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How Real-Time Payments Data Gives Banks a Competitive Edge & a Bottom Line Boost

One of the most fundamental and historic questions in commerce is, “When will the money arrive?”

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  • Written by  Abhishek Veeraghanta, Founder & CEO of Pidgin
How Real-Time Payments Data Gives Banks a Competitive Edge & a Bottom Line Boost

One of the most fundamental and historic questions in commerce is, “When will the money arrive?” Although it’s possible in some cases to spend money you don’t have, nearly every business comes back to the requirement to manage cash in the bank, not cash on its way to the bank.

According to, four-fifths of businesses report that real-time payments have the power to fundamentally reshape how they conduct business.

The gateway to that transformation is a messaging standard called ISO 20022, which governs the data structure of financial transactions across the globe. International standards create consistency for everyone who participates. If enough people adhere to the standard, waste is eliminated, and new opportunities emerge.

Together, ISO 20022 standards and real-time payments will create revenue streams for financial institutions that are willing to embrace them.

Your data ecosystem needs a standard.

No one is formally enforcing the adoption of ISO 20022. However, since the Federal Reserve’s newly launched instant payment rail, the FedNow® Service is ISO 20022-compliant, other financial institutions will likely follow suit.

ISO 20022 provides a single scheme for financial messaging, securities, trade services, cards, foreign exchange, and instant payments via the FedNow® Service or The Clearing House’s Real-Time Payments (RTP). There is some conflicting information about ISO 20022, but there are several resources that set the record straight and debunk the common misconceptions about the new standard, such as this video by Kevin Olsen, also known as “The Payments Professor.”

If you’ve attempted to create a cohesive database using the various vendors and data sources that comprise your institution, you know that it can be a nightmare. This is the essential pain that standardization can alleviate.

Does that mean you should harmonize all your data to ISO 20022? Unlikely. However, you can and should use ISO 20022 as a “north star” for how your institution prepares to send and receive data. This allows for some level of necessary fragmentation with internal systems while positioning your institution to reap the benefits that the standardization offers.

Less friction, better visibility: Using ISO 20022 and faster payments to help your bottom line.

With instant payments and the data standardization of ISO 20022, your institution can gain a competitive edge when serving commercial clients. A small business might need an invoice payment to clear quickly, so they can make payroll. A large company might have tens of millions of dollars “floating” as it moves through the conventional payment rails.

Both situations can feel dire to the client and engender lots of goodwill if you can help move things along. All things being equal, when you can promise that a business will get its money faster with you than at the bank down the street, you’ll win their business every time.

Once your institution has embraced real-time payments and ISO 20022, you can offer extremely fast payments and transaction data visibility that your competitors can’t. This also helps businesses to manage their supply chains more efficiently. For example, with real-time, standardized transaction data, a growing retail business can better track inventory and forecast future sales to manage their stocking and staffing needs.

If you use ISO 20022 to enhance data formatting consistency and data portability within your institution, you may uncover new use cases for innovative products or pricing strategies. Transaction-based income is more attractive than ever, as most institutions are paying a premium for deposits.

Consider the earlier scenario about the growing retail business - data rich transactions mean better reporting and analytics, which could be extremely useful product offerings to SMB customers. Services like these provide business owners with real-time intel to inform key operational or marketing decisions within their company. At the very least, better data maturity is a long-term gain for your institution, even though it might require an upgrade of your data infrastructure and processes.

ISO 20022 presents new opportunities for automation and security.

The standardization of transaction data allows your institution to use application programming interfaces (APIs) more easily, which can help automate data extraction and reporting, among other tasks. Reconciling payments is a great example of this, as APIs can transform this traditionally manual, time-intensive process into an automated, rules-based workflow.

Even if you aren’t involved in software development, it’s useful to know that the ability to work with APIs is becoming table stakes for working with fintechs and SaaS (software as a service) companies. Standardized data formats are key for collaborating with other third-party providers to roll out innovative products for customers, or even support automation in the back office via APIs. Whether your bank aims to reduce operational costs with automation or generate new revenue streams through new service offerings or partnerships, ISO 20022 can help you succeed.

ISO 20022 also has the potential to help your cybersecurity team identify fraud faster and lower the risk of fraud in the first place. Some security protocols assign risk scores to transactions based on a constellation of data points and ISO 20022 will provide even more data points to check against for potentially fraudulent payments. If the majority of authorized transactions follow ISO 20022, any deviation from the norm should be a red flag. The more popular ISO 20022 becomes, the easier it becomes to flag suspicious transactions and stop fraud in its tracks.

Money is about to move much faster. Will you keep up?

How successful your institution is with monetizing faster payments and data standards will likely depend on your appetite for risk and your willingness to experiment with new technology.

Fast payment processing is a competitive edge in commercial banking. So is the ability to help your clients manage cash flow, forecast future sales, and keep suppliers happy.

Fortunately, you don’t need to go all-in on a single vendor or piece of specialized technology to make ISO 20022 work for you. That’s the beauty of harmonizing with a standard — everything gets easier because everyone sings from the same songbook. Now that the world’s dominant central bank (the Federal Reserve) has committed to the ISO 20022 standard, it’s a safe bet that more institutions will follow. It’s a matter of “when,” not “if.”

Author: Abhishek Veeraghanta, Founder & CEO of Pidgin

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