16th Aug 2021

What is ISO 20022?

When people communicate, it’s easy to get confused. Meanings can be misconstrued or simply get lost in translation.

Take football for example; watching a game of football in the U.S is a very different experience to football in the UK. And even though Americans and Brits share a common, near-identical language, they will never agree on the rules of football.

It’s no different in the world of finance and business, except the stakes are much higher if organisations have trouble communicating with each other. This is where ISO 20022 comes in.


What is it?

ISO 20022 (pronounced ‘ISO twenty-oh-twenty-two’) is a global standard for exchanging electronic messages between financial institutions.

It was first introduced by the International Organization for Standardization in 2004 to give the financial industry a standard platform for developing messages in one eXtensible Markup Language (xml) rule.

Why is it important?

Just like languages around the world, there are different messaging standards and formats within the current financial landscape; each specific to their own geographies or business areas. Put simply, there are a million different ways to say the same thing.

As fintechs and challenger banks innovate to introduce new ways to pay in an increasingly globalised world, it’s now more essential than ever to make use of a common standard.

To synchronise the language used between new systems and traditional infrastructure to help realise end-to-end processing across domains and geographies.

So, ISO 20022 sets out to answer how implementing a global standard of financial messaging will:

a) Improve communication
b) Make sense of different meanings
c) Get everyone on the same page

In order to accomplish each of these goals, ISO 20022 overcomes two barriers:

  • Syntax – the structure and form – or the language – of a message.
  • Semantics – the meaning of those messages

How does it work?

SWIFT likens ISO 20022 to a recipe that comes with all the ingredients you need to put it together. The result being a standardised way of communicating across borders and industries.

This recipe is based on three separate layers:

1. Business processes and concepts – A key characteristic of the ISO 20022 methodology is the distinct separation between the business and the way it is represented in a message (the syntax).

So, the ISO 20022 methodology starts with defining the activity or business process, the roles and actors involved, as well as the information needed for the activity to take place. This data is then organised in to components containing business elements

2. Logical messages independent of syntax –A key feature of ISO20022 is the ability to reuse components across all messages – no matter if it’s a credit transfer, credit card payment or FX transaction.

So, the logical message is a description of the information that is needed to perform a specific business activity, independent of syntax and made up of message components organised in a hierarchical structure.

3. The syntax – This relates to the physical representation of the logical message. XML is specified as the primary syntax, but other common types can be used – i.e. SWIFT proprietary or FIX syntax.

This is all stored in a common repository, which also comprises an ISO 20022 dictionary. Just like the Oxford English Dictionary, it lists components, their structure, definition and context around how they should be used or interpreted.

And because ISO 20022 is a free and open standard, anyone, anywhere can add their 2 cents to the dictionary to help write and build solid business standards across the globe.


ISO 20022 as an international standard

ISO 20022 messages are designed to break down cross-border barriers and support global business needs for the foreseeable future.

By 2022, it’s estimated that over 80% of high value transactions will be done using ISO 20022. So, SWIFT’s involvement is crucial to its global adoption and standardisation.

SWIFT and ISO 20022:

  • Drafted the original ISO 20022 specification as part of the ISO working group that developed the standard in 2000
  • Appointed Registration Authority (RA) for the standard in 2004
  • Continue to send delegates to the Registration Management Group (RMG) – the body responsible for the overall management of the standard

It’s common knowledge that SWIFT have their own MT messaging standard, which they update yearly. The two messaging standards currently coexist via a shared mapping service provided by SWIFT. Though not all MT messages can be converted to ISO 20022, which is why the MT messaging standard will exist long in to the future.

In September 2018, the SWIFT board agreed to facilitate a migration to ISO 20022 for cross-border payments and cash. This will include all users of payments and cash management messages (MT categories 1, 2, and 9). The migration start date is aligned with the adoption plans of High Value Payments Systems in the Eurozone, currently scheduled for November 2021.

Most countries are still working towards introducing a payments architecture that’s ISO 20022 ready, despite the impact of Covid-19 on the finance sector and business payment trends. The UK and the US are predicted to adopt the standard in 2022 and 2023 respectively.

But some countries are ahead of the curve, with many seeing Australia’s New Payments Platform (NPP) as the shape of things to come – including the UK.

ISO 20022 and the UK payments landscape

In June 2018; the Bank of England, Pay.UK and the Payment Systems Regulator issued a statement which accompanied proposals for introducing ISO 20022 compliant messaging to payments in the UK:

“By working together as an industry, we can safely deliver a complex but critically important and highly beneficial change, which will help create the conditions for the next generation of innovation in UK payments.” – Bank of England

On 8th November 2018, the Bank and Pay.UK announced the creation of the Standards Advisory Panel, a senior group providing strategic advice on the adoption of new payments standards in the UK, with an immediate focus on ISO 20022.

This goes hand-in-hand with the introduction of a common credit message (CCM) across CHAPS, Faster Payments and Bacs, made possible by plans for the introduction of a renewed Real Time Gross Settlement (RTGS) for CHAPS and the NPA for Bacs and Faster Payments.

To summarise…


Standardising financial messaging through ISO 20022 not only offers a common, global language for corporates and financial institutions, but also brings about 3 main advantages:

  • Linking messages to business processes means they’re easily and universally recognisable
  • Reusing components means that institutions only need to map them to internal data structures once
  • The use of xml syntax as an international open standard helps interoperability, enabling automated transfers and straight through processing across entire processing chains

Eventually, standardisation will lead to enriched data carried in payments messages to enhance analytics, improve compatibility across technology platforms, improve fraud prevention measures and create opportunities for collaboration.