Wespay’s Instant Payments Brief is a series of short articles designed to help members understand the key concepts of the next generation of payment services.
ISO, the International Organization for Standardization, is a global organization that maintains standards for many industries. For example, you might pass a factory where a company has advertised its achievement of reaching an ISO 45001 certification for safety standards. In the financial payments industry, ISO 20022 provides financial global message format standards constructed using XML (eXtensible Markup Language), a language used to store and transport data. The ISO 20022 message types include payment instructions and reporting of financial institution account balance and transaction details and are maintained by standards committees. www.iso.org
Domestically, ISO 20022 is utilized by The Clearinghouse (TCH) CHIPS funds transfer system and will be implemented by the Federal Reserve’s Fedwire Funds Service in March 2025. Used by both domestic instant payment networks operated by TCH (Real- Time Payments) and the FRB (FedNow), there are a few ISO 20022 differences and nuances between the two networks.
Internationally, many countries adopting real-time payments use the ISO 20022 as the network format. Also, RTGS (Real Time Gross Settlement) networks like Swift (Society for Worldwide Interbank Funds Telecommunications) are moving toward adoption.
ISO 20022 can accommodate large amounts of data. ISO messages have been referenced as a more modern format standard superseding financial EDI. Like EDI, there are ‘versions’ of ISO messages, and baseline detail components must be adhered to for the message to be readable.
As the payment networks progress toward ISO 20022 adoption, using a common payment formatting language will increase interoperability between networks and decrease the complexity of cross-border payments as a by-product.
As financial institutions, payment processors, and businesses consider their strategy for Instant Payments, the use of the ISO 20022 standard and how it can modernize legacy payment processing should be understood.