Preparing for ISO 20022: Changes to Payments


The migration to ISO 20022 will demand significant resources and be accompanied by a host of challenges but, when completed, substantial benefits for banks and their clients will be unlocked. Marcus Sehr, Head of BNY Mellon Treasury Services, Europe, and Isabel Schmidt, Global Head of Direct Clearing and Asset Account Services, BNY Mellon Treasury Services, explain.

The introduction of ISO 20022, the new payments messaging standard, is set to revolutionise the payments industry. ISO will replace existing SWIFT MT messages and their equivalents, which are unsuitable for supporting evolving transaction needs, as the format for the transfer of cross-border and high-value payment information. Crucially, the new messages will incorporate more structured, robust and comprehensive data, thereby driving enhanced speed and efficiency; reducing false positives, manual intervention and costs; and helping to pave the way to 100% straight-through processing (STP).

The migration will happen in various stages, beginning with the euro clearing system in November 2021, with UK and US infrastructures expected to follow in early 2022 and late 2023 respectively. The migration of the SWIFT network, originally planned for November 2021, has recently been pushed back a year.

As these deadlines draw nearer, considerable efforts and resources from all participants will be necessary to meet the associated challenges. But, by establishing a clear transition roadmap, educating staff and upgrading their systems, banks – and their clients – can unlock the full benefits of ISO 20022.


Compared with MT messages, the ISO format (also known as MX messages) contains more data fields, meaning a payment message under ISO will take up multiple pages as opposed to approximately half a page. As a result, the amount of data transferred down a payment chain is significantly greater.

While the more granular data will provide banks and their clients with a wide range of benefits, there will be associated complexities in the short term that all participants need to understand. The challenge will fall most heavily upon banks that continue to use legacy systems, which may not be capable of storing and transmitting the increased levels of data. These banks will need to choose between fully upgrading their platforms or building an external, integrable system. If they do not act, they risk making their existing products and services inoperable.

What's more, it would be a mistake to think that the ISO migration will impact only systems directly associated with payments operations and cash management. In fact, any area of a bank that makes payments may be affected – making a multi-disciplinary approach to the ISO migration strategy all the more prudent.


It is not just banks that will feel the effects. End-clients will also be impacted. It will be the job of banks to ensure that, come migration, corporates are ISO-educated and ISO-ready. In particular, when it comes to initiating payments, they will need to be armed with the necessary information in the correct format and structure.

While this may sound simple, even relatively straightforward tasks could become much more complex. For example, current payment messages allow address information to be inputted into a non-specific field, in no particular order. ISO messages, however, specify ‘building number', ‘street', ‘town', and so on. Breaking down the addresses, coupled with procuring any missing data fields, will likely prove a cumbersome task for end-clients.

Therefore, as part of their ISO roadmap, banks will need to flesh out how the transition workload can be successfully balanced with their clients in order to provide support and facilitate a seamless transition for all.

Preparation roadmap

The scale and scope of the task ahead should not be underestimated. While educating clients, as well as internal stakeholders, will be a necessary first step, banks should also look to establish a cross-discipline team to capture the full impact of the transition. In addition, they should stay in close contact to the market infrastructures and work alongside SWIFT – the body providing the tools and training necessary for the migration.

Although taking these basic steps will stand banks in good stead, there is no single model that banks should follow. ISO 20022 will affect workflows in a variety of ways, differing from bank to bank, and client to client. The impact should, therefore, be assessed on an individual basis, taking into account a bank’s primary function, its technical capabilities, its business priorities, as well as any local regulatory requirements.

Light at the end of the tunnel

While the introduction of ISO might seem a daunting prospect, the hard work will be rewarded. For banks themselves, the richer, more structured data will allow for greater levels of automation. This will reduce friction in the payment processing flow, leading to more effective risk management and the optimisation of resources.

The ISO format can also help banks to improve their payment risk modelling and scoring – enabling them to offer enhanced data analytics to clients. Meanwhile, beneficiaries will be able to undertake automatic reconciliation, thereby benefitting cash flow and counterparty risk management. For those willing to invest time, effort and resources into their ISO 20022 preparations, the light at the end of the tunnel is particularly bright.