Swift is on track to begin the retirement of its existing MT messaging standard, with the elimination of the first phase of messages set for November 2025. BBH takes a deeper look at what the ISO 20022 transition will mean for banks and other impacted institutions, and how they can best prepare for the switchover.

At a high-level, what is ISO 20022?

The ISO 20022 MX format modernizes the payment process and provides a comprehensive framework for payments information to be presented in a structured way with enhanced, rich data sets.

ISO 20022’s implementation follows recommendations from the Committee on Payments and Market Infrastructures (CPMI) on ways to improve and expedite cross-border payments.  

So, how exactly does ISO 20022 achieve this?

ISO 20022 will serve as an enabler, unlocking a number of strategic benefits for banks and their customers.

• Greater harmonization: ISO 20022 will create a common data model and language across both Swift and international payment systems, such as T2, CHAPS, the US FED/CHIPS, UK CHAPS, and Hong Kong CHATS.

One reason to migrate to ISO 20022 is to reduce friction across the payments lifecycle. An example is sanctions screening, where compliance teams need to review payments for details of the parties involved. The existing ISO 15022 messages do not provide the level of detail found in the new ISO 20022 messages: limiting the effectiveness of automated reviews. This significant manual intervention causes delays and adds cost.

“Access to formatted data will makes it easier for financial institutions to perform sanctions screening,” commented Betsy Roguet, Product Manager, BBH.

Firms using ISO 20022 are already seeing fewer false positives.¹ Efficiency gains in financial crime compliance will – again – speed up payments.

Data and its translation are another area where friction occurs. Participants in the payments industry are using different data languages, requiring translation from one system to another and adding delays in payment processing. These delays will be eliminated with ISO 20022 as the global standard used by market infrastructures, participants, and message processing systems like Swift.

“With the goal of increasing the speed and efficiency of payment processing the migration to ISO 20022’s common language has reduced that friction,” said Roguet.

• Improved efficiency: In addition, ISO 20022 can facilitate automation of payment exceptions and investigations. This drives efficiencies and eliminates dependencies on manual workflows historically done via email, fax, or phone, leading to cost benefits, and ultimately faster payments and enhanced cash management.

•  Expanded datasets: ISO 20022’s more detailed payment context – which we call “rich data” - and structured data, will help users extract meaningful insights and analytics. In particular, for the securities industry, the new consistency in data elements and the developing market standards for statement messages will allow for more efficient reconciliation processing.

Many firms are still behind

While ISO 20022 may be a compelling proposition for financial institutions, it’s important to remember that this is not an optional transition. At minimum, there will be cost implications if the deadline is not met, and with no action, managers may miss out on information that is critical to their payments process. Still, adoption rates have been stubbornly low, and remain so, despite the looming deadline.

This comes as data shows that just 40% of the Swift network are expected to be ISO 20022-compliant by November 2025. Meanwhile, of all the payments going through the Swift network today, 75% are still using legacy formats, with just 25% leveraging the new ISO 20022 format.

Although some of the leading transaction banks went live with ISO 20022 in March 2023, the point at which Swift began migrating its cross-border payment system to ISO 20022, a number of smaller firms - including regional banks or asset managers - appear to be lagging behind.

In some cases, budgetary or resourcing constraints are holding organizations back from making the necessary ISO 20022 data and systems upgrades.  

“We’re seeing some clients waiting to hear from their large providers as to when they’ll be making the ISO 20022 changes. Knowing that not all providers will be flipping the switch on the same day, we’re encouraging our contacts to start the process sooner than later to avoid implementation delays,” said Jessica Sacco, Infomediary Relationship Manager, BBH.

Getting Ready: Some simple steps

In less than 10 months, firms will need to be ISO 20022 ready. This will require businesses who have yet to migrate to ISO 20022 to start moving now.

• Education: Firms need to understand how ISO 20022 will benefit them, and from that they can then determine the extent to which they take advantage of the added functionality. A few resources include:
  • The ISO 20022 Repository 
  • About ISO 20022 
  • ISO 20022 for dummies ebook 
     
• Engagement: It is essential that firms speak to their providers about their ISO 20022 timing plans, and confirm they are migrating to the new standard, keeping in mind this will be mandatory from November 2025. Firms should also be communicating with their technology vendors to gauge their support of the ISO 20022 message set.
  
  
• Testing: Planning is absolutely key, as is leaving plenty of time for testing. Equally, firms should familiarize themselves with the new ISO 20022 formats to assess what data fields they need to start capturing from source.

BBH’s path to ISO 20022

We are well-positioned to support clients with your ISO 20022 change journey.  

Most importantly we have already updated our products to support the new MX message standards putting us in a good position to help other early movers. 

We have multiple options for our clients depending on their status, whether that is supporting a fully formatted MX message, an Infomediary Flat File, a client proprietary file or in some cases supporting a translation back to the MT format. 

Working with a best-in-class provider with a deep pool of subject matter expertise will be critical if firms are to seamlessly navigate to ISO 20022 over the next few months.