The Connector.

The Connector Podcast - Fynhaus - ISO20022

October 20, 2022 Koen Vanderhoydonk (The Connector), Karim Sinno Season 1 Episode 7
The Connector.
The Connector Podcast - Fynhaus - ISO20022
Show Notes Transcript

Join the conversation with Karim Sinno, Managing Partner of Fynhaus.  He talks about the forthcoming migration from ISO15022 to ISO20022.

Banking software solution provider for 40+ banks
SWIFT Global Payment Initiative (GPI) implementations
ISO2022 migration engine from ISO15022
AML screening directly from SWIFT-Fin messages

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Koen Vanderhoydonk
koen.vanderhoydonk@jointheconnector.com

#FinTech #RegTech #Scaleup #WealthTech

Introduction  0:01  
Welcome to the connector podcast, an ongoing conversation connecting fintechs banks and regulators worldwide. Join CEO and founder toe and Vander Heiden as you learn more about the latest available trends and solutions in the markets.

Koen Vanderhoydonk  0:21  
Hello, Corinne, welcome in my podcasts. How are you doing today?

Karim Sinno  0:26  
I'm great. And yourself. How are you today?

Koen Vanderhoydonk  0:29  
Yeah, good. I heard this is your first podcast? Is that right?

Karim Sinno  0:33  
Yep, this indeed is my first. So you're gonna have to walk me through this.

Koen Vanderhoydonk  0:37  
It's gonna be easy. We're going to talk about what you like the most ISO 2222? Is that correct?

Karim Sinno  0:44  
Yeah, this keeps me up at night that for sure.

Koen Vanderhoydonk  0:49  
So it keeps you up at night. But what about the industry?

Karim Sinno  0:53  
Well, if it keeps me up at night, and I actually know what it's about, I can't even imagine like those people who are in an IT department and a financial institution somewhere in some basement, trying to figure this out and how to get out of not out of it, how to solve this problem, actually, because it's such a big problem to take care of at this moment.

Koen Vanderhoydonk  1:15  
But still, I think for me and the audience, could you then explain a little bit more what what is ISO 2002 about

Karim Sinno  1:24  
what just sum it up ISO 20,022 is basically the new standard for financial messaging. What has happened is that over the past few years, all financial institutions globally have converged in a way where that by the year 2025, almost every region in the world will be communicating using one standard, which is ISO 20,022, which is something that is cannot even be thought of at this point. Like, you can't imagine the entire world finally agreeing on something.

Koen Vanderhoydonk  2:01  
And then it has to be a swift format, right?

Karim Sinno  2:05  
It has to be a proprietary somebody forcing it on everybody.

Koen Vanderhoydonk  2:10  
Now, in a past life, I've been reading the old good old ISO 15 or 22 messages. And I really needed a manual to do so. So is that one of the biggest changes that the XML format is bringing us?

Karim Sinno  2:26  
Well, ideally, this format is gonna be standardized, user friendly. It's using an XML based, basically markup language which, which any software developer knows, and they are names and key IDs and values for every attribute or, or element in that XML. So that makes it very intuitive to understand what this corresponds to whether this is an address, field name, field, and instruction information field. So everything is much more explicit. It's much more user friendly developers do not need. Having spent five years in a financial institution to learn and the messages the hard way, that actually they can pick it up and read it. However, that does not mean the world is speaking exactly the same way. Because let's, let's take ISO 20,022 as a language, there are still different dialects that that so many of the world will implement the standards in a different way. So we're getting closer, we're not 100% locked in, or it's way closer than it was five years ago. Okay.

Koen Vanderhoydonk  3:38  
An early set a little bit about timelines, and I think I heard you say like 2024. But coming back from the old worlds, I remember being in ISO 20 or 22, and CO productions, which part of the market is actually now moving into the final ISO format.

Karim Sinno  3:57  
Okay, so if we look at around mid 2025, the entire world would, theoretically will have abandoned the ante standard that's for smoking everybody. However, their roll outs are planned a bit differently and at different schedules. So we start with Swift to, let's say the most, that has the biggest global coverage, the Swift it previously intended to start in 2021, and finish it rapidly in 2024. Now that was pushed the year. So the gradual rollout is between November 2022 and 2025. kicks off in a month. Believe it. Believe it or not, it kicks off in a month. They're not all the messages, they're throws out. They're gonna roll out gradually and they will be a coexistence spirit where we will be using the old MP messages and the MX messages either or not the key don't have duplicates of messages. However, there will be a coexistence period. That's also confusing people on what am I doing here? When will I get what? How do I deal with this. So there is a problem. Even if you're not sending MMS messages, you're gonna receive them as well. Not the Swift. Let's move next, the EU, the EU when we're talking about high value payments, those do not travel to say, but those travel to target to a Euro one that is targeted to shift the ISO 20,022. This year

Koen Vanderhoydonk  5:30  
already.

Karim Sinno  5:32  
So we look at the UK, they're clearing house is expected to adopt ISO 20,022 in April 2023. Now the US has two clearing houses a public one and a private one. The public one is rolling out as a big bank in 2025. The private one is gradually rolling it out between 2022 and 2023. So as you can see, the global financial market, very large extent is going to become the word on the on one ISO standard that is. So this is a very exciting time and very confusing time for some other people maybe.

