Expanding ISO Standard 20022's Scope to Global Payment Messages
November 2022 marks a significant milestone in the global payments landscape as Target2, the European system for large-value and urgent euro-denominated payments, begins its full migration to the ISO standard. This transition is part of a broader effort to standardize communication between payments stakeholders worldwide.
The ISO 20022 standard, adopted by 70 countries in the SEPA zone back in 2014, is set to become the universal standard for both banks and businesses. This change will bring an end to 40 years of SWIFT MT messages and extend the ISO standard to all payments carried out on organized systems and to payments in foreign currencies on the Swift network via correspondent banking by 2025.
The shift towards ISO 20022 offers multiple advantages for international business. With better structured and more granular data, businesses can expect improved transparency, more remittance information, and easier straight-through processing (STP). This new standard will facilitate business transactions while addressing client needs by reducing disruption, improving payment times and predictability, and supporting payment tracking.
One of the key benefits of the new standard is its potential to improve financial security systems. By ensuring greater insight into the parties involved in payment, the ISO 20022 standard aims to enhance anti-money laundering and countering the financing of terrorism (AML/CFT) measures. Mandatory recording and structuring for addresses will affect clients but will also improve AML-CFT screening, leading to swifter payment execution.
The change in standard is not happening overnight. A second transitional stage will take place between 2022 and 2025 for the gradual migration of international payments to ISO format. During this period, clients will need to identify each payment participant involved and provide their name and address, particularly for the beneficiary.
Germany plans to mandate the transition to ISO 20022 for all organized payment systems by October 5, 2025. This includes new requirements for SEPA and instant payments, with software needing to support payment recipient verification and migration from SWIFT MT940/MT942 formats to XML-based camt.052 and camt.053 formats by November 2025.
In collaboration with SWIFT, our website CIB is working on innovation to support its clients in offering a payment pre-validation service. This new service aims to provide clients with a smooth and seamless experience in terms of international payments.
ISO, the International Organization for Standardization, has long been a driving force in the standardization of various industries, and the payments industry is no exception. The migration to a world ISO standard marks a major shift for the payments industry, one that promises to bring about greater efficiency, transparency, and security in cross-border payments.
SWIFT GPI, an innovation by SWIFT, has already improved the speed, transparency, and end-to-end tracking of cross-border payments. As the payments industry continues to evolve, the adoption of the ISO 20022 standard is poised to take this evolution to the next level.
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