ISO 20022 will be the new standard in cross-border currency payments, replacing the current MT standard. The migration to MX messaging is intended to provide a standardized approach for all financial standards initiatives, but this presents challenges for smaller banks still reliant on legacy technology built around outdated payments processes. The pressure will put on in-house IT and operational teams will prove to be damaging in the long-term. Therefore, investment banks must tackle this revolution head on and rely on their technology partners’ expertise to support them through the ISO transformation. Only then will all banks be able to integrate MX messaging into their payments infrastructure to ensure greater standardization and improved efficiencies moving forward.
The Arrival of MX Messaging: A New Era in Cross Border Payments
Over 800 years ago, when Genghis Khan’s Mongol armies marched towards the great cities of the Jin empire, they used rows upon rows of drummers to signal their arrival and convey their deadly intent to the residents. Today, as the March 20th adoption date for MX messaging in banks approaches, a similar drumbeat can be heard.
MX messaging is set to become the new standard in cross border currency payments messages, carrying richer information, and firms need to be prepared. The migration from the current MT standard to MX is intended to provide a single standardization approach for all financial standards initiatives. While there is a co-existence period with the current MT standards until 2025, the larger banks have already started adopting the preferred MX messaging format.
However, this presents a challenge for many smaller banks who are behind the curve and often relying on the co-existence period to catch up. These firms are regularly dealing with the larger banks and may find themselves being dragged into adopting the MX standard at a quicker pace if their larger counterparts are already using it. As a result, ISO 20022 is becoming increasingly important, and the larger banks have already set the wheels in motion or implemented the internal technology to adopt the new format.
The most significant pain point for smaller and mid-sized banks is their overreliance on legacy technology, built around outdated payments processes. Many firms are reluctant to tackle this technology issue head-on due to the perceived high risks and costs involved. However, investment banks may not realize this until they try to send or receive MX messages, which could happen as soon as March 20th of this year.
The migration to MX messaging makes a lot of sense, providing a standardized approach to be used by all financial standards initiatives. The new standard carries far richer information than the current MT standard, but it requires a significant shift in mindset, especially for smaller banks still reliant on legacy technology. The adoption of MX messaging format is the new reality for the financial sector, and it is up to banks to get ahead of the curve and be ready for the future of cross border payments.
ISO 20022 and the Challenges of Keeping Pace with Technological Changes
While ISO 20022 is bringing standardization to the payments industry, it will still cover various message types and formats. It may not be immune to future changes, additional validations, or updates, which will be time-consuming and pose technical challenges, especially for banks with complex legacy systems. This will put pressure on in-house IT and operational teams, particularly if the firm lacks deep domain expertise.
As the adoption of MX messaging approaches, investment banks cannot simply wait and hope it passes them by. This is a significant change to the payments industry, and banks need to be ready to adapt. They can rely on the expertise of their technology partners to support them through this transformational stage of the ISO shift. Only then will banks be able to integrate MX messaging into their payments infrastructure, ensuring greater standardization and improved efficiencies moving forward.
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