ISO 20022 Guide

How to Migrate to ISO 20022

What new standards for high-value and real-time payments mean for your financial institution

What is the ISO 20022 standard?

ISO 20022 is a global financial messaging standard that will standardize the data structure for financial messaging for today’s real-time payments world. ISO 20022 will deliver a new rich-data format for payments, empowering organizations to share information across a variety of financial services applications and allow for the development of digital overlay services. ACI can support institutions in its migration to ISO 20022 with a variety of solution options.


What do financial institutions need to know about ISO 20022?

At a glance, the ISO 20022 standard: 

  • Was first issued by the International Organization for Standardization’s Technical Committee 68 in 2004.
  • Uses an extensible markup language (XML)-based syntax, which allows for greater data volumes, makes parsing financial information easier and prevents potential truncation and data loss.
  • Dramatically increases the number of data points banks are able to send and receive with payments from approximately 100 to nearly 9,000 characters.
  • Is both interface- and machine-friendly and helps create a record of data along a payments chain.
  • Is currently used by over 70 financial services organizations, including The Clearing House’s Real-Time Payments network, SWIFT, the China National Automatic Payment System and the Bank of Japan’s Financial Network System.
  • Is not enforced from a regulatory perspective; however, at the payments system level, operators have set their own deadlines for switching over to the new standard.

Why is standardization important?

Payments messaging standards play a critical role in ensuring interoperability between domestic and international high value (and now low value) payment networks.

Historically, financial institutions have developed their own, independent standards; we can think of this as each institution speaking its own language. Without true, universal standardization across payments messaging — that is, without a shared, common language — different networks struggle to connect and communicate, creating friction and standing in the way of cross-border payments and alternative payment methods.

The ISO 20022 format solves this issue by creating a common language. It creates a universal standard for maximum interoperability, while still offering different payment schemes and financial institutions the flexibility to customize their messaging syntax according to their needs with relatively little effort. 


What are the benefits of migrating to ISO 20022?

There are many benefits to the new ISO 20022 messaging standard:

  • The rich data that the ISO 20022 format provides enables banks to create and deliver better experiences for customers.
  • Rich data also allows for improved fraud prevention and greater compliance with anti-money laundering (AML) regulations.
  • ISO 20022 supports banks in reducing manual investigations and improving straight-through processing (STP) rates.
  • ISO 20022 empowers banks to improve the high-value services they offer to global customers.

Ultimately, banks have to migrate to ISO 20022 as the payment networks they leverage for their business evolve to this new standard. 


What is the difference between SWIFT FIN (MT) messages and the new ISO 20022 format?

ISO 20022 messaging will allow for data-rich transmissions not previously possible with legacy formats (used by SWIFT, SWIFT-like regional and domestic schemes). The messaging standard will include a common XML format, with greater data volume and a much more granular, interface-friendly layout. The data will also be more structured and feature a record of data along a payments chain. 


What is the ISO 20022 equivalent of an MT103 message?

To directly answer the question, the ISO 20022 Customer Transfer message type PACS.008 is the equivalent of an MT103. It’s also worth noting that a Bank-to-Bank Transfer PACS.009 is the equivalent of an MT202 and MT205; PACS.009 Cov is equivalent to MT202 Cov. 

All high-value payment schemes converting to ISO 20022 — including SWIFT-like schemes, pan-regional schemes and domestic schemes — typically use the same message types to address their payments. These message types include PACS.008, PACS.009, PACS.004, PACS.002 and a handful of CAMT.xxx message types.

Finally, a return — whether Customer Return (MT103 Return) or Bank Return (MT202 Return) — and then a PACS.004 is used, with some granularity distinction noted in the payload of the data.


Is it enough to convert from MT to XML?

Although this question refers to the use of SWIFT message formats, it’s applicable to any scheme moving from its legacy format to ISO 20022.

A basic converter can provide connectivity between MT and XML by moving data between the two systems, but it cannot ensure compliance or offer the same interface-friendly usage as the ISO 20022 format.

