For ISO 20022, the Time Is Now

As of March 10, 2025, ISO 20022 will become the messaging standard for financial services in the United States. Yet adoption continues to be slow among large and small banks, with only about a quarter of American banks already using the new protocol. As some have put it, it’s like waiting until the last minute to do your Christmas shopping.

Are financial institutions ready for this conversion? In a recent Payments Journal podcast, Laura Sullivan, Senior Product Manager at Form3, spoke with James Wester, Co-Head of Payments at Javelin Strategy & Research, about the challenges and benefits banks are facing. The upshot: It’s up to the banks to determine how they can best take advantage of the new protocol.

The anecdotal evidence is that many U.S. financial institutions are ready for ISO 20022. The roughly 7,000 banks that already use Fedwire should be prepared. CHIPS (Clearing House Interbank System) migrated to ISO 20022 in April 2023, so the 30 or so banks using that protocol should be ready, That still leaves a significant number of banks that have work to do.

The Missing Killer App

One thing that will move the process forward significantly is some sort of “killer app” that will significantly benefit customers while also making use of ISO 200022. “I was on a call today with some experts who were saying that customers need to drive banks to develop products for them, and I think that’s a tall order,” Sullivan said. ”Maybe the problem is payments aren’t sexy enough. Maybe the young people who are out creating killer apps don’t find payments interesting and don’t want to create these kinds of apps and delve into the minutiae of ISO 20022.”

Many industry people have been waiting for customers to indicate what kind of use cases would get them more excited about ISO 20022. But more realistically, it is incumbent on banks and fintechs to come up with these solutions.

There are two versions of successful integrations to ISO 20022. The first step is, can you continue to send and receive messages? Many of the organizations that can say yes to that may think they have completed adoption, but they may still be a long way from utilizing the format to its fullest capability.

Adopting the new standard can be the first step toward payment modernization. Many of the systems that support wire transfer today are fairly long in the tooth and not capable of running on the most modern platforms. Some organizations have done the minimum and patched their existing systems to make the ISO conversion. By building on that small step, they can devote more resources to modernizing and ultimately break down some of the silos that exist today in payment processing. 

For example, API options work for a wide variety of platforms. “Rather than having discrete operations areas, discrete exception handling, and discrete interfaces to all of your back-office systems, you can leverage a product like the API we offer at Form3 that will work for all of those platforms,” Sullivan said. “It’s agnostic to the particular platform. Then we can help you route the payment to a particular rail based on the characteristics.”

Organizations can further sharpen their efforts by asking if the bank is the receiving institution on FedNow or the RTP network. Then they can utilize more customer-focused metrics to better gauge how they want the payment to flow. 

One area where ISO 20022 can present immediate benefits is for customers receiving data from multiple banks. ISO standardizes that process so the institutions aren’t getting a different format for their data from every bank. They will receive and be able to understand the ISO format without having to develop specific code for it.

“Imagine the efficiency gains there,” Wester said.