The period of coexistence between MT and ISO 20022 message standards ends this weekend, as the Society for World Interbank Financial Telecommunications (SWIFT) November 22 deadline approaches.
From Saturday, SWIFT will require all inter-financial institution payment instruction messages to be migrated exclusively to ISO 20022 format, ending a transition period that has been open since 2023.
ISO 20022 supports several payment and settlement processes, including cross-border wire transfers and securities transactions. It is also gaining traction within blockchain-based financial networks, which are looking to open the door to traditional institutions and international payment services.
Cryptocurrency, banking industry prepares for cutover
In an update informing institutions of X’s Saturday deadline, SWIFT posted that it advised FIN and FINplus users not to send messages between 15:00 GMT on Saturday and 05:00 GMT on Sunday.
“For more information, troubleshooting guides, and emergency response information, check out the Swift Knowledge Base,” the organization wrote.
As a cryptopolitan reported Two weeks ago, more than 70 countries, including Canada, Japan, and eurozone countries, were already processing payments using the new standard.
The United States, one of the last major countries to complete the transition, introduced ISO 20022 to its Fedwire Funds service on July 14th. Fedwire processes approximately $4.7 trillion in payments each day, and President Trump’s pro-crypto policies could result in the addition of ISO 20022-compliant coins to Fed-related transactions.
It is believed that there are currently 9 coins compliant Supports upcoming standards such as Ripple’s XRP, Stellar’s XLM, Hedera’s HBAR, IOTA, ALGO, QNT, and XDC. Their inclusion on the ISO 20022 compliant list could lead to their inclusion in banking and government payment systems.
Compliance will allow these assets to transmit structured data that is compatible with banking requirements, making them more likely to be considered in discussions of centralized payments frameworks and digital reserve currencies.
SWIFT is testing connecting the ISO 20022 framework to networks like Ripple, with Ripple being tested in interbank payments and central bank digital currency payments, and Stellar being tested in cross-border remittances and stablecoin transactions.
New standards to reduce payment failures and losses
SWIFT cites the main reason for the global shift as ISO 20022 has the potential to reduce payment failures, a problem seen in both banking services and crypto payments.
According to a recent report from Datos Insights, one-third of banks surveyed said that failures incur fees from partners on between 1% and 3% of domestic payments. A further 24% reported that 4% to 5% of domestic payments incur such fees, and 11% said payment failure rates amounted to 6% to 8%.
The survey also noted that 23% of banks said 12% to 15% of cross-border transactions incur fees related to payment defaults. Additionally, 18% reported 25% or more in outage-related charges due to missing data, mismatched formats, or incomplete compliance information.
Gareth Lodge, senior analyst at Celent, said ISO 20022 could go a long way in solving these financial issues for both industries.
“This standard improves data by making it clearer what data goes into which fields. It mandates address field functionality and greatly improves sanctions, AML and KYC scanning,” Lodge said. interview with an American banker.
Blockchain networks and banks remain behind schedule
The benefits of ISO 20022 have been recognized by financial institutions, but banks and cryptocurrency companies may be struggling to transition to the new standard as deadlines approach.
“There is a disconnect between what ISO 20022 requires and what some banking systems support,” Datos Insights advisor Robin LoGiudice said in a recent interview.
She explained that even though payment systems can store ISO 20022 data, other internal systems, such as customer reporting tools, must also be able to accept new information. Without these updates, straight-through processing rates may decline and financial institutions may be forced to manually process transactions that should be automated.
Grant Harper, managing director of financial services at ITRS, said in an email that replacing 10-year-old legacy infrastructure could have a negative impact on banks’ operations. “Every time you touch a core system, you increase the risk of disruption,” he mused.