ISO 20022, a new global standard for electronic messaging between financial institutions, was initially created to give the financial industry a common platform for sending and receiving data about payments.

However, financial institutions should not look at ISO 20022 as merely a compliance burden to be met, but an opportunity to serve clients better and gain a competitive edge. The amount of data related to payments that will be transmitted under ISO 20022 standards is so robust that it gives banks the ability to know their clients better and create new products and services tailored to their needs.

The robust and granular data will also aid financial institutions in fighting fraud, allowing them to detect potentially fraudulent patterns in payments and stop them before they are completed.

To learn about the importance of ISO 20022 for financial institutions, what benefits it offers, and what it means for the future of payments going forward, PaymentsJournal sat with Andrew Foulds, Director of Global Clearing Solutions, Product Management, EMEA at Fiserv, and Steve Murphy, Director of Commercial and Enterprise Payments Service at Javelin Strategy & Research, for a podcast discussion on this topic.

PaymentsJournalHow Banks Can Realize Business Benefits and Reduce Payments Fraud With ISO 20022PaymentsJournal How Banks Can Realize Business Benefits and Reduce Payments Fraud With ISO 20022PaymentsJournaljQuery(document).ready(function ($){var settings_ap23378923 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"23378923",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_408716_29",settings_ap23378923); }catch(err){ console.warn("cannot init player", err); } });

This blog is the second of a two-part series covering that podcast. Part 1, which covered why the ISO 20022 standards were delayed and what financial institutions can expect around their implementation, can be found here.

The Many Benefits of ISO 20022 Compliance

Foulds observed that when it comes to ISO 20022, “The focus on compliance with these regulatory changes can make institutions lose sight of what the business benefits are. These messages contain a lot more data and richer data. That allows us to look at and examine this data and turn it into information, which can then be used to create new services for clients.”

Foulds added that banks can take the new data and “turn it into something useful and add to the services you are already providing now.”

For example, ISO 20022 data can be used to help business clients better manage liquidity and cash flow. ISO 20022 data can also be applied to supply chains to help solve supply chain network problems.

A Look into E-Commerce for 2023

E-commerce merchants have had to deal with an onslaught of change recently — an acceleration of online shopping, disruptions due to COVID-19, inflation, and a possible recession — which has significantly impacted how online businesses should be operating to remain viable now.

The aforementioned events have given way to a few trends that online sellers must be ready to adopt. “Because of inflation, I see consumers looking for more bargains when they shop online,” said Ya Wen, SVP of Americas at Payoneer. “Since COVID conditions have improved, more shoppers are shopping … however, people are more cautious about their wallet. I predict that market players will do more and launch more tools and resources to provide better deals for consumers.”

PaymentsJournalOptimizing Operations to Recession and Inflation-Proof Your E-Commerce BusinessPaymentsJournal Optimizing Operations to Recession and Inflation-Proof Your E-Commerce BusinessPaymentsJournaljQuery(document).ready(function ($){var settings_ap25178343 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"25178343",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_408537_29",settings_ap25178343); }catch(err){ console.warn("cannot init player", err); } });

Apart from focusing on budget-friendly offerings, merchants must be ready to optimize current strategies to draw in more customers. For merchants that have significant resources, the trends point to building an omnichannel strategy. Small and medium-sized businesses (SMBs), on the other hand, need to take a careful look at the cost of acquiring customers across different channels. These costs seem to be increasing and, therefore, merchants must rework their e-commerce tactics, focusing on their marketplace power, their traffic, and their economies of scale.

If the rising cost of customer acquisition isn’t enough, merchants must also contend with another possibility of supply chain disruption and take appropriate actions to minimize impact. Merchants can begin by looking at their supplier base and determining where they want to take action to offset this risk. China is a prime supplier for many businesses and recent news only emphasizes this need.

