Skip to content

ACI Blog

ISO 20022 for Europe: How to Speak the New Language of High-Value and Real-Time Payments

The implementation of the ISO 20022 data standard for financial messaging has been accepted by major central banks, payment schemes around the world and system operators including SWIFT. As with previous ISO standards, ISO 20022 creates a common payment processing language around the world, enabling cheaper, faster and more secure processing. Additionally, ISO 20022 brings richer and more structured data capabilities to payment messages, enhancing these benefits and enabling new kinds of integrations into the broader digital ecosystem.

Fostering cross-border trade in the Eurozone

In Europe, ISO 20022 was widely introduced as a pan-EU standard along with SEPA, which has been live since January 2008. SEPA is managed by the European Payment Council (EPC), as well as the European Central Bank. SEPA’s main objective when it launched was to create a single payments zone where countries could transact with each other, almost as if they were in the same country), with the same security and guarantees, at a low cost. In other words, this would’ve made it cheaper to do business and increased opportunities and trade possibilities across the Eurozone.

This would have also fostered commercial relationships and lessened the monopoly between banks and companies that generally insured the costs of these transactions.

Overcoming pain in cross-border payments

Unfortunately, this infrastructure faced a host of challenges, including the loss of relevant information for intra-EU transactions, combined with missed interoperability among the various domestic payment systems, which brought delays of up to five days to settle these payments. However, the decision to migrate to ISO 20022 for SEPA in 2014 marked an advance in standardization efforts on a global scale, also allowing for richer data exchange.

More recently, and building on the ISO 20022 standard, EPC launched the optional real-time pan-European scheme, SCT Inst, which offers a modern path toward the digitalization of payments across Europe.

Additionally, almost all other European payment systems for cross-border payments (Euro1, STEP1, TARGET2) are in the migration phase of ISO 20022 adoption, with go-lives planned for November 2022.

This means that in the near future, banks will be able to process their payments more efficiently and cost-effectively, with the beneficiary’s information flows containing all information in easily consumable fields. Apart from the compliancy aspect of such significant effort, major central banks and financial institutions see a great opportunity to implement a robust and data-rich standardization strategy that will benefit all market participants.

It’s ISO, but not as we know it

However, standardization is not quite as simple as it sounds. Early implementations of ISO 20022 are not quite the same as the new interbank formats that come into final effect in November 2022. A newer version of ISO 20022 is required for European banks to manage changes in the TARGET2 and SWIFT systems. And the new version of ISO 20022 is also going to be made mandatory for existing schemes (SEPA and SCT Inst).

What becomes clear is that ISO 20022 is more of a dictionary than a complete language. The way each country, scheme, system and even each bank in a bilateral agreement may choose to leverage the ISO 20022 framework can vary. And banks’ solutions need to be able to handle, interpret and translate them all if they want to remain a part of the global financial services ecosystem.

Discover more about solution approaches to solving for ISO 20022 modernization in our latest white paper: A Guide to ISO 20022 Implementation Strategies and Their Impact on Revenues

Principal Solution Consultant

Daniele has over 20 years’ experience in payments across the entire value chain. He has been working with banks, processors and fintechs to build their business case for new payment services, as well as design solutions to deliver these services to market. Daniele is an expert in real-time and open payments, supporting payment organisations to prepare for PSD2 across retail payments and wholesale banking. He also advises on wider business opportunities afforded by instant payments, including liquidity and treasury management, working with central infrastructures, payment hubs and end-to-end transaction processing. Daniele is a member of the EPC Scheme Technical Forum (ESTF) and ACI deputy representative at EBA Clearing, joining working groups that shape the industry. Daniele lives in Italy with his family, and like all good Italians he is an avid football aficionado.