Authorization-to-Settlement at Scale: A Reference Data Architecture for ISO 8583 / ISO 20022 Coexistence

The fast development of payment systems has brought additional complexity of administering financial transactions between various messaging standards. There is now co-existence between ISO 8583, historically used in card-based transactions, and ISO 20022, now developed to be more richer and an XML-based financial messaging format, in many current banking ecosystems. Such coexistence requires a highly scalable, reliable and standardized method of authorization-to-settlement workflows. In this paper, a reference data architecture of realizing a smooth interoperability between the ISO 8583 and ISO 20022 messaging standards will be suggested. The architecture proposed is based on the hybrid processing approach to support the use of event-driven processing and canonical data models, as well as automated mapping layers, to enable the processing of the end-to-end transactions in a secure and efficient way. This paper also examines the routing of transactions, reconciliation of settlements, how to handle errors and monitor in real-time giving an empirical analysis through simulation of large scale datasets. The findings have shown that the suggested architecture has the following advantages: It increases the transaction throughput, decreases the number of reconciliation errors, and it is more scaly. Some of the lessons learned include how critical it is to have an adaptable middleware or layer to facilitate innovative payment methods in the future without the need to completely break with the past. The book is a reference design framework used by banks, financial technology developers, and financial technology architects interested in modernizing payment infrastructure and making it robust to guarantee sound authorization-to-settlement workflows.