Migrating to ISO 20022: Key learnings and considerations for financial institutions

Adopting ISO 20022 presents an opportunity to unify various established Swift and related market infrastructures. The objective is to streamline communication and foster interoperability, enabling comprehensive data exchange among all participants. However, financial institutions persisting with outdated payment systems may find themselves ill-equipped for this transition. Furthermore, the absence of requisite expertise and governance needed for a transformation of this magnitude introduces additional challenges to a successful transition to ISO 20022.

Every financial institution worldwide is on its unique journey towards adopting ISO 20022. While the business benefits of the migration are evident, the implementation process has posed unique complexities. As banks prepare for the final countdown to ISO 20022, they face intricate and time-consuming technological upgrades, risks of data truncation, the need for effective management of inward and outward mapping of payment messages and missed opportunities for innovation and collaboration. A Swift update for June 2025 highlights that 44.6% of payment instructions traffic has shifted from FIN to ISO 20022 messages. The data from Swift paints an interesting picture. Many banks continue to use converters around their payment engines to achieve MT to MX translation, which will inevitably lead to missed customer insights. Forward-looking institutions will adopt ISO native solutions beyond compliance as the benefits of richer data, better analytics, and improved messaging become more evident in the payments business, thereby further increasing the current percentage of ISO adoption. 

Identifying the right technology partner

The future of payments is not a fixed destination, but a constantly evolving journey. A new report by Accenture, states that 59% of banks face challenges with legacy payments systems and infrastructure, hindering their ability to deliver next-generation solutions.

As such, it becomes increasingly crucial for banks and financial institutions to collaborate with a trusted technology partner. This approach offers two significant advantages. First, it allows banks to continue focusing on growing their business i.e., meeting evolving customer needs, without having to worry about the potential issues arising from a large-scale transformation of this nature. Second, a reliable, battle-hardened technology partner, having demonstrated success in a competitive environment, not only ensures a smooth transition during migration but is also capable of anticipating and addressing future issues that could otherwise delay the return on investment. For example, having a data model that is adaptable to the unique national or regional nuances in the application of the ISO 20022 standard. Such a partner can share best practices, apply domain expertise, and harness modern payments technology that ensures successful payment operations in the new ISO 20022 environment.

Supporting incremental migration of channels from MT to MX

While banks may understandably aspire to lead the ISO 20022 adoption journey, it’s important to recognize that not all channels, product processors (internal systems like cash management used for sending payment instructions to payment engine for clearing side processing), and customers may be prepared to align with the industry timelines. With Finastra Global PAYplus, banks can prioritize the incremental migration of source channels. This means that some source systems can continue sending MT message types in accordance with the existing processing, while others can start sending MX message types based on their business readiness and urgency. Gradually, banks can transition the remaining source systems to the MX environment, thereby enabling them to process payment messages within a comprehensive ISO messaging framework.

Achieving interoperability across schemes

Several RTGS schemes have adopted a like-for-like migration approach, which has added complexity to the implementation of a standardized ISO business model. For example, some clearings have chosen to use Pacs008 and Pacs009 messages with RETN (Return) code words, rather than adopting Pacs004 for return messages. The prevailing method employed by these clearings for managing settlement confirmations/cover messages is based on MT processing, which impacts the straight-through-processing (STP) of these messages.

Likewise, schemes currently operating on an MX version lower than CBPR+ necessitate the use of interim mapping rules. These rules can facilitate the mapping of additional CBPR+ data fields to pre-existing ones, thereby circumventing the risk of data truncation.

Global PAYplus’s canonical transformation facilitates the conversion of various message types into standard ISO message type. These can subsequently be transformed into either ISO standard or non-standard formats specific to the destination scheme using the interim mapping rules. This capability empowers banks to tackle the inconsistencies encountered in translating different message types.

Interoperability between MX-MX, MT-MX, and MX-MT schemes has emerged as an area where regulatory guidance has progressively matured. During implementation, banks often encounter numerous issues. For example, the processing of original payments may take place in the MX format, while exceptions, such as returns and cancelations, are handled on the MT format, or vice versa. Global PAYplus can accommodate these exceptional scenarios by utilizing its ISO-based payment data object implementation of legacy MT messages. This approach ensures a high degree of interoperability, providing banks with much-needed flexibility for MT and MX support during coexistence period and after it, while some MT messages can still be used.

Supporting hybrid address format

To ease the pain of migration and ensure financial institutions can adjust with the change, Swift will introduce a new hybrid address format as of November 2025 that will allow usage of both structured and unstructured elements with a mandatory inclusion of Town Name and Country.

Below table highlights the differences between Unstructured, Hybrid, and Structured address formats:

The hybrid address format limits the effort for implementation while ensuring the original goal of increased data quality in the more structured and data-rich ISO 20022 payment standard. It will also help to:

• Increase efficiency, reduce costs, and improve straight-through processing (STP) rates
• Enhance the representation of parties involved in transactions
• Provide a consolidated cross-service between payment systems
• Leverage rich data to prevent false AML alerts and aid in the sanctions check process

However, not all ISO schemes allow or formally enforce the usage of the hybrid address format, presenting a unique challenge for financial institutions. As a result, a modern, ISO 20022 native solution like Global PAYplus, which supports structured, hybrid, and unstructured formats, is ideal. Global PAYplus ensures comprehensive support for all three address formats, making it a reliable and future-proof choice for financial institutions navigating the complexities of modern payment systems.

Using the Swift/Clearing messages to enhance payments processing

Banks can extend their correspondent services by adopting the out-of-the-box CBPR+ message types and their new attributes such as the longer correspondents chain support within the message. Also, some of the message types were not previously employed due to the rarity of corresponding business cases, such as the Pain.001 relay from Swift and the processing of Pacs.009 advice messages. Financial institutions can use these messages to ensure better liquidity management and provide additional services to their corporate customers.

Why Finastra

For over 30 years, we have delivered complex, mission-critical solutions to financial institutions of all sizes, including providing ISO-based clearings in the US such as FedNow and The Clearing House Real Time Payments, for instant payments. We’ve enabled multiple Global PAYplus customers across Europe, the Americas, Asia Pacific, and South Africa to successfully transition from proprietary high-value payment formats to ISO 20022 standards—driving modernization, compliance, and operational excellence across global markets. In Payments, we serve 75% of world’s top 20 banks, $7 Tn in value processed per day globally, and delivered over 750 Go Lives including scheme updates last year across 60+ countries.

• Check out the press release to learn how financial institutions are empowering their payments journey with Finastra’s 100% ISO 20022 migration—future-ready, secure, and seamless
• Watch this video to learn how Lloyds Bank harness the power of ISO 20022 with Finastra Global PAYplus
• Download Global PAYplus solution brochure to learn how we’re enabling leading FIs and banks to modernize their payments infrastructure with peace of mind