“We already know the latest news from Apple, as they are looking to move manufacturing from China for iPad and iPhone products,” said Wen. “What that means to the e-commerce seller is that they will start thinking about their supplier and their supply chain strategy overall and try to diversify their supply chain, looking more toward Southeast Asia, Latin America, even parts of Europe. This trend will continue and accelerate in 2023 and beyond.”

That said, Wen noted that as the Chinese government continues to ease its COVID-19 restrictions and reopens its borders, Chinese merchants are eager to expand their businesses on a global level.

ISO 20022 may be delayed in its global rollout, but that doesn’t mean banks can afford to put off or ignore upgrading their payments systems to meet this new messaging standard.

Broadly speaking, ISO 20022 is a global standard for electronic messaging between financial institutions and was initially created to give the financial industry a common platform for sending and receiving data about payments.

This new standard will provide much more granular and robust data about payments, which financial institutions can use to ultimately serve their clients better. Around 21 domains of business processes are specified in the ISO 20022 standard, along with the messaging and data necessary to support the different processes.

PaymentsJournal sat with Andrew Foulds, Director of Global Clearing Solutions, Product Management, EMEA at Fiserv, and Steve Murphy, Director of Commercial and Enterprise Payments Service at Javelin Strategy & Research to discuss the current state of ISO 20022 and what to expect. In Part 1, they chat about the importance of ISO 20022 for financial institutions, why it was delayed, and what banks can anticipate around this standard going forward.

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Delays Should Not Create Complacency

ISO 20022 was meant to go live globally in November 2022 but got pushed back to March 2023. A big reason was the need for some market infrastructure platforms to iron out technical kinks. Notably, the European Central Bank (ECB) delayed the migration to its Target2 real-time gross settlement system, which would incorporate ISO 20022 standards, which in turn had a “domino effect,” explained Foulds.

“It caused other market infrastructure systems to delay their go-live dates,” added Foulds.

Swift, the global financial messaging network, also announced it will go live with ISO 20022 in March of 2023, but said that institutions will have until 2025 to adopt the new standard.

This may have lulled some financial institutions “into a false sense of security,” said Foulds, but it doesn’t mean that banks should be complacent in migrating to IS...

The year 2023 is poised to see significant evolutions within the payments landscape. From the rapid rise of contactless payments in the past couple of years to the widespread adoption of embedded payments, consumers and merchants can agree that they want their payments to be seamless, frictionless, and fast.

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The Current Payments Landscape

Consumers have always taken part in payments in some shape, but the channels in which payments are taking place have changed. In the wake of COVID-19 lockdowns, the need for contactless payments arose, bringing security to top of mind for consumers and merchants alike.

With these changes come new demands, shifting the landscape of payments. Here is what those in the industry must look out for.

“From the payments landscape forward, I look at it from three different perspectives,” said Sukanya Madhavan, Vice President of Product Management and Engineering at CSG Forte. “From the consumer side, the end consumers want additional methods of payments, such as alternate methods of payment and embedded payments. The goal is making it seamless and simple for consumers to make a payment.

“From the merchant side, adding this to their regular business activities and making payments seamless to their consumers is something to consider, while keeping costs at bay and optimizing payment operations. As a payment solution provider, we need to keep tabs on the market to determine consumers’ needs and ensure we add all these capabilities, such as a QR code or open-banking BNPL (buy now, pay later).“

Merchants must learn to thrive in this increasingly demanding environment to stay competitive. Balancing in-demand offerings while keeping costs low and providing a seamless checkout experience is no small feat.

“Alternative payments are important in meeting consumer needs,” said Daniel Keyes, Senior Research Analyst of Merchant Services at Javelin Strategy & Research. “But they also introduce new complications such as crowding the checkout page. You can potentially overwhelm consumers with options, but you also want to provide them with the ability to pay the way they want to. Offering consumers with the payment options they want while avoiding a fragmented and frustrating checkout experience is a challenge that merchants and their providers will need to meet.”

