ISO 20022 Is Coming — Are You Ready?

As an open, global standard, ISO 20022 promises to create a common language for payments worldwide — with higher quality data to drive better payments for all. According to SWIFT, by 2025, ISO 20022 will be the universal standard for high or large-value payments systems of all reserve currencies, and will support 80% of transaction volumes and 87% of transaction value globally. Sounds great, right? But of course, it’s not actually that simple or straightforward.

As financial institutions bear much of the burden of supporting the new standard, ISO 20022 hasn’t been a big focus for many corporations. But as we draw nearer to the November 2022 migration deadline for European banks, there are potential challenges that every corporate treasury should be aware of, including:

• Lack of subject matter resources who understand payments
• Tight timelines for compliance
• System conversions that are not adaptable
• A limited number of platforms that offer the new standard

ISO 20022 is an open global standard for exchanging financial information digitally. Using the XML syntax, it provides consistent, rich and structured data that can be used for every kind of financial business transaction. More data means more detailed information about each transaction is available, reducing errors and the need for manual intervention while allowing greater transparency. Greater automation means faster processing, lowering costs while delivering real-time cash visibility for an end-to-end improved payments experience. And open means that it can be used on any network, by any organization rather than being proprietary.

Originally scheduled for European financial institution rollout in 2021, SWIFT postponed the initial migration deadline to November 2022 to give banks more time to prepare. The U.S. Federal Reserve is currently scheduled to transition in November 2023, although a delay would come as no surprise. By November 2025, SWIFT will no longer support the FIN network or category 1, 2 and 9 FIN messages for cross-border payments.

SWIFT’s Message Types (MT) standards have been used for decades by both financial institutions and corporates, for payments, cash management, and trading. Most treasury and finance professionals are highly familiar with MT940 files, a.k.a. the end of day statement. MT messages were first launched in the 1970s. They were deliberately designed to be small and lightweight, with only five blocks of data — three headers, message content, and a trailer — to keep costs down and speed reasonable.

MX, or XML-based messages, were rolled out in the early 2000s. They are richer and more robust. However, many organizations never made the switch, instead choosing to customize their MT messages.

Now, however, the need to move to MX is pressing. When we talk about ISO 20022 migration deadlines, what that really means is that support for MT files is going away by end of 2025, and starting in November payments messages received through SWIFT will be either in the new format or a multi-format MX message that packages ISO 20022 and the “translated” MT file together, via the FINplus network.

Sending and receiving payments involves disparate exchange protocols and messaging formats. ISO 20022 is an open global standard, but isn’t a requirement outside of the SWIFT network. While MT messaging may be phased out, in reality, each country, and each bank may use its own format that may be just different enough to require manual intervention to match up data.

Even with the so-called “simple” MT messages, issues often arise due to unique bank formatting. But switching from MT to MX, especially where MT customizations (effectively patches in an attempt to gain more speed, data, and transparency) are in place, presents even greater complexity.

Most treasurers aren’t experts on payment and messaging formats — nor should they be. A multibank connectivity provider can help by taking care of all the translation and conversion needed for seamless transaction and messaging processing and reconciliation. You get the cash visibility you need, without the headaches of sorting through error codes and trying to figure out how to fix each individual issue.

Fides is a certified SWIFT Service Bureau, and can smooth your path to ISO 20022 adoption. Not only do we provide connectivity, we can automatically validate and convert bank messages to each specific format required. Using a TMS or ERP? Fides seamlessly connects to these systems, and we can set up a standard format to automate conversions there as well.

Conversion services can also be applied to bank statements. We can harmonize all formats of messaging from your bank, and ensure they reach your ERP or TMS in the standardized format of your choice.

One important thing to note: SWIFT connects more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories. Today, Fides connects more than 13,000 banks and payment providers, and that number continues to grow. Fides leverages the SWIFT network across numerous banks, but not every bank uses SWIFT — particularly small banks, or those in emerging countries.

We can work with you to determine the best connectivity channels to meet your specific needs, whether that’s SWIFT, Host-to-Host, EBICs, APIs, alternative channels — or any combination. And if you need help getting set up with SWIFT, our dual-BIC hybrid solution can help make onboarding faster, and management easier.

For more information on Fides Conversion and Validation Services, go here.

Fides is the world leader in multibank connectivity, payments and transaction communications. A market leader for more than a century, Fides is committed to the principles of Open Banking, making treasury and financial operations as efficient, transparent and secure as possible for all organizations.

Fides provides everything organizations need for efficient cash and liquidity management, all through a single platform — along with connectivity to more than 13,000 financial institutions through an unmatched range of methods and channels. Thousands of companies around the globe rely on Fides’ connectivity capabilities and comprehensive workflow, reporting, conversion, validation and security services, for their own businesses and for extending services to their clients.

Whether you access via the secure Fides ONEHub or take advantage of our seamless integration with third-party ERP, TMS and other backend systems, Fides is the only platform you need.