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UK banks urged to act now ahead of new cross-border payments legislation to prevent exclusion from international payment networks

UK banks urged to act now ahead of new cross-border payments legislation to prevent exclusion from international payment networks

24 April, 2024: With just over 18 months to go until the ISO 20022 compliance deadline, leading Quality Engineering company, Roq, is urging UK financial institutions to take the necessary measures now to finalise their plans and focus on the execution of a programme that is, by all published metrics, some way behind the curve. Failure to meet the date has major ramifications for individual organisations and perhaps the UK’s financial services sector in part or whole.

The Bank of England has provided a strong commitment to the international programme through the development of its new Real Time Gross Settlement System (RTGS) which sits at the heart of the UK’s national payments infrastructure.  The replacement RTGS system, slated for readiness in August 2024, makes support for ISO 20022 a prerequisite for all international payments from the SWIFT deadline.  In banking technology terms that deadline is now looming and across the sector there is an urgent and collective need for action.

The shift in cross border payments is the first step in what will become a broader adoption of the ISO 20022 standard in the payments environment as a whole.  Many modern immediate payment systems globally utilise the standard for domestic immediate payments, The new format has the potential to carry much richer data sets to support a payment instruction, opening the door for new and improved services to consumers and businesses.

For most consumers, the need for more efficient, more secure international payments probably seems unnecessary however, the use of e-commerce increasingly sees consumers execute transactions through card networks to international suppliers. ISO 20022 has the ability to revolutionise this experience for both consumers and small businesses, reducing costs and improving service.   Indeed, explicitly, according to McKinsey and SWIFT research, international payments will soon become routine, not just for large corporations, but also for retailers, SMEs and even individual consumers,

There is no doubt that the new standard has the potential to deliver a more consistent international environment to support payments for all – both internationally and in domestic immediate payment schemes.  It also has the potential to deliver deeper and more effective services around areas such as fraud prevention. Transactions could carry far more information that would enable far greater security; although for this to be fully employed, banks will almost certainly have to uplift their fraud engines and consider the adoption of deep learning AI models.

The underlying benefits of ISO 20022 are already clear to some banks, and some have made major strides to adopt this as a genuine commercial differentiator, although at this stage the vast majority have not.  For the industry as a whole, being positioned to take advantage of the potential offered is critical, and the Bank of England’s commitment to the standard in its RTGS programme is a clear indication of the need for the UK to be at the forefront of adoption.

As the BoE moves towards the next phase of RTGS this summer, it is hoped that delivering a more resilient, flexible, and innovative sterling settlement system will support monetary and financial stability in an increasingly volatile economic environment.

Paul Darby, Delivery Lead from Roq, said: “From its inception, ISO 20022 aimed to future-proof the world of payments, enabling banks to process real-time payments demands, manage liquidity more effectively and ensure system resilience. However, with just over 18 months until the November 2025 deadline, it’s a major concern that many UK banks are seemingly unprepared, which could present very real challenges in a global digital payments economy.”

There is no doubt, that the movement to RTGS puts pressure on financial institutions of all sizes.  Maintaining business as usual is a significant challenge given the aging legacy platforms many institutions utilise. However, RGTS isn’t optional, and the issue is simply how ready will any individual institution be. Beyond this, the challenge will be how quickly can the banks use the new standard to create new revenue streams from a mandate change.

The impact for those banks that don’t comply is clear for all to see.  The damage will be financial, reputational, potentially existential.  No bank will want to be exposed to this risk, but the reality is that every day of delay increases the chances of failure, and we encourage those banks that are perhaps later in their thinking than others to ensure they have robust programmes in place at the earliest possibility.

Paul Darby, Delivery Lead, added: “As the points outlined above illustrate, there are many issues facing, not only those banks that do not comply in time, but also their customers. However, one of the major factors exacerbating the transition to ISO 20022 for traditional banks is the rapid proliferation of fintech companies. These agile, and innovative startups are capturing a growing share of the market, currently around 6% of the total revenue pool, which is expected to increase to around 25% by 2030. If legacy banks do not wish to lose ground to their Fintech incumbents, they need to act fast.

Early preparation and strategic planning are key to leveraging ISO 20022 as a catalyst for innovation and improved competitiveness in the global market. Roq is committed to supporting financial institutions through this transition with their previous experience working at the heart of the RTGS renewal programme. They understand the challenges and are poised to help financial institutions not only meet the regulatory requirements but also seize new opportunities that this change presents.


About Roq

Roq is an outcomes-focused quality engineering consultancy which has now gained Platinum status from Investors in People. Roq provides a genuinely independent view on all things quality, working with some of the world’s largest organisations on their most important technology initiatives. Roq’s goal is to help organisations to realise the benefits of high-functioning, high-quality software applications delivered at a pace that aligns with their business imperatives.

Roq has been proudly providing services since 2009.

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