Once complete, the benefits of this messaging standard will be far reaching, helping banks to better serve their customers, drive loyalty and operate more efficiently. In the U.S., upgrading to ISO 20022 will improve data granularity, which will facilitate enhancements like payment status tracking or sanctions checking, and improve the interoperability of cross-border payments.
Likewise, Canadian organizations can expect to enjoy more comprehensive remittance information, automated reconciliation and straight-through processing, along with better interoperability. ISO 20022 will also offer cost efficiencies by reducing the number of standards in operation to one.
But, with this in mind, it’s a little surprising that many financial institutions aren’t ready (or in some cases actively preparing) to send and receive ISO 20022 messages as soon as possible. So – why the delay?
The spread of ISO 20022 confusion
The practical challenges of getting ready for ISO 20022 have certainly had an impact, despite the potential upsides. Updating to a new standard means new or altered payment engines, which requires plenty of investment, as well as manpower.
Uncertain timelines have also played their part. Unlike in Europe (where high-value schemes under the control of the European Central Bank face a strict November 2021 deadline), there has been confusion about timelines in North America as a whole.
Canada is starting a two phase approach (November 2021 for Receive Only and November 20223 for Send & Receive) for the move to ISO 20022, while the U.S. deadline has shifted from its original date. In 2017, the U.S. wire payments system Fedwire announced plans for a three-phase ISO 20022 migration strategy, with phase one intended to begin in November 2020 and be completed by 2023. However, following a formal request from the Payments Market Practice Group, this was halted to allow the Fed to reassess and explore the possibility of a same-day implementation at a later date, in line with other systems.
All of this has created confusion around achieving ISO 20022 compliance within the next year. Whereas Europe is facing the pressure of rigid mandates, it seems harder for North America to feel this same urgency while there’s still deliberation around deadlines.
The pressure to move swiftly
In reality, North American financial institutions should act now, even if Fedwire were to move deadlines out further. Regardless of local high-value system timelines, SWIFT has mandated that any financial institution that processes SWIFT messages must be able to receive and process ISO messages by November 2022. Although this is an extension from the original November 2021 deadline, “the end-date to enable full ISO 20022 for cross-border payments remains as originally planned, November 2025.”
This will affect any North American institution that sends or receives payments with SWIFT. And while there will be a period of interoperability, this has the potential to raise issues around fraud and compliance, so it doesn’t really buy much time.
While a full rip and replace of existing engines may not be feasible in this timeline, fortunately there are certainly payment solutions and insulation layers that can be implemented, enabling banks to either just receive or both send and receive messages while giving them full control over rich ISO data.
In our own experience, however, this will take between 9-12 months – even more reason for banks to ensure they are working with the right solution partners.
Making the most of ISO 20022
While the deadlines may have moved, both the Fed’s and SWIFT’s deadlines should be taken equally seriously. Financial institutions should begin working with the appropriate experts and partners to bring the relevant solutions into their business.
If banks act now, they can ensure that the move to ISO 20022 isn’t just a response to a regulatory burden – but an opportunity to utilize ISO 20022 to its full advantage and compete on the global payments stage.
Download our eBook, “Real-Time Payments Modernization: Leveraging ISO 20022, Universal Confirmations and SWIFT gpi for Payments Innovation,” offering insights into leveraging new real-time standards to create new revenue streams and efficiencies for your financial institution.
ACI Enterprise Payments Platform 
