In 2025, ISO 20022 messages will become a universal requirement for executing cross-border transactions, following this month’s trial deadline for enabling the new standard when transacting on the SWIFT network. However, a recent survey by financial technology research and advisory firm Celent reveals that only 63% of banks around the world will be prepared to make the transition.

Late last year, Volante sat down with Celent’s Senior Payments Analyst, Gareth Lodge, to discuss the current state of ISO adoption within the global financial industry, as well the challenges and benefits of migration. Here are some takeaways from the conversation.

ISO 20022: A New Foundation for Global Payments

The introduction of more data-centric processes and the ISO 20022 standard represents a once-in-a-generation evolution of the international payments landscape. But according to Gareth, when Celent asked banks around the world to identify the benefits of ISO adoption, quite a few said they saw no real reason to undergo the transition at all.

So why is the transition to ISO 20022 necessary? In Gareth’s view, there are at least three layers to understanding the industry’s need for collective ISO adoption.

First, there is the fact that the standards being used today in many payments systems were created almost 50 years ago, and therefore remain constrained by the limitations of outdated technology. Or, as Gareth stated, “we simply can’t keep going on the infrastructure we have today without doing something fundamental.”

Second, due to the increasing complexity associated with modern financial messaging, using a common foundation will be necessary to transacting efficiently, as well as managing the growing volume of transaction data.

Once a common foundation is established, banks can begin to realize the third layer of ISO 20022 benefits, which include: cleaner, more consistent and better structured data; enhanced automation and reconciliation capabilities; and an improved capacity to use data to drive new value for customers.

Gaining Collective Momentum

In addition to the individual challenges facing institutions around payments transformation, Gareth believes one of the biggest barriers to global ISO 20022 adoption is the lack of collective momentum across the industry.

“I think we’ve got to really focus on who is going to be ready,” he said. “And I think the banks need to be honest with themselves and honest with a central body about their level of risk, so we can get a real sense of where the industry is.”

Importantly, Gareth doesn’t see the need to place blame on banks that may be less prepared, but rather highlights the importance of getting everyone on the same page. More specifically, he points to the fact that additional work will be needed after the bare minimum in capabilities have been achieved, and that coordination will be necessary to leveraging new payments solutions in a way that creates truly novel value for institutions and their clients.

“We need to see this as a shared pain, but also as a shared gain,” says Gareth. “So let’s figure out how to get over that initial finish line, because the sooner we do, the sooner we can begin using [ISO 20022] to do other things.”

Want to learn more about the current state of ISO 20022 adoption, as well as what banks should be doing to accelerate their transformation and maximize the benefits of new payments solutions? Click here to access the full conversation.

To get a sense for how ready you are for ISO 20022 and receive a custom 10+ page report giving specific guidance on how you can get to the next level of readiness for ISO 20022 take Volante and KPMG’s ISO 20022 maturity assessment.