The change is driven by the global adoption of the new messaging standard ISO 20022, which is used for electronic data exchange between financial institutions. SWIFT, the global communication network, central banks, and local clearing houses are all moving to this new standard, which allows for richer and more structured data transfer.
Central banks around the world are working to upgrade their systems under the new message format. This, in turn, means that all banks that the central banks interact with in the respective markets must adapt. The banks must upgrade and modernize their infrastructure to ensure a functioning payment system.
“This is the biggest number of changes central banks have implemented in 70 years. It stresses the entire banking system and affects all banks”, he says.
Behind the scenes
Most changes happen behind the scenes, but to adapt to the new communication format, all companies and organisations must implement certain changes in their internal systems.
“For our part, we are pretty much over the hurdle, at least in Sweden, where we have most of our clients. There are only seven per cent left who have not yet migrated to the new format,” says Allan Kissmeyer.
New rail for payments
However, the most significant changes concern the underlying infrastructure, i.e. the rails on which the payment system rests. It’s being fundamentally rebuilt – and if everything works as intended, that change won’t be noticeable to clients.
This is a big challenge for all banks, says Allan Kissmeyer. The system changes that need to be made are time- and resource-consuming, meaning that other development initiatives must take a back seat.
“In recent years, we have had limited capacity to drive other than mandatory changes. This will continue for the next two or three years”, he says.
Keep an eye outside the tunnel
Despite this, he believes it is important to continue exploring new, innovative technology with clients.
“When running this large and long-term infrastructure project, there is a risk of suffering from tunnel vision. When you come out of the tunnel after three or five years, the world can look very different than when you entered the tunnel. So, it is essential to constantly monitor what is happening outside the tunnel to see if you need to adjust the direction. It’s a challenge.
However, in the coming years, the focus will be on ensuring a smooth transition to the new payment infrastructure – everything to avoid disturbances and instability in the payment systems.
“Our most important task towards clients is to ensure stability in the payment system. We’re working hard to ensure they get a state-of-the-art rail for their payments, enabling all the exciting new technology available. But, the most important thing is stability," says Allan Kissmeyer.