Why data is the key to unlocking payments innovation
Making cross-border payments has traditionally been a cumbersome task. A typical transaction could take several days to clear while the recipient’s bank carries out the necessary compliance checks. Delays are common, sometimes payments fail. For global businesses, this can have a negative impact on supply chains and fulfilling customers’ orders.
A new international payment standard currently being rolled out, known as ISO 20022, could start to change all that by harmonising payments data around the world.
“This format is the emerging de facto standard for new types of real-time payments systems that are in development globally,” says Aleks Stefanovski, vice president of strategy at Currencycloud, a cross-border payments platform. “That’s important because it enables fintechs to establish connectivity to different real-time payments systems around the world in a way that removes friction and improves the speed and customer experience of cross-border payments, reducing what, maybe ten years ago, took two or three days to just a matter of seconds.”
The new ISO standard follows recent regulatory changes in Europe with PSD2, the new payment services directive that underpins open banking and makes payments more secure, which came fully into force in the European Union at the start of this year. While the two are unconnected, both are critical cogs in building what blockchain-based payments network Ripple’s vice president of global account management Pat Thelen calls the “internet of value”, a future where he envisions money will move around the world like information does today.
“In the legacy world, you have very fragmented data and restricted, closed environments, which creates two things: poor user experiences and a lot of manual costs,” says Thelen. “That’s where ISO 20022 steps in, providing a rich data format that allows for more payment information to be tied to an individual payment in a way never done before. Then with PSD2 you get to the last mile, the ability to have open access to that data and allow different payment schemes to connect with one another.”
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