europe, KYC (Know Your Customers) regulations intended to protect customers from data breaches on a marketplace and identify the persons (legal or natural) with whom the marketplace does business, as part of anti-money laundering and terrorist financing directives, have also been enacted.

As online platforms continue to play an increasingly significant role, the implementation of the Digital Services Act supports creating a safer, online experience for citizens. This regulation enables the expression of ideas, communication, and online shopping by reducing exposure to illegal activities and dangerous goods. Regulation can seem extremely daunting, especially for those looking to enter the market. However, its purpose is to protect both the business and users.

Marketplaces need to work with payment infrastructure specialists that can support providing methods for local users, as well as options that are familiar and trustworthy for a global audience. Additional flexibility also needs to be built in to adapt to different demographics to ensure that a variety of consumers are appropriately catered for. If a brand wants to establish itself in a new market, varied payment methods are not a nice to have, but a must.

Despite the current economic climate, global e-commerce will continue to grow in the years ahead. Those that will be able to stay ahead of the curve will ensure that their customers’ experience is balanced with greater choice and varied payment options, in tandem with regulatory compliance.

 

 

 

 

 

 

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The trends to expect in the future of work in 2023 through the lens of a CFO

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By Eliran Glazer, CFO at monday.com

 

Not a week goes by without significant evolution in the world of work. The landscape is continuously evolving and these shifts can be analysed from many different perspectives..As it has been in recent years, the position of the CFO will continue to be paramount in spearheading essential business initiatives, communicating with employees and other stakeholders, and ensuring cross-company alignment and advancement. However, how will the role of the CFO evolve in 2023 and what can those involved in financial decisions expect in 2023?

 

CEO and CFO alignment is crucial for success in 2023 

Eliran Glazer

CEOs and CFOs know a company’s success can only occur when they work in tandem to improve organisational performance for sustainable growth. To continue to expand, the CEO and CFO will work together more closely than ever to guarantee company operation, efficiency, resiliency and guidance throughout times of transition.

With the market changing at a rapid speed, organisational agility is vital for continued success. When the CEO and CFO are closely aligned, they bring their areas of expertise to the table to drive crucial strategic decisions together so the organisation can adapt to a changing economic landscape.

This is even more applicable in the current macroeconomic environment and geopolitical tension,  when every business decision has a significant financial weight. With 70% of boards of directors looking to accelerate digital business endeavours and strategies, finance leaders will have an integral role when it comes to ensuring sustainable company growth.

 

Investments in digital tech is paramount this year 

Since the onset of the Covid-19 pandemic, teams have taken a more dynamic and digitised approach in collaboration to address remote work, across time zones, between offices and at home. For 2023, corporations should expect to see further investment in digital technology that will enable teams to have a more harmonised approach to the digital workforce. Finance leaders will play a substantial role in implementing the processes and structure by identifying the right tech tools needed for this approach. Due to this, CFOs must now be aware of the need to adopt digital technology to drive efficiency.

Based on research from a Gartner survey that polled CFOs in July 2022, 66% said they planned to expand their investment in digital technology in the next 12 months. Additionally,another 32% said they would uphold such spending – the most significant percentage of any spend category. To best serve hybrid workers, businesses will need to enhance not only the customer experience but also their employee experience and satisfaction through the support of dynamic and digital collaboration tools.

 

Proactivity & transparency in this era of change 

During this unpredictable economic climate, proactivity and transparency from finance leaders are key for making decisions that are data-driven and staying agile. To stay agile, CFOs must actively drive collaboration and partnering across functions to position the enterprise to respond to the challenges. This requires finance leaders to ensure that employees are kept in the loop of strategic decisions pertaining to the company. This can only be done by  regular updates to the employees about the company’s range of projected scenarios for the upcoming months and any planning adjustments.

To ensure success and resiliency in combatting today’s challenges, finance leaders must be proactive and transparent when conveying the business landscape. It is crucial that CFOs set realistic expectations and break down concepts so that they are well understood and clear for all employees within the company. Educating employees about  financial jargon alongside the state of the global economy will also help them find their footing in these challenging times.

 

2023 marks a milestone in the evolution of a CFO

While 2023 may seem challenging for CFOs with this great responsibility, they have a unique opportunity to make a significant and positive impact. What is most important for a company to overcome the challenges in 2023 is how flexible and nimble they can be, which requires the CFO to be a crucial player in the company’s growth during these times.

The scope of the role of CFOs has changed over the years. It is no longer solely on how to scale a business, but rather how to focus on the efficiency within that growth. To facilitate opportunities, the role of finance leaders will continue to expand this year. By identifying ways in which the CFO role can produce results, support, and even lead other parts of the company, will stimulate more collaboration, communication, and, ultimately, success.

 

 

 

 

 

 

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