The modern global supply chain revolutionized the shipping industry by standardizing the way freight is packaged and transported around the world. This “containerization” lowered the cost of goods and blurred the boundaries of the regions. Cross-border payments are facing a similar change today.
Payment protocols and messaging around the world are fragmented and restrictive, in part because countries and financial networks adhere to different standards. This leads to closed networks that don’t talk to each other, unstructured data, and opaque payments that require a lot of manual intervention – resulting in a poor payment experience.
The International Standards Organization (ISO) introduced a universal standard, ISO 20022, in 2004 to bring existing payment infrastructures to the modern world and enable global interoperability and an improved customer experience. ISO 20022 is steadily becoming the global standard for worldwide cross-border payment flows. Ripple led the way in this shift and our network, RippleNet, was aligned with ISO 20022 standards from the start.
We are now pleased to announce that Ripple is part of the ISO 20022 Registration Management Group (RMG) standards body and the first member to focus on Distributed Ledger Technology (DLT). This membership enables us to meet the needs of our 300+ customers by setting the future direction of cross-border payment standards for the advancement of the ISO 20022 standard.
This membership allows Ripple to contribute our experience and know-how in applying the ISO 20022 standard to cross-border payments and their use in the DLT data structures in our standardized API. In fact, Ripple and our customers at RippleNet are pioneers in using ISO 20022 for cross-border payments. The introduction of ISO 20022 for domestic ACH and RTGS payments has been widespread over the past 10 years but has had limited use by other cross-border payments.
ISO 20022 is the de facto global data standard for modern payment messages between financial institutions and payment systems. It is estimated that 87% of global financial transactions will be supported by ISO 20022 by 2023. This common language helps banks, financial institutions and systems to implement end-to-end processing across domains and regions – the key element for creating efficient interoperability.
Structured data streamlines the processing of cross-border payments, resulting in fewer false positives and compliance investigations, as well as stricter regulatory controls. When all networks follow the same rules and protocols, payment reach and direct processing (STP) improve significantly.
Achieving a very high STP level in payments is an essential requirement for the world’s digital economy to mature and deliver the benefits for society and commerce forecast by industry experts, such as: B. Machine-to-machine payments, the Internet of Things and smart supply chains, and greater financial inclusion. This is because all of these models require extremely reliable, high volume instant payments to be effective. ISO 20022 is crucial for this.
This interoperability improves resilience because if part of the system fails, the same standardized data can be used to efficiently redirect the transaction. The payment range is also expanded due to the increased compatibility between payment providers. End customers receive faster and more reliable payments with fewer errors and improved transparency.
Taken together, these open standards promote competition and innovation in the industry.
Stepping into the modern world together
The world is converging on a new global standard and is stepping into the future.
To ensure this shift reaches its full potential, the payments industry needs to work to push the adoption of ISO 20022 further. Ripple is in a unique position to help its customers take full advantage of the ISO 20022 standards and advise on messaging and integration-related issues so customers can simplify deployment and further reduce RippleNet operational overhead.
Bring cross-border payments to the modern world with us. Learn more about ISO 20022 and how Ripple is shaping the new world of payments.