Making ISO 20022 work for Canadian corporations

Previously Published on Payments Business Magazine

By Kate Risch Choi, BMO Harris Bank

In Canada’s rapidly modernizing payment environment many companies are getting a jump on the ISO 20022 initiative by taking on their own migration to this growing industry-standard format for financial messaging. Like the varied industries across Canada, there is no one way to tackle this kind of change. We’ll provide some background on the ISO 20022 standard itself, the benefits and risks associated with the adaptation of this new format and two different approaches to making the switch. We’ll also provide some additional food for thought on the pros and cons to making the move right now.

What is ISO 20022?

“The adoption of ISO 20022 is part of a larger Payments Canada initiative to modernize the Canadian payments ecosystem. The use of ISO20022 as a common standard message format will result in greater consistency and efficiency in payment processing,” says Derek Vernon, head of enterprise payment modernization at BMO. “ISO 20022 will help companies further improve their reporting and overall business intelligence, mitigate risk and, most importantly, increase the amount of time spent running the business and less time on day-to-day cash management tasks.”

ISO 20022 is effectively a new format for file-based communication with your bank. It can be used for payment and direct debit initiation (pain.001 and pain.008), receivables reporting (camt.054) or current and prior day balance and transaction information reporting (camt.052 and camt.053). ISO can replace many of the disparate payment type-specific, proprietary and geography-specific file formats that have muddied the treasury waters in the past. By blurring the lines between clearing systems, companies can reduce the amount of IT expertise required to use and maintain a multitude of file formats, while expanding the reach of their processes.

When we talk about Payments Canada moving to ISO, what we really mean is that Canadian banks will be required to communicate with each other in “pacs” messages—Payments Clearing and Settlement messages. The latest advice is that this will be enforced in the 2019 timeframe for direct clearing banks.

This does not necessarily mean that Canadian companies will be forced to use ISO messages in 2019. In other clearing systems where ISO has been adopted for many years, there was a multi-year transition time, where banks will accept and produce legacy formats to give companies a chance to catch up in the move to ISO. So, while the time is not imminent where a forced migration is in play, many companies take a more proactive approach to capture the benefits of ISO right away, instead of waiting. This strategy comes with both possible benefits and risks.

What are the benefits and risks of using ISO 20022 right now?


  • Companies can prepare themselves for Canada’s move to ISO on their own timeline.
  • The same process can be used for global payments and/or reporting.
  • Reduced IT support costs through centralization or format standardization.
  • Data can be stored and more easily accessed with a data tagging system, through the use of XML or another markup language.
  • The native format of many ERP systems is ISO 20022, and this can be used instead of format mapping between proprietary or special-purpose formats.


  • Banks are often translating to and from legacy formats as part of today’s ISO offering. This can limit the capabilities of ISO based on the existing legacy format.
  • While banks intend to minimize client impacts as a result of ISO usage before Payments Canada defines the requirements, changes are still possible.
  • Banks are in varying places in terms of ISO build-out, from scoping and pilot phase through general availability.


Where do I start?

One of the main drivers of ISO adoption is a move toward centralization of payables and reconciliation functions. Evaluation of historical processes is a good place to start as companies seek to achieve economies of scale in their AP processes. Many companies that have grown through acquisition find that divisions are running their own ERPs and have a variety of ways to initiate payments with what are often legacy or non-relationship banks. Some of these methods are manual, others don’t meet corporate guidelines for security and control and others do not utilize services of the bank group.

To address these challenges, we often see companies begin a campaign to streamline and centralize treasury operations. This could be in conjunction with a move of all entities to a single instance of the ERP, through format standardization while keeping different ERPs, or a move toward a shared service centre or Payment Factory model. The choice will depend on the needs of each  corporate and can be dictated by legal or compliance needs for integration or separation of entities, particularly as it relates to intercompany loans, that can be produced in a fully centralized model. There are two ways to approach this adoption.

The Big Bang approach

The first way to move toward ISO adoption is with a Big Bang approach. This could work for companies that are moving all entities to a single instance of their ERP, for companies that are already centralized for payables or receivables reporting purposes or that have an executive mandate to consolidate banking providers or move to ISO by a specific deadline. Companies that take this path generally have a “cutover date” where, after penny testing of the new process, volume begins to shift from the old to the new, and the legacy methods are maintained for a set period of time for contingency, before being retired completely.

Companies choosing the Big Bang approach sometimes issue an RFP for services or make a provider switch to improve pricing or functionality in conjunction with a move to ISO.

The phased approach

The phased approach is a bit different as the focus becomes garnering a small success with ISO before rolling the new process out to the entire company. Companies may opt to choose a single type of payment such as payroll or vendor payments, or a single entity to kick off a pilot program. The pilot participants will often then become the champions of the project and use their experiences with implementation to market and troubleshoot issues for the other divisions. This approach works well with companies that are decentralized and may be undertaking a format standardization exercise instead of a true move toward centralization.

Next steps

ISO 20022 is viewed by many as the future of financial messaging or a best practice communication format; however, making the move to ISO format without an underlying pain point to address doesn’t make business sense. If your current processes are working well, you have high levels of standardization and automation and you’re already on a single instance of your ERP, then congratulations! You’re already doing great. If that’s not the case for your company and you are looking to make some changes, then a look at the efficiencies that ISO can offer is a good place to start.

For any new ISO project, it’s important to have executive sponsorship within the company, to hold the project accountable and measure the success along the way. Companies can effectively move their payments, receivables and information reporting to ISO 20022 with either a Big Bang or phased approach, depending on the structure and centralization capabilities of the company.

A great first step is to engage your banking provider to learn about their ISO offering and understand what is involved with implementing this new format. Once ISO is up and running, companies can begin to reap the benefits as the company grows, along with ISO’s industry adoption.

Kate Risch Choi is a senior product manager at BMO Harris Bank N.A., specializing in helping clients establish and optimize file-based communication between their ERP systems and the bank. Kate managed the rollout and enhancement of ISO camt reporting in a previous role and is now leading BMO’s Pilot Program for ISO pain initiation functionality.



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