TL;DR
ISO 2022 is an Internation Organization for Standardization (ISO) used to exchange messages between financial institutions across the world that contain payment data. ISO 20022 improves on the current system of payment data by making it faster and cheaper to use. This improved speed and data could spur innovation which could add increasing value to providing payments.
The U.S Federal Reserve Board has stated that its members plan on utilizing this system beginning late 2023. Further, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) plans on giving its members the option to adopt this standard as early as November 2022.
The adoption of this new standard is critical in the usability and interopeability of the eventual rollout of the Central Bank Digital Currencies (CBDCs). Crypto projects are also getting involved in this new standard and are in the process of becoming "ISO 20022 Cryptos." Some of this crypto projects inxlude XRP, XLM, XDC among others.
Introduction
We are entering a new era in global finance. Banks and financial institutions are getting ready to transition their payment systmes from SWIFT messages to the new highly structures and data rich ISO 20022 financial messaging standard.
ISO 20022 plans to be the standard by 2025 for all major or large-value payment systems for all reserve currencies. It seeks to continue building on the old SWIFT system.
Why ISO 20022 Is Important?
When it comes to finance, having a set structure and standard is incredibly important when reporting financial data and transactions. The ISO 20022 provides a global standard between global financial institutions and improves interoperability between providers and clients.
The ISO 20022 financial messaging standard seeks to remedy the lack of strucutre and interoperability. This will provide an agreeable business message synstax amongst international entities. This standard will allow for organizations to utilize the same message structure to exchange transaction information globally.
Benfits of ISO 20022?
One of the greatest benefits of ISO 20022 is that it will create a shared language and structure for financial data. This added structure will provide for faster payments being recieved which will improve the overall quality. Here are some other great benefits:
Better Data
In addition to better customer service, enriched data will allow financial organizations to develop new, tailor-made products by analyzing the behaviors of customers. Better data and increased flexibility will also lead to more competition in the financial sector, possibly leading to new products.
More Transparency and Visibility
Better customer experience is achieved through greater transparency around remittance information. The ability to forecast liquidity flows in real time will be strengthened with better visibility and real-time perspective. Financial services organizations can, therefore, perform better in managing and controlling liquidity with an agile approach.
Better Integration and Compliance
With ISO 20022, mainstream, modern XML-based technology ISO 20022 will be able to reach every market infrastructure and payment system, allowing for more seamless integration. With improved analytics, requiring less manual intervention, fraud prevention will be better as well as compliance processes will be more accurate.
Which Cryptos Are ISO 20022 Compliant?
Lets take a look at cryptos who are ISO 20022 compliant or are in the process of being compliant.
Ripple (XRP)
XRP has made greate strides forward in becoming ISO 20022 compliant. In fact, it is the first major crypto project that has been able to position itself as an ISO 20022 crypto coin. This seems to be a natural progression for Ripple, as it seeks to become a premier payment method for cross border payments.
Further, Ripple has partnered with many banks across the world that allow them to use Ripple's On-Demand Liquidity for cross border payments.
Stellar Lumens (XLM)
Although XLM hasn't made it clear whether they are ISO 20022 compliant, they have partnered with IBM, who are compliant to this standard. In fact, IBM utilizes XLM for its cross-border payment system "IBM World Wire", utilizing XLM as a brdige currency.
Algorand (ALGO)
Another crypto that hasn't made it clear whether it is ISO 2022 compliant, Algorand has shown in some capacity interest in becoming compliant. Algorand is part of the Digital Payment Institute, producing a paper called "The Future of Payments".
This involvment has made its intentions clear in becoming at least part of this new system.
Final Thoughts
Payment data is exchanged across financial institutions using ISO 2022, an International Organization for Standardization (ISO). By making the payment data system faster and cheaper, ISO 20022 improves the current payment data system. As a result of this improved speed and data, the payment processing ecosystem could gain increased value.
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