
ISO 20022: Understanding the new language of payments
ISO 20022 is an international standard that is rapidly transforming the global financial communications landscape by establishing clear guidelines to facilitate data exchange between institutions. It has served as a foundational framework for the creation of well-known and consolidated instant payment systems, such as Brazil’s Pix.
Today, more than 70 countries are already using this standard, and it is expected that most platforms will adopt ISO 20022 by 2025, in compliance with the requirements set by their respective central banks and payment networks.
In this article, we will cover:
- What is ISO?
- What is ISO 20022 and how does it work in practice
- The main benefits of adopting the ISO 20022 standard
- How financial institutions and businesses should prepare
- Frequently Asked Questions (FAQs) about ISO 20022
What is ISO?
Before diving into the standard itself, it's important to understand what ISO actually is.
ISO (International Organization for Standardization) is a widely recognized global entity dedicated to developing international standards across various industries. Founded in 1947 and headquartered in Switzerland, ISO has operated ever since as a non-governmental organization that brings together representatives from standardization bodies in over 160 countries.
What is ISO 20022 and how does it work in practice?
Now that you have some institutional context on ISO, let’s explore the ISO 20022 standard.
ISO 20022 goes far beyond simple standardization. It’s a global messaging standard for the financial industry, functioning as a "universal language" for financial transactions.
This international standard is structured across five distinct business domains:
- Payments
- Securities
- Trade Services
- Cards
- Foreign Exchange
In practice, each domain contains different business areas, and each of them has specific sets of messages. For example, the Payments domain is composed of the following business areas: Account Management, Payment Initiation, Clearing and Settlement, Cash Management, and Reporting to Authorities.
A key feature of ISO 20022 is its three-layered architecture:
Business layer: defines core business concepts and processes.
Logical layer: provides abstract message models.
Syntax layer: defines the actual message format, typically in XML.
Other features of ISO 20022
Standardized communication between institutions
With the definition of a standardized XML-based syntax for communications, the exchange of information becomes more detailed and unambiguous, increasing both transparency and compliance.
Interoperable system
The system was designed for use across all areas of the financial sector, thereby facilitating integration between systems and institutions worldwide.
Adaptability
As new technologies emerge or regulatory changes arise, the standards established in ISO 20022 can adapt and evolve without the need for a complete overhaul.
Key benefits of adopting the ISO 20022 standard
The adoption of ISO 20022 brings several substantial benefits to the financial sector. According to SWIFT, this standard that is already in use in dozens of countries, is projected to support 80% of global payment volumes and 87% of the value of all global transactions in the coming years. The main benefits include:
Improved data management
One of the key advantages of the standard is data quality, which becomes more granular and traceable. ISO 20022 enables richer, better-structured, and more detailed payment message information, reducing delays or failures caused by inconsistent data.
More accurate and transparent payments
With more accurate and standardized data and information, payments become more efficient and agile, as networks are better connected, reducing friction during the processing stages.
Fraud mitigation
Structured data and more granular payments provide valuable information for the evolution of fraud detection systems, simplifying processes, accelerating anomaly identification, and reducing financial crime.
Regulatory alignment
It facilitates compliance with constantly evolving regulatory requirements through clear and standardized data, streamlining processes such as sanctions screening, AML (Anti-Money Laundering), KYC (Know Your Customer), among others.
More automated processes
Automation is another key benefit. This standardization allows financial institutions to automate processes, resulting in greater speed and less bureaucracy.
Global integration and fostering of innovation
With the increased agility and flexibility brought by the standard, a solid foundation is created for the development of innovative solutions and the global expansion of financial institutions.
How companies should prepare for the transition to ISO 20022
The migration process for implementing the ISO 20022 standard is not optional for companies in the financial sector and requires careful planning, as the standard is expected to take effect by the end of 2025.
First, financial institutions need to assess the impact of adopting ISO 20022 on their current systems and processes, taking into account their existing message formats and required adjustments.
After this evaluation, it is essential to develop a clear migration strategy. This should include a realistic timeline, definition of necessary resources, and the establishment of milestones with key deliverables. It is recommended to form multidisciplinary teams that include technical, business, and compliance specialists.
On the technology side, companies should review the compatibility of their existing systems and plan the necessary updates. It is also advisable to conduct extensive testing before the final implementation.
Lastly, establishing strategic partnerships with specialized providers can help ease the transition to the new standard by offering access to proven expertise and advanced ISO 20022-ready solutions.
Migrating to ISO 20022 is not just about regulatory compliance, it is also a strategic opportunity. Institutions that successfully adapt will be better positioned to offer innovative services, reduce operational costs, and meet growing customer expectations for smarter, more integrated financial experiences.
Get to know Conduit: Faster and more cost-effective cross-border payments
ISO 20022 represents a major evolution in financial transactions, making them faster, more transparent, and more secure. Conduit is actively engaged in the evolution of the financial ecosystem and in the market infrastructures that are transitioning to the ISO 20022 standard.
We remain committed to driving innovation in cross-border payments, promoting greater efficiency, speed, and cost reduction in financial transactions on a global scale.
Frequently Asked Questions (FAQs)
Q1. What is ISO 20022?
ISO 20022 is an international communication standard for the financial industry, acting as a “universal language” for transactions. It facilitates data exchange between financial institutions, improves information quality, reduces fraud, and enables greater process automation.
Q2. When will ISO 20022 be implemented?
The Payment Market Infrastructures (PMIs) of major currencies are currently in the process of adoption, with full implementation expected by the end of 2025.
Q3. What are the main benefits of adopting ISO 20022?
Key benefits include: improved data quality, more transparent payments, fraud reduction, greater automation, and easier integration between global financial systems.