Awake-In-3D: ISO20022 QFS Explained: It’s a Messaging Standard – Not a Payment System
Awake-In-3D
ISO20022 QFS Explained: It’s a Messaging Standard – Not a Payment System
On June 12, 2023 By Awake-In-3D
There is a lot of talk in GCR Land about ISO20022. Most notably, that this Standard is somehow synonymous with the QFS. But is it? In this article, we will explore the key features of ISO20022, its benefits, and how it is being adopted by the financial industry. We will also answer one of the most common questions about ISO20022: Is it an actual QFS payment system?
The ISO is the International Standards Organization. It is an independent, non-governmental international organization with a membership of 168 national standards bodies. Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market relevant International Standards that support innovation and provide solutions to global challenges. One of the more popular standards is ISO9001.
You have probably seen this designation on most manufacturers’ websites and it means that these companies comply with an International Standard for Quality Control in their production operations.
ISO20022 is similar in that it is a Standardized protocol in the financial industry for describing a pending payment transaction between financial institutions such as banks. It’s like the SWIFT Messaging System only it modernizes the overall structure of the transaction’s details not currently possible with SWIFT.
The global financial system is complex and interconnected, with financial institutions using a variety of payment systems and messaging formats to exchange information about transactions. ISO20022 is a messaging protocol that defines a standardized way for financial institutions to communicate about payment transactions. However, it is important to note that ISO20022 is not an actual payment system itself.
In this article, we will explore the key features of ISO20022, its benefits, and how it is being adopted by the financial industry.
The Importance of Standardization in Financial Messaging
Financial messaging is a critical component of the global financial system. Financial institutions must exchange information about transactions in a timely and accurate manner to ensure that payments are processed correctly and efficiently. However, with so many different payment systems and messaging formats in use, it can be challenging to achieve standardization and interoperability between different systems.
This is where ISO20022 comes in. ISO20022 is a messaging protocol that defines a standardized way for financial institutions to communicate about payment transactions. It provides a common language for financial messaging, making it easier for different payment systems and platforms to communicate with each other. This leads to greater efficiency, transparency, and automation in financial services.
What is ISO20022?
ISO20022 is a messaging protocol that defines a standardized way for financial institutions to exchange information about payment transactions. It specifies the format, structure, and content of the messages that are sent between different systems and platforms.
ISO20022 was developed by the International Organization for Standardization (ISO) in collaboration with the financial industry. It is designed to be flexible and adaptable, allowing it to be used across a wide range of financial services and transaction types.
The standard includes a variety of message types that cover different types of financial transactions, such as payments, securities, and foreign exchange. Each message type includes specific fields and data elements that must be included in the message, ensuring that the information is consistent and complete.
ISO20022 is also designed to be extensible, meaning that it can be customized to meet the specific needs of different financial institutions and payment systems. This flexibility allows financial institutions to use ISO20022 messaging while still maintaining their own unique systems and processes.
The Benefits of ISO20022
ISO20022 offers a number of benefits for financial institutions and the wider financial industry. Some of the key benefits include:
Improved Efficiency: By using a common language for financial messaging, financial institutions can communicate more easily and efficiently with each other. This reduces errors and delays in payment processing, leading to faster and more reliable transactions.
Increased Transparency: ISO20022 provides a standardized way to exchange information about payment transactions, making it easier for financial institutions to track and monitor transactions. This leads to greater transparency and visibility into the payment process, reducing the risk of fraud and other types of financial crime.
Greater Automation: ISO20022 supports the use of automation and straight-through processing (STP) in financial services. This means that more of the payment process can be automated, reducing the need for manual intervention and increasing efficiency.
Improved Risk Management: By standardizing the way that financial institutions exchange information about payment transactions, ISO20022 helps to reduce the risk of errors and fraud. This leads to improved risk management and increased confidence in the financial system.
Is ISO20022 an Actual Payment System?
One of the most common misconceptions about ISO20022 is that it is an actual payment system. However, this is not the case. ISO20022 is a messaging protocol that facilitates communication between payment systems, but it is not a payment system itself.
Payment systems are the actual platforms that process and settle payments. Examples of payment systems include SWIFT, SEPA, and Fedwire. ISO20022 can be used alongside these payment systems to facilitate communication and exchange of payment information.
In fact, many payment systems are in the process of adopting the ISO20022 standard for their messaging systems. For example, SWIFT has announced plans to migrate to the ISO20022 standard for its messaging system by 2025. This will allow for greater standardization and interoperability between different payment systems, leading to a more efficient and transparent financial system.
Conclusion: The Future of Financial Messaging
ISO20022 is a critical component of the global financial system, providing a common language for financial messaging that facilitates communication between different payment systems and platforms. While it is not an actual payment system itself, ISO20022 is being adopted by the financial industry at a rapid pace, with many payment systems already implementing the standard.
The benefits of ISO20022 are clear: improved efficiency, increased transparency, greater automation, and improved risk management. As the financial industry continues to evolve and innovate, ISO20022 will play an increasingly important role in facilitating communication and standardization between different systems and platforms.
Overall, ISO20022 is the universal language of financial messaging, helping to ensure that transactions are processed accurately and efficiently, and that the global financial system remains secure and resilient in the face of change.
While ISO20022 is a far more flexible and efficient messaging system than SWIFT, the many claims in GCR Land that “ISO20022 Compliant” financial institutions are somehow connected to the QFS is an optimistic stretch of the imagination. It is certainly not a marker or predictor for timing the release of Our GCR.
Reference Links:
https://www.iso.org/news/ref2467.html
https://ai3d.blog/iso20022-qfs-explained-its-a-messaging-standard-not-a-payment-system/
