Vietnamese banks accelerate migration to ISO 20022

By Thy An   November 23, 2023 | 05:00 pm PT
ABeam Consulting is one of the leading shifts from MT-based systems to MX operations in the banking industry across Asia, including Vietnam.
ISO 20022 helps enhance information quality and interoperability through the creation of financial messaging standards. Photo courtesy of Freepik

ISO 20022 helps enhance information quality and interoperability through the creation of financial messaging standards. Photo courtesy of Freepik

ISO 20022 is a universal standard for electronic data interchange between financial institutions. It provides a framework for creating financial messaging standards, enhancing the quality of information exchanged between financial institutions, and enabling greater interoperability.

The ISO 20022 standard uses an XML-based syntax, referred to as MX, replacing the older MT syntax used in SWIFT messaging.

ISO20022 impacts graphic. Graphic by Abeam

ISO20022 impacts' graphic. Graphic by Abeam

The transition from MT to MX is driven by several factors. The MT syntax, based on a text format, could be improved in its ability to handle the increasing complexity and volume of financial transactions. MX, on the other hand, is a more flexible and robust format, capable of carrying more data and supporting a wider range of financial services.

Moreover, SWIFT, the global provider of secure financial messaging services, has announced that it will discontinue the use of the MT format for certain categories of messages by the end of November 2025.

This effectively means that banks that fail to comply with the MX format will not be able to execute cross-border remittances.

Graphic by Abeam

Graphic by Abeam

ABeam Consulting, with industry knowledge and project management experiences, is assisting banks with this transition.

The company's services span from analyzing current (as-is) business operations to designing future (to-be) operations and managing the entire ISO project.

ABeam's support extends beyond project management. The team also provides training and knowledge transfer, helping banks build in-house capabilities for managing the new MX-based systems. This ensures a smooth transition with minimal disruption to the banks' operations.

The adoption of the MX format is not limited, but all countries, especially in Asian markets such as Thailand, Indonesia, Singapore, Hong Kong, Malaysia... are also transitioning to the MX format for domestic remittances.

This trend suggests that the SBV may soon require Vietnamese banks to adopt the MX format for domestic remittances as well.

The shift to the MX format is just the beginning of a broader transformation in the banking industry.

ISO 20022's richer data and infrastructure interoperability enable business transformation for financial institutions.

Banks that take the lead in this transition can gain a significant competitive advantage, offering their customers a more seamless and efficient banking experience.

As of October 2023, many Vietnamese banks are already in the process of migrating to ISO 20022. For example, Vietcombank, the largest bank in Vietnam, announced in August 2023 that it had successfully completed the migration of its cross-border payments to ISO 20022.

Other major Vietnamese banks, such as BIDV, Agribank, and Techcombank, are also expected to complete their migrations to ISO 20022 by the November 2025 deadline.

The adoption of ISO 20022 by Vietnamese banks is expected to bring a number of benefits.

First, it can increase efficiency and automation. ISO 20022 is a more structured and data-rich standard than the current SWIFT MT messaging standard. This will enable Vietnamese banks to automate more of their cross-border payment processing, which will lead to faster and more efficient transactions.

Second, it helps with reducing costs. ISO 20022 will also help Vietnamese banks reduce their costs associated with cross-border payments. Because its messages are more efficient to process and require less manual intervention.

Finally, it can improve transparency and compliance. ISO 20022 messages contain more detailed information about each payment, such as the purpose of the payment and the parties involved. This will make it easier for Vietnamese banks to monitor and comply with anti-money laundering and other regulations.

Vietnamese banks are making strides in embracing the ISO 20022 standard. The ABeam Consulting team is actively supporting these banks by sharing best practices and lessons learned from the Japanese Mega Banks' experiences.

The support is not limited to the transition to MX but also includes helping Vietnamese banks, as well as the opportunity to improve operational efficiency, including customer processes.

The transition to MX is a complex and challenging process, but it also presents significant opportunities. ABeam Consulting, with its extensive experience and deep industry knowledge, is well-positioned to support banks through this transition.

The firm's work with the Japanese Mega Banks and its ongoing support for Vietnamese banks demonstrate its capabilities and commitment to driving the banking industry's shift to the ISO 20022 standard.

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