This piece appears in Finextra and basically uses the eventual full conversion of SWIFT gpi to the ISO 20022 messaging standard as a catalyst to discuss IT ‘build, buy or collaborate’ scenarios. As many readers will know, ISO 20022 is the global standard being used in all new real-time payments systems, including RTP in the U.S.
Fedwire and CHIPS will also be converting over to the standard, although the dates are somewhat iffy now. This set of conversions is causing financial institutions to grapple with payment modernization decisions around the best implementation model for their particular enterprise or organization. So the article does a top line view of decision parameter examples.
‘Complex regulatory requirements, outdated and poorly integrated legacy systems and an increasingly competitive marketplace all put pressure on traditional financial institutions to evaluate opportunities for payments transformation….SWIFT gpi and ISO 20022 migration have set the stage to meet the need for consistent customer experience across multiple access channels and drive standardisation in payments.…These demands have pushed banks to consider major technology investments as well as significant process and cost improvement activities. In this environment, bank executives are challenged to balance a range of considerations: customer experience, technology disruption and regulation.’
The author goes on to two focus areas; first is technology related to ISO 20022 and a SWIFT translator, and second is process optimization and building a payments platform for the future. The buy, build or collaborate with a fintech scenarios are discussed for each, with one example as follows:
Buy? With the buy option, banks have the ability to purchase a solution ready to integrate into their own legacy systems. This eliminates some of the challenges associated with building in-house, but again there are some serious considerations to take into account before taking this route…The main challenge with the buy option is centered around the integration with existing legacy systems, which can be very complex and time-consuming. Once the integration is complete, firms must still contend with the on-going maintenance issues that are present with the build option, around updating changing messaging standards and connectivity costs to the SWIFT network.
Pro – No build effort
Con – Maintenance
A worthwhile piece to spend a few minutes reading through.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group