ISO 20022 : The new common language

By Veritran - Aug. 24, 2022 - Category : Payments Ecosystems

This innovative payment messaging format promises to facilitate cross-border settlement by being agile and data-rich

ISO 20022 is the new universal language model for cross-border payment messaging, created to facilitate the performance of financial institutions in increasingly demanding real-time transaction environments.

Payment messages, which exchange transaction information, are not standardized. As instructions move from one format to another - of the many that coexist around the world - data can be lost or modified.

As a result, the speed of settlement is delayed and, in general, it significantly impairs the way that payment flows can be automated. In the long term, it also detracts from the dynamism of institutions that have to compete with new players such as fintechs and technology companies that offer remittances and international digital payments much faster and at a lower cost.

To overcome this challenge, the industry has embarked on the ambitious project to replace and homogenize the existing financial messaging architecture through the ISO 20022 standard provided by SWIFT.


But this is not just a simple IT change. It is expected to substantially improve the user experience (UX), both for the organizations that process payments and the end user, by being a more flexible platform.

Entities will be able to track transactions, know their status and, if necessary, cancel them. In this way, they will ensure higher rates of successful transactions in a high-friction segment such as cross-border payments, without sacrificing the levels of compliance, anti-fraud prevention and system security.

In fact, it will enhance the mechanisms to ensure faster and safer payments.

The difference is that ISO 20022 enables better data capture. Currently, according to SWIFT data, up to 94% of the fields used to include counterparty information in payment transactions are in free format, i.e. with unstructured data, which makes it difficult for them to used in automations.

In addition, 10% of payments may require manual intervention, which compromises the quality of the messages.

The implementation of ISO 20022 will make it possible to obtain more orderly, better quality information that can be analyzed for commercial purposes.

It means that an operation will not be stopped by reading or typing errors, or the use of terms that imply penalties. For example, the word Cuba, included in the sanctions lists of the United Nations (UN) and the Office of Foreign Assets Control (OFAC), can cause the restriction of a payment, even if it is not related to the country, but to a surname.


Financial institutions are already migrating to ISO 20022 in line with the increasing digitization of payments. It is an evolution from the legacy SWIFT MT standard to the SWIFT MX model applicable to payment transactions, securities settlement, trade information and security data.

Both languages will coexist for three years, until 2025. The migration will be accelerated as soon as SWIFT enables ISO 20022 messages for cross-border payments and cash reporting as of November of this year.

So while banks won’t be required to send ISO 20022 messages in November, they will need to be ready to receive instructions in MX.

After the implementation deadline, the MT message will be permanently withdrawn and entities that have not completed adoption will be left out of the SWIFT payments network (although the payments network has advanced that it is actively working on the interoperability of the standard).

Some of the countries that have already implemented the system are Canada, Australia, the Philippines, Japan, Switzerland and China. It is also being adopted by a growing number of sectors: securities, payments, foreign exchange, remittances, cards and related services.

As adoption continues to grow and more institutions join the development and exchange of information, the platform will continue to improve and learn from use cases. The new format will also provide banks with greater insight into payment performance, which will open up the spectrum of innovative new products and services.

This move will be of vital importance for the industry and its modernization, so the adaptations should be a priority. Trust and interoperability are crucial for the financial industry. On that path, data quality counts

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