- Marcus Treacher of Ripple has harshly criticized SWIFT’s renewed postponement of the introduction of the ISO 20020 standard and described the system as disadvantageous and antiquated.
- The delay of the new standard for cross-border payments creates significant problems and costs for banks, which Ripple could avoid with its technology.
The ISO 20020 standard is a long-awaited change in the banking and finance industry, and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) was due to publish it in November this year. The standard, also known as UNIFI (Universal Financial Industry message scheme), aims to change the way in which messages are transmitted between institutions that make cross-border payments and also to increase the amount of data that SWIFT can transfer.
However, during a meeting in March 2020, SWIFT’s Board of Directors approved a postponement of the ISO 20022 migration date to the end of 2022. As Finextra now reports, the unexpected decision has surprised institutions from across the European market who are now facing major hurdles in the monumental transition.
Although the European Central Bank is optimistic about the handling of the plan change, financial institutions have a difficult road ahead of them. Paula Roels, Head of Market Infrastructure and Industry Initiatives at Deutsche Bank, commented on the change of plan:
It is encouraging that the ECB and SWIFT are closely working together to address the challenge for the European market: “In this respect, the blueprint provides a very good first insight into the strategy to build on […] While SWIFT’s delay by one year will provide a brief respite to some banks, especially in light of the Covid-19 situation, it also increases the overall project complexity to others, such as the Eurozone banks.
Ripple sharply criticizes renewed delay
Ripple, which recently became the first Distributed Ledger technology-oriented company to join the ISO 20022 standards committee for cross-border payments, strongly criticized the renewed postponement of its introduction. Marcus Treacher, Ripple’s senior vice president for customer success, said the delay “will hurt thousands of financial institutions that are ready to migrate and are already migrating to the ISO 200022 standard.
For example, Target2 migration to ISO20022 and consolidation with T2-Securities had created a clear roadmap and milestone for the adoption of these standards across European banking institutions. Swift’s delay has created frustration, technical complexity and risks for banks who had initiated the migration project and were striving for adoption in 2021.
Treacher also accused SWIFT of having caused friction with the European Central Bank, “which will affect confidence in the company” and will further complicate migration. Treacher also pointed out the damage caused by the migration to ISO 20020, which has been planned for 12 years:
More than anything, the need for any delay shows that the banking world and Swift have been too comfortable operating with legacy infrastructure and messaging systems, opting for the short-term cost-avoidance of ‘no-nothing.’ Every year that this migration is delayed, the cost of the move and its complexity increases.
Swift’s last big push to move from MT to ISO 20022 was in 2006, which was scuppered when the 2008 banking crisis deterred the major banks that use Swift from agreeing to this expensive move. 12 years later, and still stuck on legacy, the problem is now much more acute and much more painful.
Treacher also argued that SWIFT’s role in payments was detrimental and antiquated, indirectly pointing to the technical superiority of Ripple:
Currently, it’s faster to fly money overseas on a plane, than it is to send it through an existing correspondent banking model, such as those powered by Swift. In a world where we exchange information instantaneously over the internet, it is perplexing that such a slow and antiquated process for international payments still exists.