Over the years banks have developed staggeringly complex and costly business and operating models. But now, they must simplify, thanks to rising customer expectations, regulations, fintechs and the upsurge of neobanks, demand it. 

Often, each product has separate operations, technology, and risk management processes. And banks typically have a multitude of products, many not even offered to new customers, but all of which require some kind of operational customization to serve. 
This complexity and redundancy drive poor customer experience, high cost, operational risk, employee frustration, and regulator unease. The traditional separation between customer-facing activities, and operations and technology means few business leaders are strong end-to-end managers who understand sales through delivery. Further complicating the operating model. 

As the industry faces the challenge of implementing ISO 20022 and several other regulatory models,  we believe this is the right time for a wholesale transformation of a bank's payments operating model.

Although the consensus of a standard for financial transactions has been found using ISO 20022, the development of this single technical standard is still not a unified process. Network participants need to internally agree on a default mode of operation.

The Challenge 

Although SWIFT has created a large coexistence period for both standards, the migration is not eased by the adoption of multiple strategies for each payment market infrastructure. Given the magnitude of the change, banks should be open to absorbing the different scenarios and follow any modifications to the timelines. The coexistence period is in fact beneficial for smaller banks as it enables them to gradually move to the standard while configuring their portfolio of projects.

The global implementation of ISO 20022 poses coordination challenges to all banks as the approach and timeline will differ. 

Looking only at the timeline, the complexity does not lie in putting together the milestones or consolidating the global roadmap. In fact, dealing with different approaches at a project management level is the critical exercise to secure the benefits and mitigate the risks. 

Tailoring the implementation strategy across regions is the key for banks (as it leaves room to opt for full implementation or “like for like” conversion for cross-border payments in the first years). 

Assessing the challenge - 

The SWIFT MT standard is deeply anchored in the Financial Services industry. FIs considering the conversion of MT messages to ISO 20022 messages and vice-versa, as a simple, cheap and fast solution have a poor way of executing the change and it will not be benefiting in the long run, as the impact will go beyond the direct payment chain and related systems connected to the SWIFT network.

Banks will need to assess the impact on the back-end and front-end systems, channels, and middleware. The support functions will also be on the edge of substantial updates. The non-exhaustive list includes anti-money laundering, sanction screening, accounting, billing, reconciliation, reporting systems, information retaining, and archiving. 

As a matter of fact, the new message format requires all components to assimilate the ISO 20022 XML files and its new field length, additional fields or character set.

Elements underpinning the ISO 20022 migration 

- There is an opportunity to reengineer the payment value chain and associated support functions. Customer expectations have changed dramatically, and the ISO 20022 migration is the momentum to improve the systems’ landscape. Such an ambitious and strategic decision will holistically reduce legacy processes and systems as part of the complete payment chain renewal, as opposed to a silo migration of individual services.

  • The transition from MT to ISO20022 holds a choice between; big bang, like-to-like, step by step or a short term translation solution. 

  • FIs need to set up a project management office to involve the right stakeholders and skilled staff members for the project. 

-  To upgrade the systems, financial institutions are dependent on third-party vendors. This makes it important for the migration strategy to deal with the commitment and new releases planned by their vendors to support the ISO 20022 migration. 
Banks need to set an expectation with the vendor and determine operational responsibility, this will straighten the road to compliance. 

- An assessment to know beforehand the application components processing payment data, their owners, and users will drive the roadmap for development, release, and training. 


Banks leading the change will make simplification a priority. They will strategically redesign their business model, end-to-end. They will develop multi-year change programs. And they will ensure that they have the organizational capabilities necessary to achieve the change.

The wave of ISO 20022 adoption is both an opportunity as well as a challenge for today’s banks. With aggressive timelines across multiple payment rails around the globe, banks must consider how they will prepare, integrate with their current systems and leverage the new, rich and granular data for better client services and future innovations.

Banks that get this right will achieve dramatic results. In our experience, by taking such an end-to-end perspective, banks realize 50% performance enhancements on key customer metrics, together with 25%+ cost reductions and reduced levels of operational risk.

We hope this perspective has been provocative and provides insight as you consider both your own strategy and the tactical actions you need to implement ISO 20022.