News & analysis from across the industry

Five reasons financial institutions should speed up adoption of ISO20022

There comes a time when every successful new market innovation reaches an adoption tipping point. It’s fair to say the ISO20022 financial messaging standard is about to cross that crucial threshold. As a result, banking leaders are now in the tricky position of having to weigh the cost of delaying implementation against any potential disruption it might cause to teams in the short term.

This is because financial businesses yet to embed ISO20022 messaging across their platforms face increasing threats, particularly from forward thinking competitors who have already made this important new standard central to their operations. Vanguard players will be taking advantage of superior data quality and broader compatibility with a wide range of international payments technology.

In turn, these innovators will be enabling an improved end user experience. For example, digital wallet functionality and features such as personalised rewards, loyalty discounts and point of sale credit offers are significantly enhanced by the standard. It also allows for more seamless adoption of the latest digital financial security tools across identity verification, KYC, anti-money laundering and fraud.

To cut to the chase, banks and fintechs need to start working to ISO20022 standards sooner rather than later, if they want to benefit from a whole host of modern innovation opportunities. Indeed, there are five good reasons businesses shouldn’t delay adoption:

1. Better international transaction experiences

Global transaction system SWIFT is well on its way to becoming an ISO20022 native. From August 2022, members of its cross-border payments community are able to opt-in for ISO20022 messaging ahead of a general availability launch in November. Importantly, SWIFT is implementing a three-year coexistence phase to allow organisations to make the switch. But three years is an awfully long time in payments innovation. Early adopters will benefit from the standard’s richer, structured data and will find it easier to deploy new tech. It’s better to move now than give competitors the edge.

2. Access to open banking’s superior solutions

After a sluggish start open banking is accelerating, with a range of associated business critical initiatives coming on stream. These will define UX in the coming months and years and include real-time payments, which are enabling businesses and consumers to settle funds instantly, the New Payments Architecture, a modern infrastructure set to improve retail payments by 2024, and the Confirmation of Payee framework, aimed at preventing fraud in bank transfers. ISO20022 is proving integral to the delivery of these initiatives – and makes it simpler for adopters to move with the times.

3. Compatibility with more cross-border integrations

In this highly globalized world, integrations across multiple territories are an essential part of banking business. The Federal Reserve, EBA Clearing, The Clearing House and others are migrating to ISO20022 in order to allow greater interoperability between systems. The objective is to deliver richer data flows and greater efficiencies in transaction processing and financial crime prevention. As far as end users are concerned, they will experience faster reconciliation and more detailed information. Businesses unable to attain this standard risk being exposed as inferior operators.

4. Faster payments domestically and on the world stage

Also known as IXB, instant cross-border payments are a hot topic, with innovation gathering pace at governmental, regulatory and private sector levels. ISO20022 messaging is playing an important underpinning role in connecting banks and fintechs across the world. And it provides the scope to enhance user experiences for individuals sending relatively small remittances to overseas family members and corporates making multi-million dollar payments to suppliers. ISO20022 is also a driving force in instant payments at a national level. In the US, the FedNow(SM) Service is aligning with the standard to generate “more opportunities for implementation across products and market segments.” This will undoubtedly pull more tech innovations into the world of finance, creating both competition and opportunities for incumbent institutions.

5. The new lingua franca in payments

ISO20022 is rapidly becoming the standard language used by institutions across the globe for financial communication. Many organisations are well on their way to adoption, as are the major payments frameworks. We’re now entering a period of migration and with that, time limits for coexistence. Legacy systems are effectively now living on borrowed time. It’s sensible to adopt now on your terms than go up against a clock at a later date.


Getting adoption right: how to pass the migration test

Having weighed the COI associated with delaying ISO20022 adoption against the potential ROI, it’s now time to move forward. Development, UX and IT teams will need to align to bring about upgrades to any legacy systems and explore the use of translation tools, amongst other tasks. There’s also a need to ensure any upgraded or replacement technology works as intended. And this means testing.

It’s a rare thing these days for upgrades and migrations to involve months of coding followed by weeks of testing. Instead, in an Agile world DevOps strives for continuous integration/continuous delivery. As a result, modern best practice requires automated simulations of commands, data flows and transactions as you go. And it should be done in a way that tests a new platform to breaking point.

Trusted by some of the world’s biggest businesses, this is precisely what Iliad Solutions’ t3 testing engine enables. It can be deployed in a variety of ways – in the Cloud, on-premises, shipped in Containers or via VMs. Whichever approach you choose, t3 removes the need for the kind of hands-on, complex external framework that often fails.

And it will almost certainly limit the disruption to your teams caused by implementing ISO20022.




ISO20022 adoption programme

New Payments Architecture programme

Confirmation of Payee

UK Is Moving to Open Banking 3.0 — and It May Affect £7T in Payments

ISO20022 Overview: Migration and Adoption

t3 our platform

Federal Reserve announces ISO® 20022 specifications for initial launch of the FedNowSM Service

Find out how t3 Can change the way you test payments

Get in touch