ISO 20022 Enhanced Data - The Golden Standard, Part 2

In our recent ISO 20022 article, 'The Golden Standard', we provided an industry oversight into some of the potential challenges ahead with the ISO 20022. In Part 2, we are outlining some of the Market Infrastructure timelines and their respective requirements, as well as how this might affect data elements.


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Michael Levens
Managing Director

In a recent ISO 20022 article, 'The Golden Standard', we provided an industry oversight into some of the potential challenges ahead with the ISO 20022. In Part 2, we are outlining some of the Market Infrastructure timelines and their respective requirements, as well as how this might affect data elements.

March 2023 – SWIFT CBPR+ & T2 go-live

With the go live of SWIFT CBPR+ & T2, there were 3 main data elements affected; ISO BTC External Code Sets, Purpose Codes, and Structured Address. These data elements should be adopted for two main reasons, including; i) Town & Country are the minimum data elements required in a structured address, but it is recommended to try and improve address breakdown to allow further granularity, and, ii) Purpose codes should be reviewed and usage either from the ISO 20022 standard or bilateral usage agreed between participants so that they have common meaning and lead to less back office operational referral.

Potential use cases

  • Structured Address will aid sanctions and fraud screening.
  • Purpose codes could be used for multiple purposes.  In the event of a contingency event high value and purpose could be used in conjunction with name and address to identify high value manual payments that need to be settled
  • The codes could be used to identify supplier checks in on-going KYC, i.e., is the client buying the correct type of supplies in the quantity expected for the business, have medical goods been specified in the code, but the beneficiary doesn’t make/handle these goods?
  • The codes could indicate better granularity to clients about the types of products being purchased to help develop products to enhance a supply chain.  

June 2023 - Bank of England CHAPS ISO 20022 go-live

With CHAPS ISO 20022 go-live, the Bank of England recommends Direct Participants use of the following fields; LEI, Structured Remittance Information, Purpose Codes, and Structured Address. Direct Participants may ask indirect participants to use these elements where possible.

But why should these data elements be adopted? The Bank of England will mandate use of these elements between Direct Participant Financial Institutions from 2024. Indirect Participants may be asked to supply the same data by this date. In addition, the LEI will give a better identification on the actors within a payment chain.  The Bank of England is looking at this element long term to be adopted more widely and is influencing G20 and other central banks. The LEI at some point is likely to be adopted more widely in the future and may drive uses in other open banking opportunities.

Another reason is that Structured Remittance is likely to be used for better reconciliation internally for settlement with the Bank of England.  It is also encouraging wider use for RTGS and domestically under the National Payments Architecture (NPA) plan. Structured Address will be encouraged to get better location granularity. Finally, Purpose Codes are required to identify certain transactions, mainly for payment transactions relating to property initially (see Bank of England website for further details) and are likely to be more widely adopted in the future, not just between FIs. The Bank of England is also likely to encourage further use of purpose codes to help identify transactions, especially if it helps identify regulatory reporting figures.

Possible use cases

  • Long term the LEI will give better identification and is already used in certain securities markets.  Its introduction was to try and better fully understand the credit risk being run between entities following the 2008 financial crisis.  However, it is expected to be encouraged for smaller entities and persons in the longer term.  The Bank of England is also looking at long term usage of this element to be used in Open Banking/Finance to enable businesses to move around the financial system seamlessly and create a portable credit file in which to shop around for their finance need.  The file could easily be shared between credit providers so potential credit risk assessment can be used.
  • Purpose codes will be initially encouraged for property transactions by BoE as contingency in case of manual settlement identification, although likely to need linkage to creditor information.  A further use case is likely to be used in BoE statistical analysis and public reporting.
  • Structured Remittance Information will be encouraged from this date to better help market reconciliation.  BoE recognises that this element has potential for further use in commercial reconciliation and payment screening as well as further use cases in possible development of payment industry and the possible linkage to IoT.  Invoice information will be key differentiating factor for clients with information about ESG, usage of other information, e.g., mileage by Electric Vehicles for insurance/leasing.

April 2024 - US CHIPS go live

The main data elements that will be effected by US CHIPS go live in April 2024 is the use of ISO Codes, where mandatory. It is recommended that the data elements should be adopted as widely as possible, as CHIPS is not specifically mandating use of specific structured element other than those already expected. However, The Clearing House which operates CHIPS and the US RTP scheme does have a tripartite agreement to develop real time cross border payments with SWIFT and EBA.  There is likely to be aligned mandated uses in due course.  In addition, the adoption of common ISO 20022 elements already used or to be used with other market infrastructures will aid the usage of this payment rail.

Possible uses cases

  • It is recommended that the development of ISO 20022 elements is continued for wider usage on cross border requirements.  This will aid the development and use of the tripartite initiative and any longer-term developments.

November 2024 - Bank of England Mandates usage of Structured elements

This deadline is likely to affect data elements such as; LEI, Structured Remittance Information, Purpose Code, and Structured Address. These elements should be adopted as they are now mandated for use by the Bank of England.   

November 2024 - Australia mandates full use of ISO

With regards to data elements affected, whilst there is no specific advice at the moment, regulatory authorities are looking at; Purpose Codes, LEI, and other structured data. These elements should be adopted as recurring existing optional elements in 2023 will look to be mandated by other market infrastructures more widely. On top of this, it is recommended that work started in 2023 should be continued and built on.

 March 2025 - US FED goes live with ISO 20022 in ‘Big Bang’ approach

Whilst there is no clear data elements required at this stage, the only recommendations involve existing requirements in CBPR+ and local existing market infrastructure clearing requirements. FW codes are likely to be moved to different elements with new IDs required. The new data elements will be required as it is likely that the US FED will start to adopt other popular requirements that have already been adopted by other infrastructures by default but may not mandate usage.  

Beyond November 2025 - Data elements affected

  • More usage of optional elements by FinTechs and other PSPs and banks as payments journeys evolve and better understanding of payment data usage becomes common practice.

Possible use cases

  • Rather than pure Sanctions screening better AML & fraud screening could be utilised by combing several elements and linking it back top perpetual KYC/Transaction Monitoring in real time.  This will ensure that information that clients advise at onboarding can be tracked and remedial action taken sooner.  It will also allow better data and used in conjunction with Machine Learning and Artificial Intelligence solutions will create better client insights.
  • Better credit information may start to be available via the use of LEI’s purpose codes and transaction values.  Other Transaction Monitoring software companies could provide banks with better dashboards/information about their clients.
  • Client payment journeys for Internet of Things start to be developed.  For example, an Electric Vehicle could become the payment method for energy consumed, real time motoring insurance data, leasing data, registration data
  • Asset Backed Lending products could be improved by using data contained within the structured remittance information elements such as stock numbers/values, invoice numbers, earlier indications of expansion credit issues etc.

How Delta Capita can help 

Delta Capita’s unique market position allows us to bring insight, skills and capacity to help solve your pain points as the payments market evolves. This is all supported by our experience working with financial market infrastructures, sell and buy side, and technology companies - and across our domains of expertise.Our vast experience and coverage mean we can craft bespoke solutions to help you maximise commercial benefits from the ongoing tumultuous changes in the banking industry.

To find out more and speak to one of our experts, contact us today.