ISO 20022 migration could be a quantum leap for payment processing and it is on track to become the biggest revolution in the payment sector since the launch of the Single Euro Payments Area (SEPA) 10 years ago. 
This reform establishes a messaging standard that looks to meet the ever-increasing demand for speed, richer data, and automation.
While migration isn’t mandatory yet, migration is bound to boost communication standards and upscale the richness of data gathered across the payment sector. For banks, it promises to cut the costs associated with processing payments as well as take the hassle out of sanctions screening and financial-fraud detection.

The decisive moment

ISO 20022 has been around since 2004, now that it has the backing of SWIFT, CHIPS (Clearing House Interbank Payments System), Fedwire, and Bank of England’s RTGS service, with the widespread adoption ISO 20022 migration has reached a decisive moment for several banks and FIs. 

SWIFT has planned for a period of coexistence, the 4-year transitional phase will ensure a smooth migration from MT (Message Type) to ISO 20022 formats and will see SWIFT offer conversion services—allowing messaging formats to be translated from MT to ISO 20022 and ISO 20022 to MT.

Fedwire and CHIPS in the United States will undergo phased migrations. Bank of England will lead the phased migration in the UK, the preparation phase is set to complete by 2022 and ISO introductory phase by mid-2023. 

Early adopters like China, Japan, India, and Switzerland have already benefited, Malaysia and Thailand aim to complete the implementation in 2020, Hong Kong, Singapore, and EU zone plan to implement in 2021. 

How does it work? 

Put simply, ISO 20022 is a messaging standard that makes payment processing easier. One of the most lauded benefits of ISO 20022 implementation is the level of standardization it will bring to all markets—affecting faster and more efficient payment processing.

Currently, some transaction files are converted from one format to another at payment gateways and stripped of their data. Thereby creating challenges further down the line, when the data needs to be re-enriched. Fortunately, ISO 20022 messaging formats provide more information fields to capture granular details, including the full name, postal address, contact details and account number of a debtor. This data can then be transferred effortlessly and without alteration along the entire payment chain. 

Why now? 

The rise of e-commerce and digital banking has just pumped up the pressure to meet the rising demand for international and round the clock payments. This calls for a standard to meet customer expectations. 

However, it’s not just about speed. The primary challenge facing the payment sector is the need to keep up with regulatory and compliance requirements. Rapid data processing is critical when it comes to tackling cybercrime and fraud. ISO 20022 implementation will make it easier to detect money laundering and, of course, improve customer experience. Banks using AI and ML will deliver better results and open more opportunities. 


ISO 20022 implementation is just the tip of the iceberg. One of the many benefits of the standard is that it has the potential to dramatically improve straight-through-processing (STP) rates. Removing the need for manual intervention along the payment chain promises to cut delays and improve efficiency.

Richer data will make it easier for businesses to stay on the right side of compliance, and allow greater security levels and cost savings. Time and resource-intensive activities—such as payment processing, data analytics, investigations, and reporting—all have the potential to become automated off the back of ISO 20022 implementation.

Reconciliation—a major concern for customers and banks will become more straightforward, resulting in improved rates of customer satisfaction.

IT overhaul and upgrades 

Processing huge amounts of data will automatically put pressure on banking infrastructure—creating the need for superior processing power. Some businesses, therefore, are likely to consider a workaround—setting up a so-called “convertor” for payment processing, allowing them to convert legacy formats to ISO 20022 messages. However, it is worth bearing in mind that these converters carry the risk of data loss—which would mean complex compliance issues later down the line.

What does it mean for banks?

Migration to ISO 20022 will no doubt involve the allocation of significant time, money and resources. That said, it is important for senior management to take stock of how migration will impact their businesses. 
Clearly, migration is about more than just core payments processing anti-financial crime applications, liquidity management, and reconciliation, for example, will also need changes. Investigative measures to this end should involve analyses of the number of transactions executed annually, whether external providers need to be used and how businesses, in general, will be affected internally.  

We at Nth Exception collaborate with Banks and Financial Institutions to analyze, solutionize, and optimize cross border payments processes.