Payments eco-system has been continuously evolving with initiatives around Open Banking implementation, Instant Payments adoption, and Real-Time Gross Settlement (RTGS) system upgrades giving rise to several opportunities with innovative business models. Technology advancement in the areas of Distributed Ledger Technology has Central Banks moving towards establishing Central Bank Digital currency which is primed to become a new instrument deployed in customized ways for various use cases. Adoption of ISO20022 as the messaging standard is poised to bring significant changes in the payments industry, setting global and open standard for payments processing by enabling an interoperable and higher quality payments data flow.
While banks are working on a strategy for adopting ISO20022 financial messaging, benefits from the implementation are expected to be realized over medium to long term horizon. Eager to reap the benefits afforded by rich quality data provided by ISO20022, banks are making significant investments in enabling the new standard. As some of the benefits may require process changes along with the technology, banks should prioritize use cases to identify the ones that can bring maximum gains with minimal impact. One of the benefits that the additional structured data & improved data quality will bring is around payment reconciliation. The subsequent section of the paper talks about the automation in the B2B payment reconciliation process.
Businesses require the associated remittance information for proper accounting & reconciliation however as that data is not subject to regulatory pressures for timeliness and audit it has not been a high priority for financial institutions to handle this data through its payment and clearing channels.