How can corporates use the ISO project for effective treasury transformation?

This content was originally published by The Treasurer

Although ISO 20022 has been a pre-eminent theme for corporates and banks alike in 2024, the project’s initial steps began over a decade ago. The first seeds in the concept of adopting a global standardized messaging format were planted in about 2008. Over the years, this initiative has gradually gained momentum and urgency due to the growing need to harmonise the vast array of disparate payment systems across the world into a single messaging standard. Now, as we look to 2025 and a wave of ISO deadlines fast approaching, the pace of this transformation project has accelerated.

The deadlines for ISO 20022 adoption are varied across markets and stakeholders. While financial institutions have until November 2025 to migrate to the new messaging standard for interbank cross-border payments, corporates are not required to make the change. With both the US Federal Reserve and Swift planning their migrations in 2025, corporates and their payment flows will undoubtedly be affected and should take a proactive approach to ensure that their organisations are prepared for the transition.

Outside of payment and reporting flows, ISO 20022 also opens the door to treasury transformation, providing an enriched data foundation for enhanced real-time treasury and cash forecasting.

Forging the path

Corporates that have begun migrating to ISO 20022 payment structures are already reaping rewards. One key advantage for early adopters is that their new banking partners, which already use a common messaging structure, are easier to onboard, eliminating the need for corporates to learn new systems, such as moving from ACH to Swift.

However, overhauling digital infrastructure has proved daunting for corporate treasurers, given the competing standards and bank proprietary formats to be interpreted. The lack of a clear deadline by which to mandate a company-wide change is a compounding factor. Many corporates still use legacy formats which are not compatible with new messaging standards.

With the increased complexity of the data collected via the ISO messaging format, companies must be ready to support the additional data and structure, moving away from bespoke CSV-based formats, and ensuring end-to-end processing chain readiness.

Updating and replacing these formats is an important task for treasurers as they embark on their transition projects. It’s also a task that should be undertaken as soon as possible; those who are not trying to get ahead now may find it difficult to catch up later. Early adopters will be better positioned to undergo rigorous testing and mitigate the risk of disruptions and failed payments before their banks impose deadlines, especially where significant system or technological overhauls are required.

What steps should treasurers take to set up an ISO 20022 transition project?

Given the complexity of the ISO 20022, corporate treasurers are best positioned to lead the transformation project proactively, ensuring external alignment with banks, and advocating for system changes internally. It is vital to remember that banks are free to make changes ahead of the November 2025 deadline, and can decommission legacy Swift, CSV, and other messaging formats that they use to communicate for corporates.

As a result, the corporate treasury transformation stakeholder should be responsible for managing the flow of communications between banks, vendors, and internal teams. To ensure the project remains on track for corporates with less clearly defined timelines, it is useful to set an internal deadline, which allows for testing and adjustment ahead of bank-imposed schedules.

Here are the key steps the ISO 20022 stakeholder within corporates should follow when setting up their transition project:

1. Define payment types and affected systems
   Determine which payment types and systems the ISO 20022 migration will affect. Treasurers should assess which systems will require updates and prioritise these changes according to their migration roll-out schedules.
2. Engage with banks and vendors
   As payment types and systems migrate, treasurers should speak to their banks to understand the latter’s specific ISO 20022 migration plans. To avoid disruptions, treasurers must request clear timelines for when different payment types will require ISO 20022 data. Ensuring that vendors and banks are aligned on strategy is crucial, as this can prevent potential roadblocks.
3. Validate systems with technology partners
   Treasurers must engage with their technology partners to ensure the necessary updates and integrations are done in time to support the updated ISO messaging framework. To ensure compliance, this may include introducing purpose codes, including Legal Entity Identifiers (LEIs), and updating data systems to support enhanced remittance information, and detailed name and address information. These system changes, including database updates and user interface modifications, must be assessed early as the ISO 20022 stakeholder may need to make a business case to CFOs and wider teams for investing in an updated digital infrastructure.
4. Test and adjust by your own deadlines
   Once the necessary infrastructure changes are implemented, rigorous testing is required to ensure the smooth flow of payments. Training may be needed to ensure all relevant employees are confident with the new messaging ISO 20022 formats, and how best to collect, store and analyse the new, standardised data collected.

Treasury transformation

The ISO 20022 transition is not simply about adopting a new messaging standard; it represents a broader transformation of treasury operations. Beyond compliance, ISO 20022 ultimately offers multiple benefits that will assist with end-to-end processing and enable richer data via more detailed cash management statements and enhanced remittance information. This can be a powerful selling point when ISO stakeholders make the business case for a digital overhaul; the new data structure offers significant advantages for data analysis, real-time treasury management, sanctions screening, and improved compliance.

A primary advantage of ISO 20022 is the readability of its messages compared to the often-cryptic Swift messaging format. The new messaging format uses clearly defined fields with identifiable tags and values, such as name, settlement date, and account numbers, which are easier to interpret. For example, data previously captured as free-form text in SWIFT messages, such as name and address information, is now structured in designated fields, making it more usable for downstream applications, including compliance and AI systems.

The new format allows for more effective cash forecasting. With ISO 20022, treasurers can use the rich, granular data in payment messages to make better-informed projections of future cash flows. The data also enables real-time updates and generation of more accurate liquidity forecasts, helping companies manage their cash more efficiently.

Another significant benefit of ISO 20022 is its ability to streamline compliance and regulatory reporting. The new messaging format includes dedicated tags for regulatory reporting, such as LEIs, tax codes, and universal identifiers, which will help regulators track payments more effectively as they move across borders. Once the market fully adopts ISO 20022, enhanced regulatory oversight will become more feasible, ensuring that payments comply with increasingly stringent global regulations.

ISO 20022 can also improve sanctions screening by facilitating more accurate comparison of beneficiaries and parties in payment to government lists. The move away from approximate matches to exact data fields reduces the risk of false positives, improving the efficiency and accuracy of screening processes, and minimising time bottlenecks in cross-border payments.

Ultimately, the transition to ISO 20022 presents a significant opportunity for corporate treasurers to transform their treasury operations. Early adopters will be best placed to reap the advantages of enriched payment data. Given the complexity of the project – both in communicating and implementing updates internally, and coordinating competing deadlines with external stakeholders – treasurers must lead the charge by ensuring their organisations are fully prepared for the future of payments.