ISO 20022: From Rough Waters to Smoother Sailing

ISO 20022 is an international standard that provides a platform for developing messages in XML format. These messages are replacing the legacy MT messages previously used for data exchange between banks as well as between banks and their customers.

The goal of the standard is to harmonize international payments, making them faster and more secure. Several market infrastructures - particularly in the EUR clearing space, such as the ECB/TARGET and EBA - have already migrated to ISO 20022, even though the full potential of the new format has yet to be fully realized.

Enhancements such as the Legal Entity Identifier (LEI), structured addresses, or additional purpose codes (for classifying payments) are on the horizon or still in the process of being implemented. As a result, the transition to ISO 20022 continues to require action even after the major go-live milestones.

A key ongoing challenge is the lack of full interoperability. Different market infrastructures within the broader ISO 20022 framework have defined their rules in varying ways. Payments processed across multiple infrastructures may need to be adjusted to ensure compatibility at each stage. This requires banks involved in processing to continuously adapt their processes and data management systems.

The international payments landscape, processed via the SWIFT network, is still in the process of migrating to ISO 20022. Banks are expected to implement the new XML message format (ISO 20022 CBPR+) largely by October 2025, with the full migration scheduled for November 2026.

Due to the complexity and scope of the migration, the related deadlines are currently considered "dynamic." The coexistence phase between the legacy MT format and the new XML format within SWIFT varies across message segments and may be subject to extensions. However, these extensions may come with limitations or disincentives for continued use of the old format.

A critical aspect of this migration is the transition from unstructured to structured (or hybrid) address data for involved parties in payment messages. This shift requires a comprehensive review of processes and data management, and most banks will need to adapt accordingly. The effort involved should not be underestimated.

The SWIFT/CBPR+ ISO 20022 migration continues to generate significant implementation requirements for banks - and will remain a focus for the industry for some time to come.

Corporates also need to increasingly engage with the topic of ISO 20022. The new messaging format offers numerous advantages over the legacy MT messages - such as enhanced account information. This can significantly improve and accelerate internal processes, especially in liquidity management and reconciliation of incoming payments.

However, this requires adjustments on two fronts:

• On the one hand, backend systems - such as cash management, ERP, and treasury management systems - need to be adapted within the company.
• On the other hand, close collaboration with banking partners is essential to ensure that the enriched and improved information can actually be delivered and utilized effectively

On the payment side, corporates also need to address the use of structured addresses in pain.001 message migrations. This change should be addressed early on to avoid friction later in the implementation process.