For those who have never heard of “ISO 20022”, it may come as a surprise to learn that it’s the centrepiece of one of the biggest evolutions in the flow of global payments.
“I don’t think we’ll experience as big a change to the payments system again in my career,” says Nick Fanning, executive manager of Commonwealth Bank’s ISO program. “It’s fundamentally changing the way banks communicate with one another, replacing a standard that’s been in place for more than four decades.”
Here’s how: ISO 20022 is essentially the new “language” of payments – an international standard for the data in payment messages exchanged between the world’s financial institutions. Although the standard was devised 20 years ago, pressure has radically dialled up for financial institutions to adopt it, as the international payment community hurtles towards a migration deadline of November 2025 when old standards will phase out. Led by Swift – the network that powers some five billion international payment messages each year between more than 11,000 financial institutions – the global transition is also being championed by payment market infrastructures and central banks around the world, including the Reserve Bank of Australia.
How global payments will change
Changing a message format may sound like a relatively simple shift to make. But for most banks the magnitude of the change requires a multi-year whole-of-organisation journey to upgrade upstream and downstream systems, at significant cost. All of which begs the question: Why go to all that trouble? A key reason, Fanning explains, is that the ubiquitous adoption of the ISO 20022 standard is critical to meeting the targets set by the G20 to enhance cross-border payments and underpin the smooth flow of global trade – targets that call for improved speed, cost, transparency and access.
“Historically, if you send a payment from Australia to the US, for example, the message format of that payment changes when it’s sent to a US bank, and from that bank to the final destination,” he says. This “clunkiness”, at a time when demand for real-time speed is soaring, has opened the door to smaller fintechs which can circumnavigate legacy systems to offer a smoother, speedier service. But when the major market infrastructures use the new message standard, the interoperability will essentially be like-for-like and that takes out the risk of data truncation and friction.
In other words, global payments should speed up to real-time.
Beyond speed, the new message format includes much richer data that’s far more structured, which lends itself to a host of new digital solutions, refined compliance capabilities, reduced operational risks and increased automation and efficiency, such as automated receivables matching. “Each country has their own regulations and requirements,” says Fanning. “It’s difficult within a limited data set to include every single bit of information needed, but the new ISO standard caters for that with field tags and codes that are a lot more machine readable.”
Why global take-up is challenged
The Swift system “go live” for ISO 20022 format messages in March 2023 marked a major milestone, kicking off the global migration, including in Australia where the high value payment clearing system also went ISO live.
Since then, adoption of the new format has grown but with less than 18 months until the deadline, global take-up is slower than expected. Swift’s latest figures show it’s used by around 25 percent of the payments sent via the global Swift network – through which more than 45 million payments are sent daily. In Australia, the adoption rate is higher, at around 70 percent of the high value clearing system volume, according to the July 2024 figures of local payment industry body AusPayNet.
Ciarán Byrne, J.P. Morgan Payments’ head of global clearing product and transformation, says although a significant adoption uplift globally is expected as the deadline nears, the take-up rate to date is likely because the industry had underestimated the scale of the change. “To most organisations, ISO is seen as a tax right now, because it's very expensive to implement and takes resources from other exciting projects and programs. But as an industry, we need to move past this thinking so that we’re all in a position to reap the benefits that ISO will bring to the payments world.”
As a market leader in adopting ISO 20022, Byrne says J.P. Morgan Payments chose to go “native ISO” when switching on with CBPR+ (cross-border payments and reporting) in March 2023.
“We made the bold decision to send all of our payments, regardless of how it was instructed, as ISO messages,” he explains, a move he recommends to other financial institutions.
The organisation has implemented the standard in more than a dozen market infrastructures around the world and, as it prepares for the remaining markets as they go live – including the Federal Reserve Banks’ Fedwire Funds Service in March 2025 – it’s also stepping up advocacy for the transition across the industry. “We've learnt a lot through this process and want to share these insights to help drive the industry to succeed,” says Byrne. “The quicker we get to a stage where we're all starting to adopt the benefits, the better.”
The opportunities ahead
Carl Slabicki, the executive platform owner of treasury services at BNY, says the industry has “barely scratched the surface” on what ISO 20022 can potentially solve. “Even where ISO is being used, it's not fully adopted up and downstream in most cases,” says Slabicki, who notes BNY first integrated ISO 20022 as a core payment message in 2017 when real-time payments went live in the US. “You need all players to raise the bar to get that network effect for it to be really powerful.”
CommBank’s general manager for high-value and international payments, Susan Yang, says a growing number of CommBank’s corporate clients are using ISO 20022 formats end-to-end for cross border payments, as the bank rolls out its multi-year migration with ambitious objectives to pass through the benefits to customers as quickly as possible.
“We're not only aiming to comply with the requirements of the migration; we're also thinking about the future and how we can use the change to modernise our technology stack so it’s adaptable for future needs and products,” she says.
“We want to deliver new payments offerings quickly to our customers as they become available. While each bank will have their own strategy around how they’re approaching ISO, we’re focused on delivering benefits to our customers as early as possible and to do so we need to bring everyone on the journey, including our customers.”