Koen Vanderhoydonk  6:15  
Well, last week, I was at a big conference. And I followed a couple of sessions around ISO 15 or 22. And I thought it was an interesting discussion about coexistence or interoperability. Maybe a question to you, Kareem, if you had to choose one or two, which one would you pick?

Karim Sinno  6:34  
Let's say from a challenge perspective, I would love the I would love the big bang approach. However, we live and the financial sector does not operate that way. There are multiple contingencies and multiple fallbacks and multiple backup cases for those. So coexistence and interoperability in the sphere of the market is, is natural, we have to have redundancies. And these are huge monolithic corporations that we're talking about. These are not to three people sitting in an office that are processing five transactions a day, they process 10s of 1000s. And these transactions come from multiple sources. So imagine a big bank that has to do customer to customer transactions, bank to bank transactions, Treasury, money market, Tate finance, and information messages on top of those shifting those old just flicking a switch one day using one standard, plugging another switch another day using another standard and everything's supposed to work from day one. That's, and that's something you cannot even imagine. So that's very scary. Some people are doing it, I don't know how, how much drills they have to do before that to make sure that this works, although Oh swift have gradually rolled those out. So in November 22, what swift decided to do was we'd select the subject of these messages, the most crucial of them, let's say, the ones that constitute probably the high degree, definitely over 70% of the volume of instructions that are going back and forth. Let's move those the main ones, let's get them coexisting in 2022. They're advising people not to adopt a new standard because they're scared of the readiness level. However, as of 2022, the main instructions are gonna roll out and you're gonna get them in one of two ways you're can't get them in both swift are trying to run something inside between in the comment section and attempted automated translation. However, that's the band aid, not the solution. What happens in such cases is that the new format has much more information inside it, it's much richer, much more flexible, so that you can design solutions that are look for an automated straight through process where this routes, do this and find parameters that need this attribute to check the name the this activity to check the value of the payment, whatever compliance solution that you're dealing with there, you can convert them to do that, with XML MP unless it was coded for financial institutions to process NT messages. They never had that feature. And they've been operating through Mt for the longest time. So now we have a lot of rich data on one side that we want to have a look at as a compliance department. However, we have 10 solutions that are running inside the bank that basically have been running on an old standard for I don't know how many years and cause the cost and the efforts and load required to upgrade all of those and have them securely up and running in due time is probably something too much to deal with. So the the operational aspect of things need MPs, let's say and the compliance with ISO 20,022 MX. So there you need a solution that can read anything that comes in whether it's empty or Macs, do the proper decision making whether on an incoming or an outgoing flow to the proper decision making on what to convert? And what scenario in what way and give the compliance guys access to the full, the full picture in front of them, so that they can make informed decisions and be more vigilant when it comes to fraud. They can compliance departments, if you tell them I have to remove one character out of this instruction just so it fits, they're gonna reject that because they they fear that they might have lost some some information that might help them in identifying fraud.

Koen Vanderhoydonk  10:47  
Is this where Finn house comes in, Kareem?

Karim Sinno  10:51  
Well, yeah, that's exactly where we come and split podcast was not about finance was about ISO. However, in reality, we do solve that problem. We've approached that problem on a maybe a bigger scale first for the clients who need it. And as a simple, simple solution for the clients who just need quick transformation, what we've done was our payment hub solution is ready for all types of messages for all for all sectors and in all regions of the world. So we're ready for all of those. And we're ready to transform from any source to any destination format, depending on our needs to do multiple transformations, to suit different business units within an institution. We can route those based on business rules based on some decision making that has to be done serve during the coexistence period. So we could provide every piece of that financial institution the information they need, so that they can continue their processing and do not face any issues when they have to go live or when they have to convert from one format to the other that our goal at the end of the day is to make banking easy. With our excellent innovation. That's what we aim for. And I believe that's what we've done here.

Koen Vanderhoydonk  12:09  
It sounds like a nice mission to accomplish, I must say. And thank you, Carrie, where can they find you?

Karim Sinno  12:17  
Finance is available on all social media platforms where we can be contacted directly through our website, through LinkedIn. And we're always ready to explain the topic because sometimes it's not just about putting a solution in front of somebody's face for them to adopt it. The goal is to understand what the problem is. And the more you understand, the more you can actually tackle the problem in a manner where you let's not putting band aids left and right just so that you can survive, you're actually surviving, functioning and flourishing in this in a new ecosystem and the the next generation of financial messaging.

Koen Vanderhoydonk  12:58  
Thank you very much, Kareem. And thank you also for being part of a podcast. I think you did particularly well for your first time.

Karim Sinno  13:06  
Thank you so much for having me on. It's a pleasure. And thank you.

Koen Vanderhoydonk  13:10  
You're very welcome. Thank you also to the audience for tuning in. And please stay tuned on our channel for more news about fintech. Thank you very much.

Koen Vanderhoydonk  13:19  
Thanks for listening to another episode of the connected podcast to connect and keep up to date with all the latest head over to www dot join. They're connected.com Or hit subscribe via your podcast streaming platform.