In the intervening years since ISO 20022 was first defined as a new XML-based messaging standard with extra character space that could carry extra transaction data to help banks and corporates process payments more efficiently, the blockchain was invented.
New tools on it, such as stablecoins, are gaining traction even as new native standards are also devised for newer DLT-based processing platforms. These could eventually challenge traditional financial market infrastructures (FMIs) and the recently won position of ISO 20022 as the worldwide lingua franca standard of 21st century payments processing and global finance.
An example of a potentially rivalrous internet native payment protocol is Coinbase’s X402. This was introduced last May to enable instant cross-border stablecoin payments directly over the original HTTP net that Sir Tim Berners-Lee invented in 1989 with his World Wide Web paper.
X402’s aim is to allow application programming interfaces (APIs), apps and AI agents to transact seamlessly and thereby unlock a faster, more automated internet economy with machine-to-machine (M2M) payments and such-like in the coming Internet of Things (IoT) era. There are many other rival standards on what Berners-Lee has described as the “new net” AKA the blockchain and on his traditional www rail as well.
However, none of them are likely to displace ISO 20022 anytime soon, or indeed traditional payment methodologies – stablecoins are nowhere near. Traditional payment formats and standards already have a massive user base and widescale global adoption in their favour.
ISO 20022 has incumbency and scale
“The rise of blockchain-based models doesn’t make ISO 20022 less relevant. It makes it more important,” says Mansour Davarian, Head of Transaction Banking Solutions, Lloyds Bank.
“ISO 20022 is standardising data and providing a common language, ensuring interoperability between new payment rails and existing financial infrastructure,” he says. Effectively, it’s a data standard around which many things can coalesce.
“Even where technologies don’t use ISO 20022 messages directly, they are still likely to replicate or map to the same data elements,” continues Davarian. “The data standard therefore remains critical, even as tokenisation and DLT-based systems scale.”
“Whether value moves via traditional FMIs, instant payment systems or newer digital asset networks, corporates and banks still require consistent data for reconciliation, liquidity management, compliance and control,” he explains.
TradFi and DeFi can be linked via ISO 20022 and APIs
Traditional rails (TradFi) can link to DLT-based decentralised finance (DeFi) applications via ISO 20022 and open APIs, which provide an easy, fast means of connectivity and data exchange. Even if DLT-based platforms do eventually arise, such as Swift’s nascent ledger, then there will still need to be API-enabled linkages to traditional infrastructures – and they won’t disappear quickly either.
Sunk cost ways of processing payments collectively on payment platforms such as Swift’s cross-border behemoth and internally at banks and corporates won’t just suddenly disappear overnight. That takes decades and it’ll only happen if the marketplace eventually decides its advantageous.
As Gareth Lodge, Principal Analyst at Celent, says: “ISO 20022 is absolutely still relevant. Adoption by corporates today of stablecoins is a fraction of a fraction of traditional payments. Ditto for any rival DLT-based or net native internet protocols like X402. Part of the reason Swift will continue to exist [whatever platform it uses for processing –Ed.] is its universal nature.”
“Compare this to the 150+ stablecoins that have already launched and the already embedded rules and standards, such as ISO 20022, that such incumbents have in place already around their FMIs. Ditto for the internal adoption at banks and corporates who’ve already aligned their compliance and processing systems, ERPs, and so forth with ISO 20022 and long-established norms.”
“In addition, X402 and ISO 20022 are essentially different layers. You need both, but for different things. The latter can act as a universal messenger link between traditional (TradFi) rails and decentralised (DeFi) blockchain apps, with APIs providing additional connectivity.”
“While Coinbase may have its own standard… so does everyone else, making ISO actually more attractive, not less,” continues Lodge. “And of course, you still need to on- and off-ramp to DLT and DeFi apps, using fiat money and conversions to get on chain money into the real world.”
“While new forms of money will play an increasingly large role, they will be in addition to – not replacing traditional rails, at least not for many years.”
In other words X402, or others like it, won’t replace ISO 20022 because they’d have to gain the same number of adherents as the widespread XML-based ISO 20022 standard already has. It’d take decades to get any similar global traction. For example, it’s taken ISO 20022 since the turn of the millennium to get to where it is now finally replacing its predecessors.
Incumbency and scale matter. The XML-based ISO 20022 messaging standard finally has this after Swift’s connection migration deadline last year that mandated anyone wanting to use its cross-border payment platform needed it – or else they couldn’t connect. The US Fedwire Funds Service that launched last year also adopted ISO 20022 natively, alongside most domestic instant payment platforms around the world from India to Singapore, to the SEPA countries in Europe, and Mexico to Nigeria.
Some ACH systems still need to natively adopt it in the US [NACHA], UK [Bacs] and elsewhere. But ISO 20022 is undeniably embedded in global payment, treasury and finance systems after far too many years of initial adoption delay. Replacing it is not on the cards.
There are some remaining challenges for ISO 20022 – not least the November 2026 standards update challenge that is seeking to remove unstructured postal addresses in payment fields and further aid a more data-centric standardised approach among banks and corporate treasurers that use the standard. But ISO 20022 can already be said to be the linga franca messaging and data standard of the 21st century. It isn’t going anywhere.
Treasury viewpoint
According to Gherri D’Innocenzo, Head of Cash Management & Payments, Standards & Projects, at Siemens, who has driven the corporate’s internal adoption of ISO 20022, the standard remains highly relevant. “Internet native protocols represent a potentially important innovation that might accelerate M2M and micropayments end uses. But they address a very different problem space than ISO 20022. They’re automation focused,” he says.
“X402, or others like it, can act as the trigger and access layer, enabling payments at the point of interaction, while ISO 20022 supplies the structured financial language required for settlement, referencing, reporting and interoperability across treasury processes. Its embedded nature means it’s not going anywhere.”
