J.P. Morgan's treasury services business is now offering payment initiation and reporting capabilities using the ISO 20022 standard. ISO 20022 is a global messaging standard that allows clients to integrate core treasury, payable and receivable applications with banking and other financial partners. Using the ISO 20022 standard, J.P. Morgan's clients can send and receive payments messages in XML format.
According to Louise Gorman, it is on the information side where banks and their clients will see the true value 20022. "This is a standard for payments and information," she told BS&T. "It allows more information to travel with the payment allowing for greater connections along the finance or trade supply chain. You receive the payment and remittance information at the same time and can reconcile the information in an automated fashion."
By using ISO 20022, J.P. Morgan says its clients benefit in a number of ways, such as improved STP and STP with full remittance information, standardized access to the global payments landscape, and improved cash position management and reconciliation with the provision of real-time data.
Gorman says the ISO standard is available to whomever wishes to use it. In particular, she sees corporates and nonbank financial institutions that are just becoming familiar with SWIFT as the primary adopters of 20022. XML is the next generation messaging format that has been adopted by SWIFT (SWIFT MX) and is also the standard being used in the single euro payments area (SEPA). As a result, she expects faster adopter in the EMEA region countries.
From a technology and connectivity standpoint, Gorman said there isn't too much involved for a client to start using the ISO standard. "It really depends on the version of the client's ERP system and treasury workstation. It will mean some technology change depending on where the client is at the moment. But this is true of almost anything," she says. "The client is able to create files and transmit them to us using SWIFT or a propriety system. ISO 20022 is just a richer standard with more information."
She says vendors in the industry are beginning to realize the importance of ISO 20022 and are making it part of their offerings.
The movement toward standards in payments has been a long, arduous trip peppered with successes and failures. However, Gorman sees a trend in the industry toward adopting standards that are more global in nature, rather than regional. She notes, however, "You can put the format out there, but the beauty is in getting it accepted by everyone. When all the players in the industrial supply chain can speak the ISO language, that's when the real efficiencies start."
So far, she is seeing moderate adoption of ISO 20022 by J.P. Morgan's clients. However, considering the current economic climate, she says this is encouraging. "People aren't putting in new systems now," Gorman notes. "They feel if something works well already that they can't make the argument now to make a change. It's not going to be a revolution, but as the economic cycle shifts, I think more of our clients will pursue the opportunities around [ISO 20022]."