The Actions Plan on application of ISO20022 in the National Payment System (NPS) infrastructure of the Central Bank of the Republic of Azerbaijan has been developed and approved as part of the implementation of the actions specified in the “State Program on Expancion of Digital Payments in the Republic of Azerbaijan for 2018-2020” approved with Decree No. 508 of the President of the Republic of Azerbaijan dated 26 September 2018.
The Actions Plan on application of ISO20022 in the National Payment System (NPS) infrastructure of the Central Bank of the Republic of Azerbaijan encompasses development of data formats by the Central Bank in accordance with this international standard and creation of opportunities for the use of this standard in the National Payments System (NPS) infrastructure, as well as measures on implementation of functional work arising from the migration into the new standard in internal information systems of NPS participants, electronic banking and payment services for corporate customers.
As part of the Actions Plan, the work on adjusting the Real Time Gross Settlement System (AZIPS) to ISO20022 has been completed. 22 of the 28 organizations participating in AZIPS have already completed the integration of their internal information systems into the new standard. Other institutions will also complete the work in this direction until the end of August this year.
The work on the adaptation of the The Low Value Payments Clearing and Settlement System (LVPCSS) to ISO20022 has been completed. Currently, the work on the integration of the internal information systems of the participating organizations into ISO20022 standard is ongoing. It is planned to complete the work on adjusting the information exchange carried out by the participants through the LVPCSS system to ISO20022 by 30 December 2023.
Introduction of ISO20022 in the NPS infrastructure will allow to create a single data format on data exchange among payment system participants, minimize risks in payment operations, decrease resources allocated for automation (financial, time, human), and create extensive reporting functionalities.
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Frequently asked questions
- What is ISO 20022?
ISO 20022 is an international standard designed to simplify global business communication.
The standard enables efficient payments clearing and settlement among financial institutions globally through the use of a common set of messages and language that the institutions agree to use in a consistent way. It allows participants and systems across different financial markets (e.g. payments, securities, foreign exchange, cards) to communicate using consistent terminology or syntax, which supports interoperability and more remittance information within the payment message. It is an open standard that anyone can use, and to which anyone can contribute.
The ISO 20022 standard is managed on behalf of ISO by SWIFT (the Society for Worldwide Interbank Financial Telecommunication) as the Registration Authority for ISO 20022.
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- Why is the Central Bank implementing ISO 20022 in Azerbaijan?
| Azerbaijan’s core payments infrastructure has supported local financial sector for decades with good performance and clearing and settlement cycles, but Azerbaijan’s economy is being reshaped by digital technology, changing user demands, new entrants and changing global payment systems. To address these needs, the Central Bank of Azerbaijan has launched this initiative to modernize the current payment system. The application of ISO 20022 standard is considered as a priority in the "State Program on the expansion of digital payments for 2018-2020" in order to increase the efficiency of cashless payment transactions in the country, increase the straight-through processing ratio of payments, make settlements quicker. |
- What is enhanced remittance information?
| Remittance information is supplied to enable the matching/reconciliation of a payments entry with the items that the payment is intended to settle, such as commercial invoices in an accounts' receivable system. |
- Why is enhanced remittance data so important?
The development of electronic payments has created a need for more information to exchange along with payment messages. And while our current systems serve us well, they lack the ability to provide the information users need, resulting in barriers to end-to-end straight through processing - key to allowing Azerbaijan businesses, governments and financial institutions to initiate, receive and reconcile electronic payments efficiently.
The exchange of more remittance information with payments offers the potential for:
- Straight-through Processing;
- Automated reconciliation of incoming payments with outstanding invoices;
- Easier payment tracking, issue resolution and system reconciliation for both customers and financial institutions;
- Consistency in providing remittance information, resulting in efficiency and cost benefit.
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- What does “coexistence” period mean?
| As participant financial institutions migrate to the new ISO 20022 messages, they will be required to support and maintain the existing standard as well, during what is known as a coexistence period. Ideally, this period of time will be as short as possible to help participant financial institutions avoid unnecessary duplication of costs and effort required to support multiple standards. |
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