“We need to have a balance,” Madhavan added.

In a payments world that often is often focused on the new thing, reliable ACH payments—the province of the National Automated Clearing House Association (Nacha)—keep steadily growing, with billions of payments processed annually to the tune of trillions of dollars.

PaymentsJournalACH Network Processed 30 Billion Payments—a Total of $76.7 Trillion—in 2022PaymentsJournal ACH Network Processed 30 Billion Payments—a Total of $76.7 Trillion—in 2022PaymentsJournaljQuery(document).ready(function ($){var settings_ap20118610 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"20118610",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_406952_29",settings_ap20118610); }catch(err){ console.warn("cannot init player", err); } });

That doesn’t mean, however, that nothing is new in the ACH lane. On a recent PaymentsJournal podcast, Michael Herd, the Senior Vice President of ACH Network Administration at Nacha chatted with Brian Riley, Co-Director of Payments at Javelin Strategy & Research, about the highlights of the past year, what has been driving business for Nacha, developments to look forward to in 2023, and why Herd sees reason for optimism.

“It really is a far-reaching, industrial-strength payment system here in the U.S.,” said Herd.

2022 by the Numbers

The volume attests to Herd’s contention.

The ACH Network processed 30 billion payments in 2022, encompassing $76.7 trillion. Those numbers were up by 3% and 5.6% over what the network handled in 2021.

Herd said that volume was achieved despite “some headwinds.” He noted the absence of pandemic assistance payments, which flooded into taxpayers’ bank accounts in 2020 and 2021. There was also a slowdown in economic growth and in jobs.

Nonetheless, the numbers grew across the board for the ACH Network, with dollar growth of about 6% year over year. It all amounts to more than 120 million payments per business day, and over the course of the year, it’s approximately 89 payments per U.S. citizen.

But perhaps the best measurement of ACH payments’ enduring appeal and easy reliability is that the value of the payments processed by the ACH Network has increased by more than one trillion dollars every year for 10 consecutive years.

It’s an enviable steadiness, Riley noted.

“The volume continues to grow,” he said. “I don’t want to know about events that blow up. It’s nice and steady. It’s there, reliable.”

The Continuing Growth of Same Day ACH

In March 2022, the per-payment limit on Same Day ACH transactions increased from $100,000 to $1 million. That boost brought new players into the fold and fueled remarkable year-over-year growth for the payment method.

“There was an immediate impact to that increase,

Ransomware attacks are hitting financial institutions big and small, and show no signs of abating. When companies suffer ransomware attacks, they typically turn to their legal counsel or insurer for advice about how to choose a good ransomware negotiator. When small business, in particular, is hit, they often turn to their primary financial institution for ransomware-response guidance. That’s because they’re unsure of which negotiation service is the right fit. Ransomware negotiation is a niche industry, as it involves direct interaction with the criminals who wage ransomware attacks.  

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In recent months, Javelin Strategy & Research’s Tracy Kitten, Director of Fraud and Security, and Alexander Franks, Fraud and Security analyst, conducted research into the industry around ransomware negotiation. They found that many financial institutions didn’t know much—or, in some cases, anything—about the ransomware negotiation companies they refer to their clients. Oftentimes, FIs just know negotiators by word of mouth from outside lawyers and insurance providers.

In a recent podcast, PaymentsJournal sat down with Kitten and Franks to discuss the main findings of their report. They provided an overview of what companies should look for when choosing a ransomware negotiation company and how companies in that specialty differ in the resources they offer.  

What to Do When Ransomware Hits

Kitten explained that Javelin’s research is really focused on the basics: Who are the players and what should customers ask of them? “So, it’s a very niche part of the ransomware mitigation landscape,” Kitten said. “But a very important one and one that we found really is kind of at the crux of ransomware mitigation.”

