The Reserve Bank of Australia (RBA) has joined AusPayNet and Australian Payments Plus (AP+) in backing the implementation of CPMI ISO 20022, which is designed to address inconsistencies in adoption and harmonise the use of the ISO 20022 global payments messaging standard.
The RBA, which chairs The Bank of International Settlements’ (BIS’) Committee on Payments and Market Infrastructures (CPMI) working group, said it would join with the local payments standards setters to align their relevant ISO 20022 message usage guidelines with the new CPMI data requirements, which are divided into 12 separate obligations.
The RBA said it will also work with the CPMI to encourage international market infrastructures and cross-border payments providers to align their ISO 20022 message usage guidelines with the CPMI ISO 20022 data requirements.
This, they said, would be achieved prior to the CPMI’s end-of-2027 timeline for global adoption.
ISO 20022 is an open international messaging standard used for electronic transfers between financial institutions. Used extensively in cross-border payments, the standard includes a rich array of metadata containing descriptions of messages and business processes. The standard replaces the now three-decade-old ISO 15022.
Swift estimates that by 2025, 79 per cent of the total volume and 87 per cent of the total value of high-value payments worldwide are expected to use the ISO 20022 standard.
Australia’s New Payments Platform (NPP), for instance, uses ISO 20022 messaging. In March 2023, Australia’s High Value Clearing System (HVCS) also successfully adopted ISO 20022, in line with the global go-live date for the messaging standard (though it will co-exist with the old standard until at least November 2025).
The HVCS currently processes incoming cross-border payments, with the NPP set to introduce this capability from December 2023.
The CPMI noted inconsistencies in the implementation and use of ISO 20022 worldwide, which it said “risks undercutting some of its benefits for cross-border payments”.
Fragmentation of payment messaging standards is identified as a key factor contributing to frictions in cross-border payments.
The RBA said that global adoption of the CPMI ISO 20022 data requirements will help to reduce inefficiencies in the processing of cross-border payments that can arise from varying implementations of the ISO 20022 messaging standard, misaligned message flows and inconsistent data usage.
The 12 requirements set out by the BIS and Group of Twenty (G20) include a range of transparency, data structuring and core requirements designed to address inconsistencies in the application of the ISO 20022 standards.
According to the RBA, widespread implementation of the CPMI ISO 20022 data requirements is expected to lead to increased straight-through-processing of cross-border payments, helping to make them cheaper, faster and more transparent for end users.
“The publication of the CPMI ISO 20022 data requirements is a positive and practical step in the G20 program to enhance cross-border payments,” said Michele Bullock, the RBA’s recently appointed Governor and former co-chair of the CPMI Messaging Workstream.
“The implementation of these requirements will require a coordinated effort by the global payments community over the next few years,” Bullock said.
AusPayNet chief executive Andy White added that, “by facilitating straight-through-processing, implementation of the CPMI ISO 20022 data requirements will also improve processing of cross-border payment messages, helping the G20 achieve its targets for cross-border payments”.
An investigation paper from FSI research and advisory firm Celent found that fewer than two in three large banks believe that will be ISO 20022-ready by November 2025. Around one in four stated they would need assistance to meet the deadline or rely on available stop-gap measures.
