With the global migration to ISO 20022, one of the biggest challenges facing correspondent banks is how to handle the migration from legacy MT messages to new ISO 20022 MX messages within cross-border payment markets. What changes will they need to make to their IT infrastructure? How will they dually support both MT messages and MX messages during the transition to ISO 20022? In this two-part blog series, we address the first issue in part 1 and the second in part 2.

Preparing for MX messages through IT modernization

Supporting ISO 20022 MX messages and the move from batch to real time requires a flexible payment infrastructure that can handle all payment types, scale to meet growing volumes, offer a truly unified global service tailored to local variations, and differentiate service levels for customers.

Many correspondent banks have legacy systems that are still in production, deeply embedded within complex ecosystems and critical to moving billions of dollars on a daily basis. These legacy systems have run well since electronic messages first emerged and are technically capable of continuing to do so for many years to come. What should correspondent banks do with their legacy systems? Should they keep “as is,” improve or fully replace?

Depending on each bank’s current environment and business goals, there are three payment modernization options to consider: 1) legacy platform replacement, 2) intelligent wraps, and 3) managed payment services, or a combination of these.

Full platform replacement

Full platform replacement is often the best option for banks with multiple, unreliable legacy systems that pose significant compliance risks. This approach involves replacing legacy systems with modern, integrated and cloud-proven payment solutions. System integration partners can assist with this effort. Further, advanced deployment technologies and the use of a cloud-based infrastructure can reduce implementation times and enable banks to innovate at speed.

Intelligent wraps

Some banks have legacy payment platforms that are reliable, but comprised of multiple, disparate systems. In this case, a good option is to focus on wrapping existing systems to create a unified front-end interface. This type of intelligent wrap can connect with multiple settlement systems (e.g., SWIFT, ACH, domestic real time). At the same, it can deliver additional services (e.g., onboarding, limit checking, integrated wire and ACH payments), along with consolidated reporting.

Managed services

Especially during the COVID-19 pandemic, many banks have realized that handling IT modernization in-house is problematic. Justifying the capital investment and hiring the right talent are tough challenges. As a result, many banks are increasingly turning to third parties to provide cloud environments and application management for their payment services.

Managed payment services requires little to no upfront costs, provides access to expert talent, and reduces overall total cost of ownership while ensuring business continuity. Through a managed services partner, banks also can minimize overall risk while preserving the option to migrate to a single payments platform in the future. Other advantages include service-level driven performance, common processes and tools, and planned upgrades drive continuous improvement and ensure regulatory compliance.

Managing the transition

Once you have the right IT infrastructure in place for ISO 20022 MX message migration, the next challenge is to manage the transition effectively. In part 2 of this blog series, we will explore that issue further. In the meantime, for more in-depth information on the migration to MX messages, read CGI’s new white paper, From Heritage to Hypernew: Exploring MX Options for Correspondent Banks. In addition, feel free to contact me.

About this author

Ainsely Ward

Ainsley Ward

Vice President, Consulting

With more than 20 years of international banking and payments experience, Ainsley is a recognized industry thought leader and leads business development for CGI's Payments Solutions. Previously, he worked on modernization and open banking initiatives in Canada and as a banking subject matter expert for ...

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