In search of ISO 20022 nirvana

“It might not be as exciting as AI or open APIs, the tech topics of the day. But the shift to ISO 20022 messaging is a major leap forward in corporate payments, and in how we communicate and process financial transactions globally,” says Jon Paquette, Executive Vice President, Solutions and Product Strategy, TIS, while arguing that the advance of this standard is what interests treasurers most at the moment.

“Compared with previous standards, ISO 20022 allows for a greater degree of commonality, as well as enabling much richer and more structured data to accompany every single transaction,” explains Paquette. “This enables transformative efficiencies for corporate treasuries, including the ability to execute all payment types globally with a single format – even those with special language characters or unique regulatory reporting fields.

“Being able to capture remittance details through these better-structured and machine-readable data fields will also significantly increase the rates of automated reconciliation and cash application,” continues Paquette. “When implemented globally, the ensuing benefits to data quality and process efficiency – especially within the more complex corporate payments and banking arena – cannot be emphasised enough.” 

This nirvana is all well and good if everyone moves to a common universal iteration of the XML-based computer language everywhere around the globe. Some of Swift’s smaller correspondent banks haven’t, however, and the ISO 20022 adherence deadline has consequently been further extended back to 2025. 

“Fixing the infrastructure first is important, with the November 2025 final Swift deadline for compliance with the standard paramount,” says Kieran Hines, Principal Analyst, Celent. “This key priority [of introducing ISO 20022 everywhere] will allow for the creation of more treasury-specific services.” 

“It’s less about the instant rail data in the payment message itself and more about how banks are able to use it to the advantage of their clients in the service wrapper they put around it,” says Hines, referencing the extra data-carrying capabilities of ISO 20022 messaging and the seamless connective capabilities of open APIs, which amplify what is possible. 

According to Natasha Zurnamer, CEO and Founder of the fintech Optty, who is an ex-merchant and former Head of Supplier Relations at Lux Group, the trend towards ISO 20022 adoption and widespread use of open APIs is clear. “Also, with these drivers, everyone in the value chain is becoming more agnostic,” she says. “We are seeing banks wanting to engage with multiple PSPs and do account-to-account [A2A] real-time payments on modernised infrastructures.”

This is in response to fintech and more established finserv companies already offering similar cheap instant services. Banks don’t want to be left behind. Digital marketplaces are also proliferating where connected payments and services can flourish.

“In future, merchants could use their own cash to lend to customers or counterparties in the supply chain if they are fully on top of their instant payment in/out data and its liquidity impact, and similarly across the liquidity position of customers and suppliers. They can be thanks to the increased freeflow of data in an opening banking and API-enabled environment,” adds Zurnamer. This prospect of merchants offering loans is worrying for banks from a disintermediation perspective.

The liquidity information and other data-rich services impacting working capital, cash optimisation, and visibility that a treasurer would want to see, however, are further down the line than mere merchant acceptance price reduction drivers, personal loans, or other such interests. But these treasury-specific services are still accessible via overlay services on modernised infrastructures or via data-centric tools that can be bolted on by a fintech, bank or finserv firm. Corporate banks should be prepared for change due to the easier connectivity enabled by widespread open API usage. The same forces impacting the retail bank will hit them, even if the complexity of corporate payments protects them somewhat from the wave of change unleashed by new technology and trends.

Corporate processing of payments on an industrial, global scale can also benefit from the aggregated volume and economies of scale that become possible in an open API-enabled environment, where banks fight with each other for volume, and with new-entry fintechs, regardless of borders.

A single bank or PSP can process everything for a corporate on a continent-wide basis. For instance, under the EU SEPA rules, because data-sharing, easier connectivity, and accessibility have been positively encouraged by the regulators, they have slowly become aware how the tech trend towards openness can encourage competition.

An airline receiving multicurrency payments across Europe, for instance, can now aggregate that flow to gain better economies-of-scale price reductions.