ISO20022 – Modernization To Traditional Payment Method

ISO20022 payment method designed to overcome the current SWIFT procedure problems. The business has become more competitive and economies are linked like never before. This globalization increased the global average payment volumes and highlighted the limitations, risks, and free method style. To overcome these issues and standardize the whole payments world ISO20022 is designed. This covers transfers, payment transactions, securities transactions, and information between financial institutions. Other payment methods like RTGS and CHAPS have upgraded the payment industry in recent years. This migration of SWIFT MT messages to new version MX messages ISO20022 will have a 360-degree impact on corporate, banks, and payment systems to make them more efficient, reliable, and systematic to changing patterns in the industry. It is built on strict business models and a review process. 

Unique Features of ISO20022 Payment Method

  • Major upgrades in ISO20022 will be traceable payment at any stage. This will be done by generating a unique UETR ref at an initial stage of payment which will not be changed during its course to the different financial institutions. 
  • Other major fixes will include clear information on charges levied by different institutions 
  • Recall funds at any point in time. It is estimated that by 2025, 75% of large transactions will be done using ISO20022. 
  • Another unique format is its design on how to convey a message. In the new system, every character should align with the format. Failure to do so can result in cancellation/delay of payment. This will involve a standard XML format with defined rows. 
  • The migration presents challenges to the current financial institution. They might need to invest in tools/training to upgrade their resources/ systems to a new version. Institutions need to make sure that their employees understand the subject well. 
  • With ISO20022 payment method, there are more chances of automation, easy to interpret, supports local languages, easily maintained system. 

TYPES of ISO20022

ISO20022 includes around 800 types covering securities, funds, payments and cards. All are given four digit unique character code called Business Area Code. 

Significant types of ISO20022 are:

SESE- Securities SettlementsPAIN- Payment Initiation
SEMT- Securities ManagementPACS- Payment Clearing and Settlement
SEEV- Securities EventsCAMS- Cash Management

These message types include PACS.008, PACS.009, PACS.004, PACS.002 and a few other types.

MT103 will be equal to PACS.008 

MT202 will be equal to PACS.009 

M202 Return will be equal to PACS.004 


Globally, approval to migrate to ISO20022 was obtained in 2018. This will be adapted from Aug 2022 on an opting basis and is available for complete conversion in 2025, providing three years of coexistence of MX and MT messages for financial institutions to adapt and understand the new environment. ISO20022 payment method is already in full swing as India, Japan and China have already adopted it and will soon be joined by the European Central bank. Adoption at large scales will open doors for more innovation and improvement with the whole payments world speaking the language of the same payment. 

It usually takes about a year for any institution to migrate to ISO20022.

Jaspreet Kaur

More than four years of significant contribution across the Investment Banking domain and in-depth knowledge in the Securities Market, Swift messaging and AML. Have a good understanding of fixed income, derivatives and payment tools across countries.