ISO 20022: Preparing for US readiness

What is ISO 20022, and why does it matter?

ISO 20022 is the preeminent data standard used by the financial industry to create consistent payments messaging, including high-value, batch, and real-time payments. ISO 20022 can deliver significant benefits to banks through:

• Improved efficiencies: Enriched, structured data provides operational efficiencies through improved straight-through processing and reduced errors.
• Customer experience: Reductions in payment returns, failures, and manual investigations speed up the payment process for customers.
• Technology modernization: Compatibility ensures access to the latest third-party solutions that increasingly utilize the new standard.
• Data analytics and insights: Standardized, enriched data can be leveraged to better capture and analyze customer and transaction metrics for improved client insights.
• Fraud reduction: Additional enhanced data elements enable banks to analyze and identify patterns of fraudulent activity more efficiently.

Payment systems across the globe have already adopted ISO 20022 or have announced plans to adopt. Real-time payments systems have widely adopted the standard, and many high-value systems have also announced plans to support ISO 20022, including Fedwire, Lynx, and SWIFT.

In the United States, ISO 20022 readiness is a strategic imperative for banks using CHIPS and Fedwire. CHIPS will become ISO compliant in April 2024, while the Federal Reserve is migrating to the new messaging format on March 10, 2025. While global banks have likely begun ISO compliance in response to global mandates such as SWIFT CBPR+, domestic participants will need to assess the impact of The Clearing House (TCH) and the Fed’s mandates on their business. It’s critical that organizations start the preparation for ISO 20022 migration ahead of the two deadlines. A delayed migration poses numerous risks, such as disruption in payments transacting, the inability to position and reconcile prior-day activity and reporting, insufficient bank resourcing support to complete migration efforts, and more.

What are the readiness options and implementation challenges?

Options for achieving ISO 20022 readiness range from the minimum viable path toward enabling continued participation in the networks to a more strategic and forward-looking investment focused on completely modernizing payments infrastructure.

At the core, fundamental activities are required to ensure compliance and readiness for continued participation in Fedwire and CHIPS.

Readiness options

• Additional data capture from senders and recipients to ensure minimum compliance
• Message restructuring to reformat data into the ISO 20022 format
• Integration updates to continue uninterrupted exchange of data between internal platforms and third-party solutions

Implementation challenges

When determining where to focus changes, how to enable updates, and to what extent systems will adopt the new standard, there are multiple avenues to becoming ISO 20022 compliant:

• Upgrading or enhancing existing internal systems
  Replacing internal systems with ISO 20022-enabled third-party solutions
• Upgrading or replacing third-party solutions to versions or new platforms that support ISO 20022
• Deploying translation tools that can perform translation outside of payment infrastructure to avoid impact to legacy technology and processes
• Deciding the extent to which they will support ISO 20022 message types and data