The March of Mx Messaging

By Phil Flood, Global Business Development Director – Regulatory and STP Services, Gresham Technologies

When Genghis Khan marched his Mongol armies on the great cities of the Jin empire over 800 years ago, he would ensure that there were rows upon rows of drummers. They would be beating out a steady rhythm, signalling their impending arrival, and conveying deadly intent on the residents. The noise would be so overwhelming and steady that, as the siege begun, residents would become gripped by fear as the conclusion drew closer and closer. With the initial adoption date for MX messaging in banks of March 20th of this year now locked in, safe to say, the drumbeat has begun.

MX will become the new standard in cross border currency payments messages carrying far richer information, and as a result, firms need to have ISO 20022 front of mind. The migration from the current MT standard across to MX makes a lot of sense – it is intended to provide a single standardisation approach to be used by all financial standards initiatives. Although there is a co-existence period with the current MT standards until 2025, this can be compared to the often years long sieges that the Mongol armies employed to break down resistance. The end is there – staring at banks just down the road, and the conclusion is that they must be ready when the co-existence period finishes. It won’t last forever, and the fact is, the larger banks have already either set the wheels in motion, or implemented the internal technology that enables them to adopt the preferred MX messaging format now.

This is a real issue when one considers just how behind the curve many smaller banks are, who are often largely relying on the coexistence period to get their ducks in a row. Why? Mainly due to the fact that these firms are regularly dealing with the large banks, and therefore could find themselves being dragged onwards adopting the MX standard at a quicker pace, if that is what the larger counterparties are already using. When a tier 1 investment banks drops a stone in the pond, the ripple effects are felt by all the wildlife living in it. ISO 20022 is no different.

The biggest pain point being felt by these small and mid-sized banks right now is their overreliance on legacy technology, that has been built and structured around payments processes that are rapidly becoming outdated. Many firms are reluctant to tackle this technology issue head on, due to the perceived high risks and cost involved, making it incredibly difficult to introduce new processes that will be effective in the new payments landscape. This is all because the MT message format is likely to be heavily embedded in many of these legacy systems, investment banks may not realise this until they begin trying to send or receive MX messages – which could be as soon as March 20th of this year!

On top of this, whilst ISO 20022 is bringing with it standardisation across the payments space, it will still cover a myriad of different message types and formats. It won’t be immune from future changes, additional validations or updates. Keeping pace with these, and the technical challenges that even a relatively minor update can present for the back-end of a bank, will be hugely time-consuming, especially if these technological additions are being made onto an already complex web of legacy systems that aren’t fit for modern purposes. The pressure that this will put on in-house IT and operational teams, particularly if the firm is lacking in deep domain expertise (which comes at a premium in 2023), will prove to be damaging from a long-term efficiency perspective.

As MX messaging marches on, the investment banks standing in its way cannot batten down the hatches and hope it passes them by. This is a major change to the payments industry, and banks need to be ready to adapt by tackling this revolution head on. They aren’t, and shouldn’t be, alone in this – they can rely on the expertise of their technology partners in order to support them through this vital stage of the ISO transformation. Only then will all banks be able to successfully integrate MX messaging into their payments infrastructure to ensure greater standardisation and improved efficiencies moving forward.