ISO 20022 Migration for the Australian Payments System –
Responses and Options Paper – September 2019 4. Migration Approach

4.1 Summary of responses

4.1.1 Risks and challenges

Respondents identified the need to prioritise the domestic migration project against other initiatives as the most significant of the risks identified in the Issues Paper by likelihood and consequence (risks 1–4, Figure 7). Other issues identified by respondents include: industry capacity; migration challenges (risks 5 and 6, Figure 7); the capacity for vendors to keep up with an aggressive whole-of-industry domestic migration timeline; potential for compliance and screening failures during the coexistence phase; and technical challenges in supporting multiple formats during the coexistence phase. Some responses identified risks arising from a lack of clear regulatory and reporting expectations, particularly in respect of AML/CTF compliance and sanctions screening, during the migration project.

4.1.2 Migration strategy, timing and coexistence

Most respondents preferred a domestic coexistence phase to support the transition from existing MT messages to ISO 20022 messages. Many in the industry agreed with the view that the domestic coexistence phase should be aligned with the beginning of SWIFT's coexistence phase for cross-border payments migration. Some options to manage industry coexistence are discussed in Box C.

Around 55 per cent of respondents support a like-for-like migration followed by adoption of enhanced message content (Figure 8). Support for an initial like-for-like phase was influenced by a general desire to reduce overall project risk by allowing for a phased approach to project delivery. In contrast, other respondents indicated a desire to complete their build as part of a single project. These participants are in favour of a delivery model that provides flexibility by allowing a like-for-like migration with an option to adopt enhanced content. This would allow them to populate messages immediately after implementing their internal build but would not impose any requirements on recipients to process the enhanced content. The requirement to populate and absorb enhanced content would be made mandatory later in the coexistence phase, meaning that participants who choose to migrate later in the coexistence phase would need to migrate straight to enhanced content, without any like-for-like period. These respondents stressed this will allow a participant to commence using enhanced content early if it is ready to do so.

Some respondents identified potential impediments to migrating domestic payments messaging by the end of 2024, ahead of SWIFT's cut-off for MT cross-border flows. The key theme coming from these responses was the challenge of ensuring internal project investment prioritisation of this initiative against other competing initiatives, e.g. ASX-led CHESS migration and ongoing NPP initiatives, as well as payments-related developments in other jurisdictions. Some respondents have a preference to undertake system builds for both domestic and cross-border migrations simultaneously, while others noted that staging the domestic migration behind the SWIFT cross-border migration could reduce their project delivery risk.

4.1.3 RITS AIF migration

Coexistence will affect some participants' use of the RBA's AIF service, which currently uses the existing MT standards. For the HVCS and batch migrations to ISO 20022, the main potential impact is to the reporting that RITS provides to ESA holders, as these may contain details of settlements that were submitted to RITS by both MT and ISO 20022 instructions.

Some planning is required as certain ISO 20022 fields may be both richer in data and longer in character length and these may not align to the equivalent fields used in current MT AIF messages (such as ESA statements). The RBA will look to consult with industry to help ensure that current MT AIF reporting can continue without impact to ESA holders from the commencement of the coexistence phase. This will occur as part of the industry discussions to determine the ISO 20022 message usage guidelines.

The RBA intends to introduce a new ‘ISO 20022 AIF’ CUG during the coexistence phase and this will run alongside the existing MT AIF CUG. The various services offered by the existing MT AIF CUG will be gradually introduced in ISO 20022 format, subject to equivalent ISO 20022 messaging being available. The intention is for AIF members to have the option of selecting the AIF message(s) they will use from either (or both) the MT AIF CUG or the ISO 20022 AIF CUG until the end of the coexistence phase.

4.2 Proposed migration approach

The RBA and APC propose a migration approach that comprises a coexistence phase of three years, consistent with the industry's preference. Given responses to the Issues Paper had mixed views on the timing of the introduction of enhanced content, it is proposed that the industry initially adopts a like-for-like migration that allows for enhanced content to be optionally included in messaging. The enhanced content would become mandatory to include in messages at a later stage within the coexistence phase. This approach would allow participants flexibility with their project delivery to include enhanced content at a time that suits their organisation. Some participants may choose to build enhanced content capability up front, while others may prefer to deliver like-for-like message content in the first delivery phase and enhanced content at a later stage of their project. A phased approach should reduce the risk of managing widespread changes across multiple participants and systems across the industry.

The proposed approach, mapped out in Figure 12, entails the following phases:

1. Consultation, planning and design, and build and test phases are completed over 2019 to 2021.
2. From November 2021 to November 2023, existing MT messages or new ISO 20022 messages would coexist according to the chosen coexistence option. The ISO 20022 messages would comprise existing fields mapped from MT messages as well as new fields reflecting the enhanced content. Senders would have the option of whether or not to populate the additional fields.
3. From the beginning of the third year (i.e. from November 2023) enhanced content items (as agreed by the industry) would become mandatory for ISO 20022 messages. MT messages could continue to be generated by those participants that had not yet migrated to ISO 20022. Any participant that chooses to migrate during this year would need to immediately support mandatory enhanced content.

After November 2024, all participants must have migrated to ISO 20022. The RBA intends to no longer support MT messages in RITS.

The timeframe supports organisations that are aiming to align their ISO 20022 adoption with the start of the SWIFT cross-border migration in November 2021. It also enables organisations to choose to introduce support for enhanced ISO 20022 content for domestic messaging any time between November 2021 and November 2023. It should also support organisations that wish to defer their internal migration projects until after November 2023, however, it requires them to move immediately to enhanced content when they do migrate.

Participants that remain on MT messaging after November 2021 will need to manage data truncation resulting from cross-border and domestic payments received in ISO format during the coexistence phase. Participants may also need to manage differences between domestic ISO 20022 message usage guidelines and other international jurisdictions on an ongoing basis. Notably, compliance obligations would still apply to the original message received.