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The US Federal Reserve has postponed the date of adoption of the ISO 20022 message format on Fedwire to help banks prepare for the launch of its new FedNow instant payment service.
Last week, the Fed announced that it will migrate to ISO 20022 in March 2025, after input from banks showed that financial institutions are struggling to prepare for both the migration and the upcoming FedNow instant payment service.
The Fed originally planned to implement the standard on Fedwire, its real-time gross settlement (RTGS) system, in November 2023 to align with domestic and international efforts.
Migration plans are now in place for the world's largest payment systems.
SWIFT will begin the migration this November and will fully switch by November 2025, while the UK will start the migration of its high-value payments system CHAPS in April 2023. The Clearing House (TCH) will adopt the standard on a single day in November 2023 for CHIPS, the privately run counterpart to Fedwire, just like originally planned by the Fed.
However, feedback on the plans from industry participants show that many institutions are struggling with resource constraints, as they needed to prepare simultaneously for the launch of the FedNow instant payments system, as well as the ISO 20022 migration for Fedwire, both originally planned to take place next year.
One of the commenters noted that the potential concurrent implementation of FedNow and the ISO 20022 migration “would strain the resources of community banks, particularly their information technology departments and vendors”.
The Fed said it is “cognisant” of the fact that institutions may have limited financial and human capital resources and shifting the implementation date for the ISO 20022 migration to 2025 “should mitigate commenters’ concerns regarding resource constraints in light of the launch of the FedNow Service”.
The migration is now planned to take place on a single day on March 10, 2025.
A TCH spokesperson confirmed to VIXIO that TCH and its banks will stick with the conversion date of November 2023, as planned.
Approximately 95 percent of CHIPS payments have a cross-border leg, according to TCH, and the November migration will enable CHIPS messages to use the same ISO 20022 format as other global large high-value payment systems.
This will “substantially enhanc[e] the efficiency and information content of cross-border payments”, TCH said.
