Published: January 07, 2025
The transition to ISO 20022 is transforming global payment systems and the interactions between all stakeholders in the financial services sector. For corporate treasurers, it offers the prospect of enhanced data and more streamlined processes.
The financial services sector is poised for a significant shift as global payment systems transition to ISO 20022, a messaging standard to revolutionise payment initiators and processors. While rather technical, this transition has profound implications for corporate treasurers.
Jerald Seti, Vice President of Product Management, Financial Services, ION Treasury, explains: “This has been a long journey that started around 2008 when the first seeds were planted, moving towards a global, standardised formatting mechanism.”
The goal? To harmonise global payment systems. Systems including Fedwire, ACH, Swift, CHIPS, and CHAPS have unique messaging structures, creating an extremely high barrier to entry. “It prevented people and organisations from moving freely between payment mechanisms without encountering these barriers,” Seti adds.
Europe took an early lead in the transition race with the introduction of SEPA and, since then, many regional and national payment channels have adopted ISO 20022. Yet, key players such as the US Federal Reserve remain transitioning, with critical deadlines approaching. “The major standout is the US Federal Reserve, which has a deadline of next year,” Seti adds.
Wim Grosemans, Global Head of Product Management, Payments & Receivables, Cash Management, BNP Paribas, underscores the urgency of upcoming milestones, particularly for cross-border payments. “The deadline of anything that passes through Swift from an interbank perspective is November 2025,” he advises.
For most corporate treasurers, however, the first important date to keep in mind is November 2026, when there will be an end to the capability to send unstructured address fields to identify debtors and beneficiaries. “Typically, the sending bank will take care of structuring the address they have on file for the debtor, but for other beneficiary sites, there’s going to be some work ahead for corporate and banks,” Grosemans adds.
Beyond harmonisation, ISO 20022 promises more granular and structured data. Seti emphasises: “If you compare a Swift message with an ISO message, an ISO message is much more readable.” The new format replaces cryptic tags with clear labels, allowing easier parsing and analysis.
This granular data should unlock new possibilities, particularly regarding fraud prevention and predictive analytics. “The name and address information, for example, used to be a blob of free format information,” Seti explains. “Now, elements such as first name, last name, building number, and PO Box will have bespoke fields.”
Such changes, however, pose challenges for corporates, especially those with outdated systems. Grosemans advises treasurers to assess their master data: “If the master data is granular enough, that’s the best possible situation.” He also recommends aiming for fully structured addresses, even if semi-structured options are permissible.
The need to act is more pressing for corporates with complex set-ups, such as IHBs or those holding PSP licences. Grosemans highlights: “Treasurers that need to use bank-like messaging will have to migrate that messaging by November 2025.” He encourages such firms to consider continuing bank-like messaging or transitioning to corporate payment initiation.
ISO 20022 also introduces fields for regulatory reporting and tax and purpose codes, which enhance transparency and oversight. “We’ve seen this post-Dodd Frank [the legislation passed by the US Congress in response to financial industry behaviour that led to the global financial crisis of 2008] on the derivative side,” Seti notes, predicting that payments may soon face similar scrutiny. Purpose codes, though currently optional, can streamline classification and downstream processes.
One of the standout advantages is the simplification of bank onboarding. “It’s going to make it much easier for corporates to onboard new banks,” says Seti. “Theoretically, all banks should now be speaking the same language.”
While regional and bespoke nuances will persist, the standard message structure reduces the complexity of switching banks or payment channels. Treasurers can adopt a hybrid approach, optimising costs and efficiency across bulk and high-value payments.
Seti also encourages corporates to move away from manual processes: “It’s a good opportunity for corporates to re-evaluate their bank connectivity and automate, rather than relying on downloading and uploading files from portals.”
ISO 20022 also introduces structured data that can revolutionise payment reconciliation. Grosemans notes that the enriched remittance data provides an opportunity for automated matching. But that requires a first-mover. “At some point, someone has to start sending structured data for others to receive it,” he points out. Collaboration between corporates and banks will be crucial.
Sanctions screening also stands to benefit. Seti highlights how the granular data will eliminate reliance on “fuzzy logic” for name matching, which currently generates false positives. “Treasurers are now comparing apples with apples,” he explains, meaning improved accuracy and reduced inefficiencies.
Implementing ISO 20022 requires a cross-functional approach. “Corporates must define who is affected and bring everybody on board,” Seti advises. He highlights the need for a stakeholder to champion the project and secure resources, as system changes will be extensive.
Grosemans stresses the need for treasurers to instigate early engagement with their banks to align on timelines and master data updates. “This is an iterative process,” he says, noting that collaboration with banks and technology partners is critical. Treasurers should verify that their ERP and TMS providers are ready for the transition.
A primary challenge in the ISO 20022 transition is navigating varied deadlines. While banks face strict timelines, corporate deadlines are harder to pin down. There are also regional discrepancies to navigate.
“Some European communities are abolishing legacy corporate formats (but not all – yet)”, Seti underlines. Treasurers may require a hybrid approach, sending ISO messages to compliant banks while maintaining legacy formats for others.
Seti recommends prioritising major banks to mitigate risks: “Start with those handling the highest payment volumes, then address smaller banks.” Proactive engagement with banks and vendors is crucial, allowing treasurers to plan and adapt as deadlines shift.
The structured format of ISO 20022 unlocks opportunities beyond compliance. “There’s a clear opportunity to populate payments correctly from the start,” Grosemans explains. Accurate data entry will prevent delays and enquiries, streamlining cross-border transactions.
ISO 20022 also enhances payment speed and transparency. Corporates can choose optimal settlement instruments by efficiently leveraging local rails. Grosemans highlights the long-term potential: “If treasurers correctly work their master data, they could speed up payments and improve transparency.”
Looking at the bigger picture, the transition to ISO 20022 presents a chance for strategic transformation. Grosemans envisions a more efficient future: “If we all speak the same language from start to finish, it reduces friction, adds transparency, and simplifies workflows.” Faster payments, driven by regulations such as Europe’s Instant Payments Regulation, offer exciting prospects for real-time treasury management.
Seti suggests treasurers evaluate their infrastructure: “Consider moving from on-premises to the cloud or outsourcing bank connectivity to reduce maintenance burdens.” He also points out the importance of security enhancements, including encryption and fraud-detection services.
The journey to real-time treasury
The transition to ISO 20022 will require time and resources from treasurers. Still, real opportunities exist to grasp if it is embraced as a strategic initiative.
Grosemans enthuses: “It’s a journey for treasurers to think about how they manage master data, bank connectivity, payment initiation, reporting formats, and reconciliation. Ultimately, it will enable real-time treasury use cases for corporates.”
Seti agrees, noting that now is the time for treasurers to ensure awareness throughout their organisation. “Make sure you are aware of the changes happening,” he concludes. “Become familiar with the deadlines and reach out to your banks.”
Supporting the Treasurers’ Juggling Act Treasurers know what they want for their cross-border payments: seamless interoperability and liquidity management. This, however, is becoming harder to achieve amid geopolitical uncertainty and proliferating sanctions and compliance obligations. Add to that real-time operations, ISO 20022 standardisation and instant cross-border payments, it is easy to see how expert guidance […]
