While the industry’s eyes are on agentic (is that even a word?) commerce, fraud and a range of other “hot topics”, something happened this week that will revolutionise cross-border payments by 2029 – but it got little attention.
That “something” is the first deadline for compliance with the new global standard for bank data messaging – or ISO 20022. For decades, cross-border transactions – especially those between “exotic” (i.e. rare) currency pairs – have been slow, fraught with risk and expensive.
There are lots of reasons for this, but a major problem in this environment has been incompatibility between the data formats used by banks in different jurisdictions. This left huge gaps in the fence for fraudsters, and necessitated extensive manual processes, especially when screening for sanctions, KYC and AML.
Since 2023, ISO has been working to introduce its new messaging standard, which essentially acts as universal language for financial messages like payments. ISO 20022 will replaceold formats like SWIFT MT – and is, in essence, the difference between a text message in 2005 and today’s texts that use emojis, attachments, and metadata.
ISO 20022 employs an XML-based structure which enables far more information (payer and payee names and addresses, references, invoice numbers and more) to travel with the payment. Banks with upgraded systems can automatically process payments using this standard, dramatically cutting the time and cost taken to process – and making AML and KYC compliance way easier, not to mention transaction tracking.
A whole new world?
With the arrival of ISO 20022 messaging, fintechs, banks and corporates can connect across borders more rapidly, at lower cost and with fewer errors, 24/7/365. As of this week, SWIFT has turned off support for payment instruction messages that do not comply with the ISO 20022 standard, representing the beginning of the end for the old way of doing things. By 2028, banks are expected to be fully compliant with ISO 20022 messaging, with old standards such as SWIFT MT being phased out entirely.
ERIS SAYS: ISO 20022 messaging will save banks and their customers enormous amounts of time and money in just three short years. It’s astonishing that this has received such scant attention from the media – especially since cross-border payments are growing three times faster than domestic. With confirmation that ISO 20022 can also be adapted for crypto, one wonders how much we need new technologies that promise “there in seconds” delivery times, when ISO 20022 is understood, accepted and embraced by regulators. Firms promising blockchain-based international transactions delivered anywhere in milliseconds should pay close attention …
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