Financial institutions are indirectly impacted when ransomware attacks strike their commercial customers.  Franks noted that when a company looks for a ransomware mitigation specialist, it needs to ask about three main things: capacity, culture, and collaboration. Ransomware negotiation providers differ in those aspects, so asking about them can mean the difference between paying a ransom and avoiding a loss.

Ransomware negotiators also differ in what they are capable of doing—or willing to do—for clients. Franks suggested that prospective clients ask negotiators about helping with payments, helping with the handling of cryptocurrency,

With cybercrimes reaching unprecedented levels and impacting businesses in every industry, consumers are naturally wary of providing personal information online. Financial institutions continually rank among the most trusted organizations with which consumers do business, but FIs can quickly lose their coveted ground if their customers or members lose cyber-trust due to lack of privacy protections and transparency.

Javelin Strategy & Research’s “Cyber-Trust in Banking Scorecard,” which ranked 21 U.S. FIs on consumer privacy, cybersecurity empowerment, and cybersecurity education, finds that FIs that focus on focusing on privacy, empowerment and education for customers and members are the best situated to cultivate trustworthiness and long-term relationships.

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Cyber-Trust Defined

What is cyber-trust and why is it important that financial institutions nurture this among their members and customers?

“The relationship between a consumer and the organization that they are doing repeated business with is contingent on trust,” said Suzanne Sando, senior analyst of Fraud & Security at Javelin. “You’re not going to go back and continue to do business with a company that you don’t feel takes you seriously or takes your privacy and your general livelihood seriously. Looking through the lens of financial institutions, they are arguably one of the most trusted organizations, which I think is why building and maintaining what we call cyber-trust is so important for FIs.”

“The impetus for this Cyber-Trust in Banking Scorecard was for us to get a feel for how much our financial institutions in the U.S. are focusing on empowering consumers from a cybersecurity perspective,” said Tracy Kitten, director of Fraud & Security at Javelin. “What’s interesting and ironic about it is that right after our report published, we saw so many institutions putting into motion some of the recommendations that we listed in the report.”

This comes as Congress continues to come down on FIs have responded positively, as they have made changes in the right direction.

How Consumers Define Cyber-Trust

The scorecard revealed how consumers’ trust in their FIs determines consumers’ willingness to surrender personal data. However, the FI must still handle consumers’ personal data responsibly.

“Consumers who trust their primary financial institution are more comfortable than those who don’t trust their FI with cybersec...

It’s been about five years since real-time payments (RTP) became a reality in the U.S., and their popularity and adoption continue to skyrocket. According to a survey U.S. Bank  conducted among 1,000 financial executives across various industries in May and June of 2022, 56% said they will adopt real-time payments by 2024.

Furthermore, 41% of companies described as “RTP leaders” saw an increase in revenue compared with the previous year, while only 33% of “RTP laggards” reported the same. A further 39% of RTP leaders saw an increase in profits in the past year, while 44% said they saw their brand value increase.

To learn more about the importance of businesses adopting real-time payments and integrating them into their overall digital strategy, PaymentsJournal sat with Mike Jorgensen, Head of Emerging Solutions at U.S. Bank, Anuradha Somani, Head of Payments, Global Treasury Management at U.S. Bank, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

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Real-time Payments as a Competitive Differentiator

The growth of real-time payments continues to rise: In the second quarter of 2022, companies made more than 41 million real-time payments, totaling $18 billion — a 12% growth in volume from Q1, according to The Clearing House.

According to The Clearing House, roughly 62%of accounts in the U.S. can receive real-time payments “and if all the payments providers and banks had everything turned on, that figure could reach about 90%,” noted Murphy.

But real-time payments aren’t just about instant payments; they also mean that payments can be reconciled 24/7 and give businesses access to more and larger amounts of data related to payments, said Somani. She added that businesses shouldn’t just think of real-time payments as something to tack on as an afterthought, but rather using them to create “a fundamental change to your business model.”

“It gives you the ability to create a friction-free and seamless experience, so the payment moves to the back of the mind for the consumer,” she added.

