Facilitating the interoperability of high-value and international payments: The ISO 20022 migration of the Eurozone

Abstract

The European Central Bank has launched a project to consolidate its real-time gross settlement system TARGET2 with its other settlement platforms, including its securities settlement (TARGET2 Securities) and instant payments settlement (TIPS) platforms. This consolidation will require a single gateway to access the various systems, the introduction of centralised liquidity management, and the standardisation of all messaging in accordance with the ISO 20022 universal financial industry message scheme. The project will have a significant impact on banks, affecting almost their entire payments IT infrastructure. It will also change business rules and processes, and impact on their liquidity management. Clearly, banks will have to dedicate significant resources to fulfil their obligations before the actual migration takes place in November 2021. The project follows a global trend for the migration of high-value and cross-border payments to the ISO 20022 standard, with the Dollar Zone, Sterling Zone and SWIFT all starting similar projects. This paper describes the content, the approach, the timeline and the impact of the consolidation on banks. It also illustrates why TARGET2 consolidation represents the biggest challenge since the implementation of the euro and the Single Euro Payments Area. Finally, the paper outlines the key decisions banks must make on the road to migration.