By Gerry Gaetz, President and CEO of Payments Canada
The world is slowly-but-surely transitioning its payment systems to use the ISO 20022 payment messaging standard. The reasons for the transition are compelling on paper, but the market dynamics can make early adoption a tough sell. We should know, Payments Canada is strongly committed to the ISO 20022 standard across all our systems and has been working with our members, and the wider Canadian marketplace, to drive that adoption since our modernization program started in 2015.
There are two kinds of adoption. The first is simply the support for, and use of, the new standard. In this instance, adoption might lead to some marginal added-value, but in general, it would be business-as-usual, but just with newly formatted payment messages. The second, is where the entire payments-value chain is maximizing use of the new standard with rich data travelling with every transaction, and also exploiting the new standard with innovative products and services. The latter is what Payments Canada targets as our modernization program enters production, and the former is a risk that must be managed.
Payments Canada has three main aspects to its legislative mandate: to operate payment systems, to facilitate innovation in the ecosystem, and to support interoperability. We undertake many activities to accomplish these mandates. Setting standards in the payment system helps us to accomplish all three.
The benefits of standards crystallize when they are broadly adopted. This “network effect” is the source of power and benefit to the payments ecosystem. This means reaching beyond our Canadian payment systems and driving interoperability globally is vitally important to the maximal use of ISO 20022.
Payments Canada believes a market-driven strategy is highly preferred to one that works to mandate adoption from the very start. We have experience with the latter, and have made the decision based on our experience and research to support a market-driven effort, only mandating laggards over time.
We are convinced of the benefits of ISO 20022 to Payments Canada, our members, our stakeholders and the Canadian economy, however, we have also discovered that driving adoption within our target time horizon is an onerous, expensive and large scale task. We are not currently structured or funded for such a sustained campaign. Nor are many of our counterparts in countries around the world. We have all concluded jointly and independently, that ISO 20022 is the future global standard. And while the International Organization for Standardization—or ISO—created, manages and helps govern the standard, there really is no driving force to accelerate and maximize market-driven adoption.
Given the variety and range of interested and impacted constituents, and the limited understanding of the true potential of a completely ISO 20022-enabled payment system, a collaborative and engaging mechanism that explores, educates, supports and exploits the ISO 20022 standard is needed globally. One does not exist today.
We think 20022 Labs can provide the global leadership that is needed. Payments Canada believes strongly in the 20022 Labs concept, its alignment with our own corporate strategy and goals, and we have a high level of confidence in the organization. We have first-hand experience of market testing, and have confidence in the market interest and financial support for the initiative. Ultimately, we believe 20022 Labs will help to build a foundation of ISO 20022 understanding and demand on which Payments Canada and our members can build an innovative, world-leading payments value-chain.
We look forward to working closely with 20022 Labs as it drives robust ISO 20022 adoption, leading a global movement from here in Canada.
Gerry Gaetz is President and CEO of Payments Canada