ISO 20022 puts the automotive industry in the fast lane
*This article first appeared in the Trillium Automobile Dealers Association’s member newsletter.
Try to imagine a world where every automotive dealer had different names for the parts of a car. That would make communicating with one another rather difficult. You don’t really have to imagine it because it already exists.
What some call a cylinder block, others might call an engine block. Now add in the extra wrinkle of speaking different languages, a common occurrence in cross-border transactions, and trying to place a simple order for a standard part could cause confusion.
This kind of confusion exists today in the financial world, specifically when completing business transactions. Here’s an example. What do we call the person or entity that receives a payment or credit to their account? In Canada alone, we have nine different ways of explaining this. Difficult to have interoperability between Canadian systems let alone cross-border jurisdictions.
The solution is ISO 20022, an open global standard for financial messaging. ISO 20022 provides consistent, rich and structured data that can be used for every kind of financial business transaction. The Society for Worldwide Interbank Financial Telecommunication (SWIFT), is managing the documents for ISO 20022 as the Registration Authority.
At Payments Canada, we’re in the business of making payments easier, smarter and safer for all Canadians. And adopting ISO 20022 into our payment systems — and educating the payment industry on its immediate and positive impact — is part of that objective.
ISO 20022 aims to solve this global interoperability problem for various financial systems worldwide. These standards build on previous standards and expand on how financial systems and networks around the world communicate with each other, using the same language. In other words, it builds a glossary of terms that every financial institution uses to make sure everyone is driving on the same side of the road. There’s a reason stop signs are universally octagonal and red.
ISO 20022 will have many benefits. Here are just a few of the use cases that can, no doubt, be of value to the automotive industry:
- Payroll - ISO 20022 enables improved straight-through processing rate for payment systems, which allows a corporation to improve efficiency of payroll, bonuses and expenses reimbursements.
- Paying Multiple Supplier Invoices - A business owner pays multiple invoices to their supplier using a single electronic payment, including information from each invoice in the same payment message. This eliminates the need to send and reconcile multiple payments.
- More Options with Data-Rich Payments - A business has multiple options for making data rich payments that meet cost and timing needs. Reliance on cheques is greatly diminished because the myriad of information businesses pull from cheques will now be in the payment message itself, along with more potential data points.
SWIFT’s long-term goal is for worldwide adoption of ISO 20022. This is happening, but this will not happen overnight. Many countries have already adopted it for some or all of their payment systems. And Canada is moving that way, too.
Senior ISO 20022 Analyst
ISO 20022 and the SUMMIT
ISO 20022 in Canada and the global marketplace is just one of the many topics being covered at The 2023 Payments Canada SUMMIT May 3-5 in Toronto.