Implementing ISO 20022 for cross border payments

19 May 2023 5 min. read

In March 2023, the ISO 20022 standard adoption for cross-border payments went live for SWIFT and EUR RTGS systems (Target 2 and EBA). What does the regulation exactly entail? And what is the impact for banks and how should they prepare? Experts from FiSer Consulting shed light on the matter.

A lack of standardization is one of the main reasons for cross-border payment inefficiency. Think of the variety of regional and local specific payment data formats causing friction at intersections between payments systems, clearing houses, and settlement mechanisms. These factors make the execution of cross-border payments a complex, slow, and expensive process.

Regulators and businesses have addressed this challenge in the G20 roadmap for enhancing cross-border payments. It became a focus area for data and market practices to adopt a harmonized ISO 20022 - a ‘new’ payment messaging standard.

Implementing ISO 20022 for cross border payments

However, ISO 20022 is by no means new. Initially introduced in 2004, it became a standard for SEPA EUR payments in 2014. What is new is the global adoption in the cross-border payments space, where the so-called MX format (ISO 20022) started replacing legacy Swift MT.

ISO 20022 in a nutshell

The improvements introduced by ISO 20022 are aimed to materialise in: 
• Richer data – more new fields and fields contain more information
• Highly structured data - information presented in a defined structure

As of November 2025, all messages between financial institutions, both sending and receiving, must be based on ISO 20022. The broad implementation timeline for ISO 20022 adoption:

Implementing ISO 20022 for cross border payments

What is the underlying rationale?

A common standard is needed to avoid fragmentation and harmonize the payment process for all participants in cross-border payment flows.

For instance, Immediate Cross-border Payments (IXB) is an initiative that provides a fast and efficient cross-border payment corridor between the US and Europe. It combines the regional/domestic real-time payment systems (e.g., RTP in the US and RT1 in Europe) to facilitate these transactions globally.

Full adoption of ISO 20022 will enable interoperability on a global scale, where systems in a chain can exchange and use information without boundaries. However, notable to add is that markets/players are at different levels of adoption across the industry.

While some markets have already switched to ISO 20022 (e.g., low-value and real-time payment systems), most local markets will continue adopting during the coexistence period. Also, there are different implementation timelines across banks – some organizations are early adopters of ISO 20022, while others are way slower.

In the transition period, the market will be fragmented with various levels of interoperability.

Preparing for the implementation challenge

While migration from an MT to MX format implies technical changes, it is more than just an IT project for most banks. Due to the complexity and scale of the transition for underlying payment infrastructure, products, operations, and controls. the task at hand will come along with significant organisational changes as well.

Take the example of preparing for an updated element in payment processing – convey of remittance information. It typically includes the purpose of the payment, invoice number, and anything else that can help the recipient identify and reconcile the transaction.

At first glance, supporting remittance information during migration from MT103 to ISO 20022 (pacs.008) is a technical challenge: field 70 of MT103 allows up to 140 characters of free text, versus 9,000 characters supported by the pacs.008 message in a structured format.

How can extended information be processed end-to-end throughout the bank’s payment infrastructure without data truncation or loss? Coordination of multiple stakeholders is essential, starting with channels for initiation and reporting, payment systems, account management systems, screening, transaction monitoring, data management, operations, client services, reconciliation, risk, and compliance.

By tackling the ISO 20022 changes in a holistic manner, bank can benefit from:
• Upgrading and centralizing their payment infrastructure for faster and more efficient STP processing of richer and structured MX payment data;
• Reducing and optimizing costs by decommissioning a legacy payment system;
• Generating more revenue by attracting more volumes – thanks to a fast, efficient, and scalable modern payment platform;
• Improving customer experience and loyalty by providing faster, more reliable, and transparent cross-border payments.

Concluding remarks

ISO 20022 is about standardizing payment data throughout the lifecycle: from initiation to processing and usage. Such standardization enables faster and frictionless payment processing via higher automation and better interoperability, and eventually provides the fundament for better customer experiences.

In the journey from coexistence to interoperability, the tangible advantages of ISO 20022 implementation are proportional to the scale and speed of adoption. Every bank should determine its own path towards the end of coexistence period (November 2025), and in the process ensure that it has the right change governance in place to meet the timelines and requirements.