Swift’s launch of ISO 20022 for cross-border payments and reporting (CBPR+) has opened up "new possibilities" for financial institutions (FIs), but are different implementations of the standard holding back interoperability?
In March, Swift announced that migration to ISO 20022 for CBPR+ has officially begun, marking the beginning of a two-year coexistence phase with MT, an older messaging standard.
Both standards will be supported by Swift until November 2025, after which FIs must be able to receive multiformat (MX) payment messages in ISO 20022 to continue using CBPR+.
So far, much of the early adoption of ISO 20022 has been among payments market infrastructures, with two of Europe’s large-value payment systems, EURO1 and T2, going live on ISO 20022 on the same day as Swift.
When it announced the start of the migration phase, Swift said the richer, structured data enabled by ISO 20022 will be an “essential element” of the next generation of payments.
“ISO 20022 is the foundation for FIs to work smarter and faster, leading to greater operational efficiency, improved data analytics and compliance, new opportunities for innovation and enhanced customer experiences,” said Swift.
But according to one firm that handles large payment transaction datasets, there are blind spots in Swift’s rollout of ISO 20022 that undermine its efforts towards efficiency and interoperability.
A standard without standardisation
Belgium-based Intix is a specialist data management firm that provides transaction visibility and tracking platforms for major FIs.
In July, Intix launched a new partnership with FIS, which allows FIS clients to use Intix technology to search and report payment transaction data and investigate financial messaging data.
Antoine Cuypers, director of strategic alliances and key accounts at Intix, spoke to Vixio about the challenges of ISO 20022 migration and its progress so far.
Although ISO 20022 has been described by Swift and others as a “standardisation”, Cuypers said it would be more accurate to describe it as a “framework” with various usage styles.
“The reality is that ISO 20022 allows a lot of flexibility with a lot of optional fields, and all of the different implementations have started using these optional fields in their own manner,” he said.
“If you're communicating in ISO 20022 on Swift, you will be using CBPR+. But your CBPR+ messages will not work on the FedWire network in the US, for example, and they won’t work on SAMOS, South Africa’s RTGS.”
In other words, although the framework is the same, there are large differences in implementation from one network to the next.
For example, as can be seen in the chart below, much of the data sent using ISO 20022 on CBPR+ remains semi-structured or unstructured.
According to Cuypers, this situation has been further complicated by Swift’s launch of MyStandards, a platform that allows FIs to create their own specifications and usage guidelines for ISO 20022.
“So if you're bank A and I'm bank B, I can make agreements with you on how we will send ISO 20022 messages between ourselves,” he said.
“These are not interoperable. They are going to be unique to us and they will have their own mapping scheme and declaration scheme.”
With these complexities, it could be argued that Swift has provided FIs with the tools to take the industry further away from one of the main goals of the ISO 20022: interoperability.
“From my personal perspective, I think that Swift has mishandled the opportunity of ISO 20022,” said Cuypers.
“Yes, it’s great to have a common framework and for everyone to buy into it, but if we all start using it with our own peculiarities, then we return to the problem of simplifying complexity.”
Transaction visibility on any network
Given that visualising transactions and payment messaging data is Intix’s “bread and butter”, Cuypers said he is not complaining about the discrepancies in the implementation of ISO 20022.
For Intix and other similar firms, these discrepancies are a good problem to have.
“With all these different flavours of ISO 20022, we take away that complexity and give clients a uniform view,” he said.
“We don't ‘translate’ or ‘transform’, per se, as we always keep the raw data intact. And that's important from a data integrity perspective — for audit, compliance and regulatory requirements.”
However, not all of these “flavours” are expected to be a permanent feature of ISO 20022 for cross-border payments.
Consistency is key
This month, the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures (CPMI) published a new report on “harmonised” ISO 20022 data requirements for cross-border payments.
Developed in partnership with Swift’s Payments Market Practice Group (PMPG), the requirements aim to establish a consistent minimum set of messaging data for more efficient cross-border payments.
As a key element of the G20 cross-border payments programme, the BIS has encouraged FIs to begin aligning themselves with the requirements by the end of 2027.
Michele Bullock, former co-chair of the CPMI Messaging Workstream and governor of the Reserve Bank of Australia (RBA), said the benefits of adopting the requirements will increase as uptake widens.
“Implementation of these data requirements will require coordinated effort across the global payments community,” she said, “but the entire community stands to benefit in the long run from a convergence on these shared data practices.”