To elaborate, a convertor limits the granularity of data and how it is passed from one system to another. Passing data from an ISO 20022 format to a legacy format requires truncation. On the outbound side, in most cases, freeform data must be mapped to the ISO freeform fields instead of the ideal granular ISO-equivalent fields. Moreover, since legacy formats cannot handle rich data — hence the inbound truncation path — a significant amount of data will be lost when passed through outbound legacy engines.

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Which payment types are moving to ISO 20022?

The ISO 20022 message format is relevant to:

  • FI to FI Status Report Messages (PACS.002)
  • Customer Credit Transfer Messages — Single (PACS.008)
  • Customer Credit Transfer Messages — STP_STP EU (PACS.008)
  • General Financial Institution Transfer Messages (PACS.009, PACS.009ADV, PACS.009COV)
  • Financial Institution Direct Debit Messages (PACS.010)
  • Confirmation of Debit/Credit Messages (CAMT.054)
  • Customer Statement Messages (CAMT.053)
  • Transaction Report Messages (CAMT.052)
  • Return of Funds Messages (PACS.004)
  • Resolution of Investigation Messages (CAMT.029)
  • Payment Cancellation Request Messages (CAMT.056)
  • Notification to Receive Messages (CAMT.057)
  • System Event Notification Messages (ADMI.004)
  • Receipt Acknowledge Messages (ADMI.007)
  • Customer Credit Transfer Initiation Messages (PAIN.001)
  • Customer Payment Status Report Messages (PAIN.002)
  • All Xsys Messages (XSYS.XXX)

How does ISO 20022 relate to cross-border payments?

The ISO 20022 global payments standard allows for greater interoperability between payment networks and schemes, which is essential to processing cross-border and cross-rail payments. ISO 20022 also attaches richer data to payments, eliminating the need for manual parsing and creating more detailed payment chains.

Going forward, financial institutions that send and receive cross-border and cross-rail payments will need to be fully equipped for ISO 20022 — that is, be fully able to send and receive rich data to prevent information loss and gaps from forming within payment chains.


Do banks need to be able to send and receive ISO 20022 messages?

While SWIFT and other schemes offer co-existence periods until 2025, banks must be able to at least send and receive ISO 20022 messages for high-value payment rails to remain compliant with network and system updates and to continue transacting on behalf of their customers. This is especially true of correspondent banks, which must be able to pass structured, enriched data to the next party in the chain, as well as receive new ISO 20022 messages from across their global network of partner financial institutions.


Is migrating to ISO 20022 mandatory?

Various real-time gross settlement (RTGS) domestic and regional schemes have mandated the new ISO 20022 standards, with each establishing their own migration timeline. Certain schemes, such as SWIFT, offer coexistence periods, during which both FIN and ISO 20022 messages will be accepted.

However, even in the case of coexistence timelines, should a financial institution and an intermediary send an ISO 20022 message, that intermediary must be able to receive and pass that message along. Even if a bank were to find a workaround — such as, say, using a translator — it must still contend with the global shift and the impact on its correspondent banking business.


What is the timeline for ISO 20022 migration?

There is no singular timeline for ISO 20022 migration. Instead, each scheme has set its own deadline for switching over to ISO 20022, with some offering coexistence timelines and workarounds.

Some key timelines to note:


How long does it take to migrate to ISO 20022?

A typical migration timeline can run anywhere from nine to twelve months, depending on the partner and solution. ACI’s Enterprise Payment Platform is banks’ ultimate answer to ISO 20022 migration and replaces legacy solutions.

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How can banks migrate to ISO 20022?

Contrary to popular belief, migrating to ISO 20022 does not require a “rip and replace” of legacy systems at step one. 

For financial institutions that want to protect their existing engine and numerous back-office systems, ACI offers its ACI Enterprise Payments Platform solution.

