The European Central Bank and its community are offering a New Year’s glimpse into what’s in store for the future of the global payment industry. Europe led the way when credit card technology transitioned from the outdated magnetic stripe to the more secure and reliable electronic chip. The continent is also ahead of the curve in terms of electronic billing and invoicing. Now Europe’s preparing to ring in New Year 2020 with ambitious initiatives to further modernize and accelerate payment processing.
What’s New for the New Year
The European Central Bank has embarked on a project of historic proportions that will implement a real-time payment settlement system, powered by ISO 20022 messaging. The interface architecture will include a centralized payment liquidity management system with a common data warehouse and billing component. EBA Clearing, which is a private payment infrastructure provider in Europe, also plans to migrate its payment system to ISO 20022 to enable same-day euro transactions.
Introducing ISO 20022
The upgrades are expected to make financial institutions more competitive while also supporting large corporate clients. Those companies will be able to complete transactions faster, with fewer errors, greater transaction visibility, and easier reconciliation. Some of those benefits are possible because ISO 20022 messages facilitate the transfer of remittance data and information about the party making the payment. The new European Central Bank initiative will also support interoperability for both domestic and cross-border payments.
A Global Trend
The global financial industry is scheduled to switch over to the ISO 20022 standard by 2025. Toward the end of 2021 the start of this technological transition will be mandated by SWIFT for its participants. Since that timeline only gives them a few short years to complete the move, early adoption is being embraced by several payment market leaders. Early adoption trends can already be observed in Europe, Hong Kong, Canada, and the United States. By late 2025, at least eight out of every 10 high-value payments in the world will be facilitated by ISO 20022.
Other Industry Benefits
Those who adopt now will likely incur lower transition costs with less need for re-engineering their systems to achieve regulatory compliance. They and their customers will also start to enjoy the beneficial features of this new technology. The system promises seamless, smoother exchanges of data for speedy, frictionless payments and significantly enhanced customer service. If history is a reliable indicator, this innovation will be a game-changer. Two years ago, for instance, SWIFT launched a global payments initiative that, as this new project intends to do, made payments faster and easier to track. Today the majority of cross-border payments utilize SWIFT’s global payments initiative system.
Most of the transaction times across that updated SWIFT system are measured in minutes versus hours, and virtually all of them take no more than 24 hours. Now, with the power of this European Central Bank project and the worldwide roll-out of ISO 20022, the industry will experience next-level possibilities. Payments that currently impress the industry because they only take minutes will be possible in just a matter of seconds. Time is money, and industry changes getting underway in 2020 will save both money and precious time.