ISO 20022: What Is It and How Does It Impact Your Business?

Getting paid and making payments in the most timely, efficient and secure way possible is at the heart of success for every business. And as electronic payments become the norm for most businesses, it's important to stay aware of underlying changes in the systems that enable them.

In 2025, we're witnessing a significant change in the US—a move to a globally accepted message format for domestic wires and standard for international SWIFT wire payments.

What's ISO 20022?

ISO 20022 is a new global standard for better, safer payments. It's an international requirement applied to electronic data interchange between financial institutions. In essence, it's how the payment instructions that businesses make to their banks are captured as data and processed from end to end.

"In modern financial markets, success is built on accurate, real-time data," according to SWIFT, the official registration authority for ISO 20022. "Being able to efficiently exchange data is key to providing cheaper, better services today, and building bigger, more profitable businesses in the future. That's where ISO 20022 can help."

In technical terms, ISO 20022 adopts a common language for development of messages using standardized Extensible Markup Language, or XML, a modern and robust technology widely used to store, transmit and reconstruct data that can be read by humans and machines.

This development is designed to overcome the complexity and limitations of the proprietary FedWire and MT, or SWIFT Message Type, format—the current approach to structuring financial messages between banks and financial institutions.

In practical terms, it makes it possible for a higher—and more consistent—standard of data to be carried in payments messages. Inconsistent data requirements hurt all stakeholders involved in the payment, whether it's the sender, receiver or bank facilitating the payment.

Does ISO 20022 matter outside of the IT department?

The most important advantages of moving to ISO 20022 include increased security, frictionless payments processes and reduced human intervention.

In other words, ISO 20022-enabled payments increase protection against error and fraud, increase reliability and cut down on the amount of time the finance function in a business spends on reconciling or researching a client payment. The benefits of ISO 20022 expand far beyond the IT department.

Why is the industry moving to ISO 20022 now?

This is not change for change's sake. The world is getting more complex and more connected every day. But, at the day-to-day operational level, the data fields available for making electronic payments haven't kept pace with the demands of modern business. This includes the increased obligation to comply with regulations.

Here are some specific examples.

Data restrictions

Many of the available MT message data fields are either size-restricted or optional—with uncertainty around whether the options should be applied. This can result in entry of necessary data being limited or left out completely. It may even be that there are no relevant fields for required information.

"Standardization is crucial for financial institutions because it facilitates better data quality, enhances the efficiency of payment processing and improves compliance with regulatory requirements," according to SWIFT.

Payments friction

Different users have tried to overcome these limitations in different ways. Available fields have been stretched to try to include required information.

But these attempts have driven up complexity, with users taking separate approaches and applying standards differently. As a result, there are more rejected messages, more manual investigations and more expenses. It also causes frustration through payments delays.

Regulatory compliance

Regulators are demanding greater visibility into each payment. Increasingly, they want to know all the parties involved. They want to know why the payment is being made.

The existing MT format makes it difficult—if not impossible—to consistently provide the specific information required. The result is workarounds, ambiguity and possible payment rejection. These issues occur daily.

The ISO gives this example of ambiguity: Inserting "CA" in the party field could mean either California or the country code for Canada. There lies immediate potential for friction and delay.

How will ISO 20022 make a positive difference?

More than 6,000 banks and financial institutions in the US are rolling out ISO 20022 to modernize the US and international wire payments systems.

Payments and reporting message data will be more structured and contain more granular detail—meaning an end to the workarounds and ambiguities. The new format is designed to accommodate more remittance information in more transparent ways, leading to reductions in failed and queried payments.

Take postal addresses as a specific and practical example. These are vital for accurately identifying the parties in a financial transaction. The ISO 20022 Postal Address element provides a standardized format for address information, ensuring full consistency and accuracy across different systems and countries.

Better quality data also drives improved data analytics. ISO 20022 platform users can look forward to more built-in resilience and fraud prevention, alongside new business services.

"ISO 20022 helps to reduce payment friction, streamline reconciliation by using structured remittance information, increase the accuracy of cash flow forecasting, and improve working capital through richer and structured data that allows forecasting future inbound and outbound payment flows," according to SWIFT.

What is the ISO 20022 rollout timetable?

We're currently in a transition period for international wires that began in 2023, when ISO 20022 was first deployed. During the transition, both MT, the old SWIFT format, and MX, the new ISO 20022-promoted format, have been supported.

The Federal Reserve will move to full ISO adoption in March 2025 for all banks in the US. After November 2025, the only acceptable standard for international wires will be ISO 20022.

What changes will I see with my business payments?

The detailed answers will depend on the specific payments needs of your business. You'll likely see new data requirements concerning payment recipient information for payments you send by wire and will receive more robust information. With improvements in message standards, you'll also see fewer delays of payments held up for false-positive hits, ensuring certainty and speed of payments.

What are the business benefits I can expect from ISO 20022?

The enriched data ISO 20022 enables will provide the basis of clearer remittance information. This means less need for you to call your vendors to find out which invoice they're paying. Your bank statements and information reporting will become more informative.

The bottom line

ISO 20022 provides streamlined payment processing through the requirement of more detailed information within payment messages, improved fraud detection, speedier reconciliation—and a better service. It's a major improvement to the payment process and a positive step toward better, safer payments worldwide.