ISO 20022 messaging: FAQs answered by the ION Treasury experts
This article was updated on 31 October 2022.
This article was originally published on 19 August 2021.
The world is leaning towards a standardization of payments messaging. A lot of global initiatives have started to gather pace and the legacy messaging has stopped evolving. The rich data model of ISO 20022 messaging has addressed this issue and helps process payments reliably and fast. The ION Treasury experts have answered the most frequently asked questions from our 50,000+ community of users around the world. The answers provide viewers with a quick overview of the new standard messaging system.
How is ISO 20022 shaping the bank formats?
- In the last decade, ISO 20022 messages have replaced fixed-length local and MT formats and defined them as the new standard.
- Starting 20 March 2023, SWIFT will replace MTs in categories 1, 2, and 9 with ISO 20022 messages for banks and will retire them by 2025. The standard MT101 is not impacted.
- By switching to ISO 20022, you gain enriched, structured, and quality data, more harmonized market compliance, straight-through processing (STP), and a better customer experience at the end.
- Structured information will facilitate enhanced Anti-Money Laundering (AML) and sanctions screening.
- Additional information will facilitate automated remittance reconciliation.
What are the worldwide initiatives for adoption of ISO 20022 messaging?
- The European Central Bank announced the start (T2) on 20 March 2023.
- SWIFT CBPR+ is starting the co-existence start phase on 20 March 2023, as well.
- UK’s Bank of England (CHAPS) will migrate in April 2023.
- In Switzerland (SIC), China (CNAPS2/CIPS), and Japan (BOJ-NET/FXYCS), ISO 20022 is already live and adopted as analyzed by the Payment Market Practice Group (PMPG).
- The Reserve Bank of Australia (RBA) plans (RITS) to start the migration in November 2021, and to end the support for domestic MT formats by November 2024.
- In the US, the Federal Reserve (Fedwire) plans March 2025 for migration. And NACHA (ACH) is closely following and analyzing the global trend.
What does “SWIFT is retiring MT formats in 2025 with CBPR+” mean?
- On 20 March 2023, SWIFT will begin to replace the MT formats of category 1, 2, and 9. These formats are used for customer payments transfer, financial institution transfer, cash management status messages, and bank statements.
- CBPR+ (Cross-Border Payments and Reporting Plus) ISO 20022 messages will replace them and phase them out by November 2025. CBPR+ is interoperable with HVPS+ (High-Value Payments Plus), another standard used by banks, and incorporates SWIFT gpi (Global Payment Initiative) requirements for real-time tracking.
- This applies to bank communications via SWIFT, not to corporate-to-bank communications.
- To accommodate this, SWIFT is replacing FIN with FINplus (InterAct) and allowing 10–50 times the current maximum file size to be transferred.
- Here is a list of some of the equivalent messages published by CBPR+:
- Use case: Payment transfer between banks
- Existing FIN MTs: MT103
- ISO 20022 equivalent: pacs.008.001.0x
- Use case: Transfers between banks
- Existing FIN MTs: MT202/200
- ISO 20022 equivalent: pacs.009.001.08
- Use case: Notice to receive an incoming payment
- Existing FIN MTs: MT210
- ISO 20022 equivalent: camt.057.001.06
- Use case: Bank Statement, end-of-day (EOD)
- Existing FIN MTs: MT940/950
- ISO 20022 equivalent: camt.053.001.xx
- Use case: Bank Statement, Intra-day
- Existing FIN MTs: MT942
- ISO 20022 equivalent: camt.052.001.xx
- Use case: Payment transfer between banks
- Message translation products on the market will help briefly, but eventually, a more permanent solution will be required to become future-proof for long-term ISO 20022 support.
What’s the impact of CBPR+ on corporates?
SWIFT is not making it obligatory for corporates to migrate to ISO 20022 messages. There are exceptions made for corporate-to-bank message exchange in the SCORE service and for market infrastructures closed user groups for the foreseeable future.
Kerstin Schönwitz, Senior Product Manager ISO 20022 corporate-to-bank standardization at Deutsche Bank AG says:
“Deutsche Bank will be an early adopter of ISO 20022 in the interbank space in November 2022. The deployment of ISO 20022 for cross-border payments in correspondent banking and the high-value Market Infrastructures will finally enable frictionless interoperability between corporates and banks delivering rich and structured data end-to-end (e.g., structured remittance information). Deutsche Bank actively participates in industry groups like CGI-MP and CBPR+ to develop a truly global standard. “
What should my ISO 20022 transition project look like?
The ION Treasury experts recommend the following stages for your ISO 20022 transition project:
- Exploration: Identify your current bank formats for payments and bank statements transfer, and analyze all possible impacted areas. Review your bank connections and clarify with your banks the utilization of ISO 20022. It is important to obtain buy-in from senior stakeholders to support your ISO 20022 adaptation plan.
- Planning: Revise your strategy on used formats for payments and bank statement transfers. Design a migration plan by highlighting the impacted bank accounts and possible milestones. Include and inform all impacted participants in your transition plan.
- Execution: Renegotiate with your banks the use of ISO 20022 for your identified accounts. Enforce impacted participants with the upgrade of ISO 20022 within the defined timeline.
How can ION Treasury support you?
The ION Treasury team is working aggressively to support your ISO 20022 adoption plan through our portfolio of treasury management systems. We are active participants in the CGI-MP industry group to represent your interests.
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