Insight & Analysis

ISO 20022 migration hits another snag

Published: Nov 2022

The migration to the payments messaging format ISO 20022 has been delayed by SWIFT, again, in a move that demonstrates the complexities of getting all the world’s financial institutions to adopt the new standard.

It has been heralded as the new era in which payments won’t just simply be about money. With ISO 20022, the messaging format that financial institutions use to communicate with each other, there will be the potential for more information. When one institution sends money to another, it will no longer just be about the payment; it will be about the data that accompanies a transaction. This will make it easier to identify where it came from, what it is for, and make it easy to refer to any relevant documentation. The new messaging format could be game-changing for correspondent banking – and cross-border payments – but the migration to ISO 20022 has hit another snag.

SWIFT announced that it was delaying the migration of ISO 20022 for cross-border payments and reporting, a project that is known as CBPR+, until March 2023. It is not the first time that the migration has been delayed.

This time the decision came after the European Central Bank (ECB) announced it was postponing the launch of its upgraded real-time gross settlement and securities settlement system – which also uses the ISO 20022 standard – to “allow users more time to complete their testing in a stable environment”.

SWIFT said in a statement, “An overwhelming majority of our global community has requested that SWIFT align the start of the global ISO 20022 migration for CBPR+ with the ECB’s updated timetable to ease implementation. In response, we have taken a decision to accommodate this request, and SWIFT will begin the ISO 20022/MT coexistence period for all users on 20th March 2023.”

The coexistence period means the old style of messaging will still be possible as the new format is phased in. The difference with the upgraded ISO 20022 has several implications in the services that will be possible with cross-border payments and correspondent banking.

Annemarie Bona, a subject matter expert and Product Manager at ION Group, a provider of treasury and risk management solutions, writes that some of the benefits of ISO 20022 include the gaining of enriched, structured and quality data as well as more straight-through processing and automated remittance reconciliation. Also, this inclusion of quality data with transactions can help prevent money laundering. One example of this could be providing land registration details as additional data to accompany large payments – to prove that the transaction is for a legitimate purchase of property.

The SWIFT CBPR+ migration deadlines affect certain types of financial messaging and MT 1,2 and 9 messages will be phased out in favour of the ISO 20022 compliant MX format. Bona explains that the categories impacted will be financial messages for customer and financial institution payments transfer, cash management status messages and bank statements.

The old MT and the new MX messages will co-exist as financial institutions adapt to the new format. Although the start of the ISO 20022 messages for cross-border payments has been delayed, this does not mean that financial institutions cannot use them, if they are ready. They can opt-in to the new standard and communicate this way if it has been agreed on a bilateral basis with the financial institution on the receiving end of such messages.

SWIFT previously delayed the migration schedule for correspondent banking back in 2020, pushing back the deadline to 2021. Given the complexity of payments systems, it is perhaps not surprising especially as many payment systems upgrades are delayed. Still, however, industry observers comment that it is frustrating to wait even longer and are concerned that the initiative will lose momentum.

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