This solution acts as an iterative step in the migration process, standing in front of the legacy engine, ensuring compliance against various deadlines, enabling banks to manage and leverage rich ISO data and streamlining ISO 20022 migration for other various systems. This empowers financial institutions to migrate to ISO 20022 and transition from their legacy engine onto ACI’s solution according to their own smooth, controlled and low-risk timeline.


What challenges are associated with ISO 20022 implementation?

Each ISO 20022 migration is distinct, and no two banks’ implementation will look exactly alike. For this reason, it’s impossible to say what challenges are associated with ISO 20022 implementation; what challenges one financial institution faces, another may not.

That said, there are some general best practices participant banks should follow to ensure a smooth migration process:

  • Conduct a thorough gap analysis of core payments processing capabilities to fully understand which systems must undergo modernization for ISO 20022, and how to prioritize those systems.
  • Become familiar with each applicable domestic and regional scheme’s ISO 20022 requirements prior to migration to ensure proper compliance.
  • Take a gradual approach, first doing only what’s absolutely necessary to connect to payment rails and accommodate larger data volumes — for example, setting up end-to-end payment flows for STP — and then migrating over additional systems and interfaces.
  • Educate staff on the significance of the new ISO 20022 format and invest in adequate training for new systems.
  • Adopt a forward-thinking perspective, consider which opportunities to pursue prior to beginning the migration process and build those opportunities directly into ISO 20022 strategy.

What kinds of data-rich services are possible with ISO 20022?

The ISO 20022 format’s rich data capabilities open up a world of possibilities, helping banks apply artificial intelligence (AI) to financial advice to speeding up the automated reconciliation of invoices.

The ISO 20022 standard will also enable the growth of alternative payment methods, as rich data capture will drive forward-thinking banks to better incorporate and deliver on emerging payment types.


Which payment schemes / systems currently use ISO 20022?

SWIFT has supported ISO 20022 for some time now, using what it calls SWIFT MX. SWIFT MX is optional and uses a different set of rules for ISO 20022. As of September 2019, there have been 10 high-value payment schemes live on ISO 20022; China’s CNAPs and Japan’s NET are just two examples.

The SWIFT November 2022 go-live follows the Cross-Border Payments and Reporting Plus (CBPR+) rulebook, whereas all RTGS schemes follow the High Value Payments Plus (HVPS+) rulebook with 95% alignment.

Of course, there are a tremendous number of ISO 20022-based instant payments systems live around the world with significant overlap.


Is it a case of SWIFT gpi vs. ISO 20022, or SWIFT gpi and ISO 20022?

Although SWIFT gpi and ISO 20022 are separate initiatives, both can open the door to real-time payments and a host of new value-added services, especially when high-value payments switch to ISO 20022.

Given that most instant payment schemes are ISO 20022-based, there is friction in translating messages to and from legacy high-value payments systems. Much of that friction will be eliminated when high-value payment schemes migrate to the ISO 20022 format. In fact, ISO 20022 will enable financial institutions to almost seamlessly leverage both high-value and instant payment schemes.

SWIFT gpi Instant is a payments service for real-time cross-border payments and transfers. Payments sent via SWIFT gpi Instant:

  • Can be either domestic or cross-border
  • Must be sent via a high-value payments scheme
  • Must be marked with the associated gpi service call
  • Should originate and/or settle into a local instant payments scheme

When the instant payments scheme responds to the originating financial institution, the originator then responds to the recipient, so their financial institution is notified of the outcome.


How does ISO 20022 impact Universal Confirmations?

Many smaller financial institutions unable to adhere to the level of SLA required under SWIFT gpi are instead implementing Universal Confirmations — a smaller scope of messaging types and a lower-level response time to mandates. Universal Confirmations only require Customer Transfers in order to provide a response to the SWIFT Tracker with a slower SLA response time.

Universal Confirmations is not really related to high-value payment schemes migrating to ISO 20022; instead, it impacts Credit Transfers (MT103 migrating to PACS.008).

ACI Worldwide has solutions for your financial institution to support SWIFT gpi, Universal Confirmations and ISO 20022. Contact our sales team today for more information.

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