Introducing ISO 20022 to Lynx: what it means for high-value payments in Canada

Payments Canada uses the SWIFT network for the transmission of payment messages to and from Lynx participants. SWIFT, or the Society of Worldwide Interbank Financial Telecommunication, is the global provider of secure financial messaging services, and the organization spearheading a global initiative to implement ISO 20022 for cross-border payments.

By November 2022, all financial institutions on the SWIFT network must be in a position to receive payments using the ISO 20022 messaging standard. To assist Canadian financial institutions and to set the foundation for payment innovation to take place in Canada over the coming years, Payments Canada is gearing up to implement a second release of Lynx, Canada’s high-value payment system.

Kevin O’Neil, Director, Strategic Relationships & Head of Canada at SWIFT, shares his perspective on Release Two of Lynx including why introducing ISO 20022 to the Lynx system is a critical component of Canada’s payment modernization journey, and how Canada is supporting the global adoption of ISO 20022.

Can you tell us a bit about your role at SWIFT?

I am privileged to work with the Canadian community on behalf of SWIFT, as we deliver on our strategy to enable instant and frictionless transactions from end-to-end anywhere in the world. This includes innovation activities such as SWIFT’s gpi (Global Payments Innovation) initiatives, our SWIFT Go offering for low-value cross-border payments, working with the community on best practices for security and compliance, and of course helping to facilitate ISO 20022 adoption in the Canadian market.

In your role, you’ve seen a great deal of change in payments around the world. How does Lynx compare to modern high-value payment systems globally?

A global transformation of both wholesale and retail payments is underway, driven by a multitude of forces. Financial market infrastructure renewals, changing customer expectations, and regulations are putting payments transformation at the top of the agenda around the world - and the need has never been greater. With the role of e-commerce continuing to grow and the acceleration of payments towards real-time, 24/7 processing, public and private sectors must work together to deliver digital payment experiences that are simple, secure, compliant and cost efficient for users. These trends make it an exciting time to be part of global payments evolution.

Canada’s payment modernization program is an ambitious multi-year journey that is preparing the Canadian industry for success today and in the future. We greatly value our partnership with Payments Canada and our Canadian community members to help to facilitate the journey, not just with ISO 20022 but also towards a future of instant and frictionless transactions.

The Lynx program has positioned Payments Canada, together with the Canadian community to adopt and evolve ISO 20022. SWIFT will continue to partner with the community to build on this foundation to continue to drive change for the better for the Canadian ecosystem in the years to come.

What does the introduction of ISO 20022 in the cross-border space and to the Lynx system mean for high-value payments?

ISO 20022 will ultimately improve client experiences, drive operational efficiencies, and reduce costs and risks. It’s important the payment industry does not only view ISO 20022 as a mandatory change, but looks to enable the important business benefits that the richer data model brings.

ISO 20022 significantly improves the quality of data exchanged across the payment ecosystem. By 2025, estimates show that almost 90% of cross-border payments will leverage ISO 20022, driven by adoption of ISO 20022 by market infrastructures around the globe and the global financial community. Richer, structured, data enables new efficiencies for straight through processing, improved data for compliance purposes but also delivers a host of new client insights and features the industry can offer to improve client experiences.

As more financial institutions begin to send and receive ISO 20022-enabled payments, what will this mean for Canadian consumers and businesses?

With more and better structured data in an ISO 20022 message, financial institutions will be able to deliver innovative services, provide better customer experiences, and benefit from fewer processing exceptions that create friction and delays. These benefits also extend to the corporate customers of banks who will soon be able to improve reconciliation within their back-end systems, for example, with simpler matching of invoices to payments. Consumers and businesses will benefit from longer term reduction in costs, increased transparency, reduced operational and compliance risks, and new value-added services enabled by rich data.

How does the work SWIFT is doing to support the global implementation of ISO 20022 complement the work you do as part of Lynx Release Two?

The SWIFT Cross Border Payments & Reporting (CBPR+) global program aligns very well with the Lynx ISO 20022 adoption program (Release Two). Both programs allow for coexistence of legacy and ISO 20022 formats while the global ISO journey evolves. SWIFT and Payments Canada are working together to enable an end-to-end ISO 20022 payments journey for the Canadian community. Moving forward, the adoption of a rich and globally consistent data model will lay the foundation for payment modernization across global real-time gross settlement (RTGS) and instant payment systems.

When you think about the future of modern payments, what are you most excited about?

SWIFT is excited to work with the community towards reaching the vision of instant and frictionless transactions for a 24/7 world. The combination of a richer data model combined with new technologies provides a strong foundation to innovate in a scalable and secure way.

Thanks to the strong collaboration of our community on SWIFT gpi in recent years, the industry has significantly accelerated the speed of cross-border payments and enabled full end-to-end transparency in response to market needs. Today, almost half of gpi payments are credited to end beneficiaries within five minutes, about two-thirds within 30 minutes, and nearly all within 24 hours.

We are introducing new products and services that further reduce friction and enable financial institutions to unlock more value for their customers. These include upfront validation of beneficiary details to ensure payments reach their end destination quickly; streamlined exception management to speed up resolution times; fast and predictable low-value payments; and new rich data services based on the ISO 20022 standard.

It’s exciting to be part of the Canadian and global payment modernization journey.