Key Takeaways
Fragmented and complex cross-border payment systems lead to delays, uncertainty and additional costs.
Data-rich payments using the ISO 20022 standard are set to streamline the process by unifying the language of payments.
Detailed contextual data alongside the payment, such as invoice number and payment purpose, will benefit clients by shortening transaction times and enhancing transparency.
On a recent Scotiabank Market Points podcast, Kim Salti, Director, North American Business Payments Products, and Charlene Lee, Director, Cross-Border Payments Transformation, chatted about how data-rich payments are changing the game. Here are the highlights from that conversation.
For many businesses and consumers across Canada, sending regular remittances abroad and receiving inbound funds can be complex and challenging. Payments must pass through several intermediaries, and crucial data can be misinterpreted, resulting in a delayed or rejected payment.
A lot of hands help with a payment when it crosses a border.
Fragmented systems and a lack of standardization create unknowns for clients:
- Where’s my payment?
- How do I know it arrived?
- When did it arrive?
- What’s this payment for?
The good news is that many payment industry leaders are rolling out new data-rich technology to enhance transparency, streamline payment processes, and speed up transaction times.
Why data-rich payments?
The challenge: When information accompanying a wire transfer cannot be read accurately by the recipient, additional inquiries between banks and customers slow the process. Customers may also face additional costs if the original wire payment fails. For example, listing the purpose is mandatory for payments to India. However, since there is no set place to input this information, it could be missed on the receiving end. Legacy frameworks struggle to manage the intermediary payment steps between sender and recipient while complying with regulations across global jurisdictions. “Currently, the free form text data that flows with a payment is spotty.” - Kim Salti
The solution: Data-rich payments unify the language of cross-border transactions through ISO 20022, an international standard that institutions must comply with to help payments clear and settle. The contextual data helps senders and receivers understand the payment. The process is like ensuring that ‘soccer’ and ‘football’ are translated the same way despite regional differences in meaning. For example, instead of sending a stand-alone $3,000 payment, a data-rich payment can include the invoice number, payment purpose, sender and receiver, and much more.
The case for structured standardized data for businesses
For businesses that manage significant sums of cross-border payments, the structured data format can enhance operational efficiency. Benefits include:
- Faster operations
- Accurate account reconciliation
- Fewer day sales outstanding (DSO)
- Smoother compliance
Eliminating trapped liquidity: Prompt reconciliation means cash is applied to the books and can be used sooner. Trapped liquidity from funds in transit can be millions of dollars for global multinational companies.
Accurate compliance and security: Roughly 5% of all transactions face a screening stop, but most are false positives where the delay was unwarranted. For example, a payment with Cuba in its name might trigger a stop, even if it was for a scuba diving company. Specific drop-down codes “simplify life for everyone,” said Kim Salti.
Data can be captured in a structured and unambiguous way so that to everyone across the globe, it means the same thing.
One of the things we want to prevent is unnecessary stops along the chain.
What ISO 20022 means for Canadian businesses and their customers
ISO 20022 bundles more information with each transaction for convenience. It connects systems and streamlines the ability of different organizations to work together effortlessly, regardless of location – effectively creating a universal language for the payment industry. With enriched contextual data, cross-border payments should face less friction by:
- Boosting accuracy and speed
- Promoting faster money movement across borders
- Providing more transparency and security
- Strengthening capital control
As the payments industry upgrades to data-rich technology, businesses should keep up with developments to leverage the benefits of innovation. Educating their customers on how to use these new fields will be important. The good news is that customers won’t need to understand detailed ISO language as the data input fields will be simple for them to use.
Preparing for ISO 20022: Behind the scenes at Scotiabank
Scotiabank is working closely with clients and partners to build awareness and get ready for full ISO 20022 adoption in November 2025.
- Scotiabank is engaging with businesses in Latin America, Canada, North America, Europe, and Asia, to ensure they are ready to receive and send payments. Businesses with more manual operations will likely face a greater learning curve than those with higher automation.
- Scotiabank is continuing to build out its wire payments experience for business banking clients by empowering them with richer data and enhanced payment transparency.
- This multi-year endeavour kicks-off with the first major release of the Structured Remittance Advice feature via ScotiaConnect®, giving clients the opportunity to include detailed invoice information directly within the wire payment.
- Next on the roadmap is the launch of Receivables Reporting via ScotiaConnect and ScotiaConnect Host-to-Host, allowing clients to not only send remittance data, but to see it in a consolidated report that shows all the payments a customer has received.
- Scotiabank continues to work with Payments Canada and the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to coordinate responses across the payments industry.
- The 2025 milestone is just a starting point from which to drive consistent industry usage and unlock the full value of this payment format.
What businesses can do to be proactive
To fully leverage benefits from data-rich payments and ISO 20022, businesses should evaluate their payment processes and integrate data-rich innovations:
- Engage with their bank to understand the implications of upcoming changes. They may need to update their payment data to tap into greater automation and faster fund flows.
- Speak to their Enterprise Resource Planning (ERP) and Treasury Management System (TMS) providers to plan for using ISO 20022 with their banking partners.
The transition of the global payments industry to data-rich and ISO 20022 is poised to propel the financial industry into a new era. With adequate preparation, businesses and their customers can benefit from the cross-border payment industry’s evolution to faster, more secure, transparent, and frictionless transactions.
Reach out to your Scotiabank relationship manager to understand how ISO 20022 will impact your business, and how your organization can take advantage of the new data.