Jorgensen noted some industry-specific examples,

Faster payments and the user experience are the differentiators that will enable banks and credit unions to remain relevant and competitive.

We’ve seen this gradual shift during the past decade as modern payments have undergone a significant transformation based on consumer expectations. And in the past few years, in particular, the shift has accelerated as the pandemic changed the way many are paying for goods and services.

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To put it simply, consumers want convenience — and that’s what’s driving this surge in digital payments. “Most people are looking for the iPhone experience,” said Jeff Bucher, Senior Product Manager at Alkami. “On your iPhone, you can click on the app and you can get things right away. You can order food immediately and have it delivered quickly.”

“Banking is important and using banking in the same manner that you use other apps and other interfaces is what people expect,” he added. “At this point, people want digital banking at their fingertips. They want to be able to have a streamlined interface, and they expect robust capabilities — to pay their bills online, pay their friends and family, and pay their loans online as well.”

The growth of faster payments is starting to be reflected in new use cases, according to Mark Majeske, SVP of Faster Payments at Alacriti, especially when looking at real-time payments, which has been available in the U.S. for five years.

“2023 is going to be the year of use cases,” said Majeske. “How do you drive usage of these systems,  at the end of the day, adoption of these RTP [real-time payment] rails and FedNow — that’s coming up — really depends on us, with consumers and businesses using it. In the next couple of years, we’re going to see a huge emphasis on user expectations.

Key Differences Between the RTP® Network and the FedNowSM Service

The FedNow Service is poised to go live next year, and it shares considerable similarities with The Clearing House’s RTP network, which launched in the U.S. five years ago.

“Both the RTP network and the FedNow Service are instant, real-time payments, and they’re final,” said Bucher. “This is key to understand — that once you send the payment, it’s done. The only way to get the money back is to request that the money is sent back.”

“It’s a push-only method,” he said. “They’re not batches like ACH [Automated Clearing House] — ...

The year 2022 was one of global financial uncertainty and risk, and 2023 may bring more of the same. For executives in payments risk management, planning for the year ahead should involve taking this geopolitical and financial uncertainty into account and planning accordingly.

In a recent PaymentsJournal podcast, Sudhir Jha, senior vice president and head of Brighterion, a Mastercard company, and Brian Riley, head of credit and co-head of Payments at Mercator Advisory Group, discussed how artificial intelligence (AI) is growing as a tool in payments risk management, and they also delved into the key trends they expect to see this year.

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Security Challenges Facing Financial Institutions in 2023

There is likely to be a heightened risk of geopolitical conflict, inflation, and resulting credit issues in 2023. “Unemployment has been low, but household budgets are not keeping up with the cost of living,” Riley said. “Interest rates are off the charts.”

In the past year, there has been an increase in scams associated with peer-to-peer (P2P) payment apps, such as Zelle, a trend that’s likely to continue.

As a result, many are looking to AI to help prevent such scams. “The developments in AI are not accessible to everybody,” Jha said. “The government hasn’t done the equal investment to make it available to everybody. In the ‘70s, ‘80s, and ‘90s, there was a lot of funding of fundamental research that could be made available to everybody to use. From a government perspective, the U.S. is not investing enough in AI to make sure that the research trickles down to everyone.”

Smaller players don’t necessarily have the capacity to develop their own AI solutions. As a result, they often form partnerships with larger companies, such as Mastercard, to make use of the larger firms’ increased computing power.

Brighterion is using AI to address P2P fraud across its network. “We are building solutions very similar to what we have done for the card side, on the account-to-account side, to provide solutions that work at the network level,” Jha said. “We can give you a solution that works across card payments, ATM transactions, and even crypto transactions. Fraudsters are aware that many financial institutions have silo applications for finding fraud in one channel, so they will have one card for account-to-account and one for crypto.

“We are trying to provide a multichannel solution ...