By Edgar Barbosa

Businesses that are looking to keep up with the information demands of this transformative age need to evolve their payments capabilities. The ability to capture and consume greater volumes of more detailed data can provide companies with the leverage they need to create differentiation in the market.

ISO 20022 is the global standard governing payment messaging structures and is considered an essential component to a modern payments infrastructure. It introduces a greater range of required and optional data fields to enhance remittance information and allows for transmission of user defined fields including links.

ISO 20022 provides the necessary standards to create a common messaging format and also allows for adaptation to meet specific requirements for Canada.

So far, ISO 20022 has been adopted in more than 30 countries around the world. Countries with regulation mandating the use of the standard have embraced it faster than others.

In Canada, Payments Canada’s payments modernization initiative includes the implementation of ISO 20022 as the foundation for payment messaging across all modernized payments systems. Payments Canada intends to leave as little open to interpretation as possible in order to drive a consistent adoption of the standard. The first instance of the rollout is expected to be the inclusion of the messaging standard in the launch of the real-time rail, expected to go live in 2020.

The benefits of implementing this global standard are substantial. For example, the requirement for specific mandatory defined data fields could help increase interoperability both domestically and internationally. The incorporation of optional user-defined fields can help increase the level of automation and value-add offerings that businesses can bring to market. There are also material efficiency gains that Canadian businesses can unlock by implementing ISO 20022. Here are several of them.

Productivity improvement. The availability of greater and more detailed remittance information can help simplify business processes to improve productivity. For example, it can reduce the need for time-consuming payment investigations and time spent capturing detailed bank account information from customers and suppliers. The increase in automation would also enable a re-alignment of skills to meet the new demands of technology changes and increased customer expectations. Finally, augmented data and visibility can allow companies to better manage their liquidity requirements, enabling more efficient cash management and forecasting processes.

Interoperability across geographies. Improved payment standards alignment across jurisdictions can increase the efficiency of international payments. As remittance information becomes standardized, the need for requisite processes for international payments diminishes, reducing the dependency on high-cost intermediaries. It also has the potential to benefit companies with a multinational presence by expediting international payments that today are subject to long delays.

Enhanced analytics capabilities. Richer remittance data can facilitate the use of payments-related data to contextualize and personalize customer interactions, enhancing customer loyalty and satisfaction. It may also allow companies to identify competitive advantages from business partnerships to better meet customer needs. A potential use case would be including a link to an employee’s paystub within the payroll remittance, allowing viewing of detailed payroll information when an employee checks their personal account balance.

Mitigation of operational risk. As companies consume, store and process larger amounts of payments data, they gain greater visibility into their supply chains. This can help identify concentration risk or vendors that may be under hardship. It may also open the door to better matching cash outlays to needs faster, helping optimize the company’s investments.

Canadian companies are at different stages in their payments modernization journey. Some haven’t begun planning for this transformation, while others have significantly developed their payments capabilities. Many companies with global footprints have already established projects to enable implementation of ISO 20022 in their payment processes. As companies ramp up their efforts in this area, there are some key points to consider:

  • The interpretation of the standard needs to be consistent. Lessons learned from implementations in other jurisdictions highlight that there is both a dependency and a requirement to align with partner financial institutions in order to understand their interpretation of the ISO 20022 standard. Some companies with operations in Europe indicate that variability in bank file formats persists, despite the adoption of ISO 20022;
  • Global companies may have different regional priorities for ISO 20022 implementation. Global companies often need to rank their project spend across geographies to meet budgetary goals. They often prioritize projects stemming from regulatory change. For many companies in Canada, building the case for change for ISO 20022 adoption will require them to compete for global funding;
  • Benefit realization may be constrained by the pace of adoption. While cheque usage continues to decrease in Canada a large proportion of businesses still require cheque payments. This is largely due to the detailed remittance information that accompanies cheques required by the recipients’ processes. The ability to transfer more remittance information can accelerate migration to electronic payments. This may require re-work of internal processes to accommodate new data and will continue to depend on the adoption of the standard across the company’s value chain; and
  • Cost of processing incremental data needs to be factored into the case for change. Organizations may need to update their infrastructure to accommodate the increased volume of data and to take advantage of the richer information provided through the ISO 20022 format. That may include retrofitting legacy technology stacks to produce the data required to enable ISO 20022 messaging. It may also include the need to undertake data governance and storage revisions.

Despite the complexity of implementation, businesses in Canada have an opportunity to unlock significant benefits through adoption of ISO 20022, regardless of how much they have been able to advance their payments capabilities in recent years. Productivity improvements from greater automation and the ability to better manage operational risk can positively impact the bottom line. But the journey to realize those benefits needs to be well understood. Each organization will face unique challenges in enabling their technology stack to leverage and monetize the large amount of payments data that can be exchanged in an ISO 20022 enabled infrastructure. The effort is well worth it.

Edgar Barbosa is payments leader at EY Canada. For more information on financial services trends, visit

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