Smarter Faster Payments: essential insights on seamless ISO20022 implementation

A hot topic at the NACHA Smarter Faster Payments 2024 conference in Miami on May 6-9 is sure to be ISO20022 implementation.

As an industry, we have expanded beyond just traditional DDA accounts. Digital payments and embedded payments are evolving rapidly.  Younger consumers are transacting with new and emerging products. Corporates are seeking real-time and cross-border functionality.  Financial institutions are under pressure to invest on multiple fronts (API strategies, new payments rails, fraud-mitigation, etc.) just to stay relevant. ISO20022, which enables enriched data and messaging capabilities, is serving as the foundational catalyst for this innovation and investment.

A quick look at the NACHA event agenda proves no shortage of sessions devoted to this key topic.  The majority of these sessions will tend to focus on the ‘Why’ (i.e., the positives and benefits related to adopting new standards).  But it will be fascinating to hear what’s said about the ‘How’ (i.e., the details of what is necessary and required).  These details tend only to surface at a later stage, once a project has been initiated.  The old saying, “the devil is in the details”, holds true.

If your organization is actively undertaking any ISO20022 related projects, I’d like to challenge you with a few simple questions on four critical areas:

1. Are you relying solely on your core provider/processor?
2. Are you struggling with data and message mapping?
3. Is your test case/test scenario coverage broad enough?
4. Is your test tooling enabled for an enterprise-wide approach?

I’ve been focused on payment testing since 2013. The above challenger questions routinely serve as conversation points with prospective clients and tend to highlight certain deficiencies around testing strategies and abilities. With that in mind, let’s take a deeper look at these four areas in more detail.

 

(Over)Reliance on core provider/payment processor

One of the most common objections I hear when engaging with a client to discuss payment testing solutions is: “I won’t need anything, my vendor is taking care of everything”.

On the surface, this holds true.  Your core vendor or processing provider might well handle the message conversion.  However, as an organization, are you aligned with the vendor to know what they’re doing or providing, so that your organization can leverage their solution as part of your broader needs? How is that vendor handling data to make sure it is optimized for the financial institution?

It is not just about message/data translation.  It’s about data prep going into the system and data extraction from the systems.  The financial institution still must do something with that data, so an over-reliance on your vendor is a potential fail-point.  We advise our clients to have appropriate mechanisms in place to test data (plumbing/routing) outside of the core payment system. In today’s world – the payment message/payment execution is only one small piece of the overall equation.

 

Data/Message Mapping

I often come across organizations that struggle with basic mapping.  This is worrying from an ISO20022 perspective, because message mapping is a central task in implementation.

Across the US, there are more than 6,000 financial institutions that face the job of converting from a legacy Fedwire message/format to the Fedwire ISO. This intersection between legacy and ISO is one of the details where devils lurk.

 

Test Case/test scenario coverage

There’s testing and there’s testing. When evaluating testing solution providers it’s important to know the capabilities of any tool. Don’t focus just on what a testing solution covers, find out what it doesn’t.

Many network providers’ testing products only cover what we call the happy path, i.e., passes. But they neglect to cover fails or negative testing scenarios. Some even lack load/TPS testing, which should be routine. This is because these solutions are built by non-specialists, who lack skills or knowledge of how to construct tests, or it’s not their core competency. This is in contrast to Iliad’s offering, which features pre-built test packs for each network.

 

Enterprise-wide approach

Yes siloes remain a big problem, particularly when it comes to testing financial products. At large organizations with multiple departments and technologies that have been built up over decades, it can be extremely challenging coordinating tests between internal endpoints. Then if you add in the need to make calls to external endpoints, the whole thing can seem insurmountable.

That’s why any solution provider should give tech leaders the capability to centralize testing programs, using common test assets and tagging. With this oversight, it becomes much easier to cover departments without adding unnecessary processes for busy colleagues.

Proper tooling is paramount to a project’s success and an organization’s ability to launch quality products with speed and confidence. Iliad Solutions has been providing payment and financial message testing solutions to the global market for nearly a quarter of a century.  Some of the largest names in the payment industry have successfully completed  ISO20022, real-time payment and Open API/Open Banking initiatives with support from Iliad.

Anthony Walton (CEO), Alexi Karalis (CTO) and I will be in Miami May 6-9 for NACHA . Smarter Faster Payments 2024.  If you’d like to understand more about Iliad and how we can support your organization’s ISO20022 implementation, please reach out!  We’d welcome a chance to visit with you during the event.  Message me via the NACHA app, via LinkedIn, or via traditional email or phone channels.

 

My contact information is found below:

Mike Packer, Sr. Account Director – North America

Mobile: -1.912.536.6467

Email:   Mike.Packer@iliad-solutions.com

 

Looking forward to seeing you in Miami.

Mike