Seizing the Opportunity: Leveraging ISO 20022 for Growth

By Nadish Lad, Global Head of Product and Strategic Business, Volante Technologies

As the 2025 ISO 20022 compliance deadline looms, financial institutions (FIs) using the Fedwire Funds Service are gearing up to meet regulatory requirements. While some FIs may not feel ready to maximize the new messaging standard’s benefits, come March 10, 2025, they will have no choice but to move forward if they wish to continue using Fedwire.

Thankfully, systems and solutions are in place to help them make the required transition. While compliance is undoubtedly crucial, it's essential to recognize that ISO 20022 is more than just a regulatory mandate. It's a powerful tool that can revolutionize operations, drive innovation, and unlock new growth opportunities.

With the analyst firm Datos Insights reporting that 45% of mid-tier bank clients plan to utilize ISO messaging, FIs who embrace ISO 20022 messaging will modernize their payment systems, enhance data exchange, and deliver superior customer experiences. This strategic approach positions institutions to meet compliance obligations, facilitate digital transformation initiatives, and see their innovation efforts thrive in the digital age.

ISO 20022: Beyond ComplianceISO 20022 is a global messaging standard for electronic data interchange that enables standardized and interoperable financial communication across institutions. It replaces outdated messaging formats with a structured, data-rich framework for greater transparency, accuracy, and efficiency.

A 2024 Celent survey found that the available budget for innovation is on the decline, with a fall of 10% since 2022. Historically, ISO 20022 has been viewed through the lens of compliance. However, for forward-looking institutions, this represents an opportunity to modernize legacy systems and innovate services.

The standard facilitates operational efficiency and strategic growth by empowering financial businesses to use enriched transaction data for predictive analytics, customer insights, and streamlined operations. As FIs look to ISO 20022 as a steppingstone rather than a hindrance to their business continuity, there are a few key benefits of ISO 20022 transformation, including:

1. Enhanced Operational EfficiencyISO 20022 introduces structured data formats that reduce manual intervention, streamline transaction processing and lower operational costs. Automation accelerates payment flows, ensuring faster, more reliable transactions. These efficiencies enable institutions to enhance customer satisfaction while driving down expenses. 
2. Improved Data Transparency and AnalyticsISO 20022's data-rich nature provides FIs with detailed, standardized information for every transaction. This allows businesses to derive actionable insights, enabling better decision-making and the creation of tailored, data-driven services that more effectively meet customer needs. 
3. Superior Risk ManagementWith ISO 20022, institutions gain real-time visibility into data for each individual transaction, significantly improving fraud detection and risk mitigation capabilities. This proactive approach to risk management ensures compliance with regulatory standards while protecting customer trust.
4. Industry-Wide InnovationBy enabling real-time payments and enriched remittance data, ISO 20022 fosters the development of new financial products and services. Secure, accurate, and transparent payment solutions can benefit a broad spectrum of industries, such as healthcare, logistics, and wealth management. Financial businesses that embrace these innovations are better positioned to differentiate themselves in competitive markets.

PaaS + ISO 20022: Technology's MomentIntegrating ISO 20022 with payments-as-a-service (PaaS) solutions offers an even greater advantage. Using low-code technology, PaaS quickly composes ISO 20022-based solutions to simplify complex transaction processing, reduce errors, and improve service quality across industries. These tools include pre-built message formats and transformation capabilities, ensuring accurate processing of ISO 20022 messages. Automated validation and enrichment processes enhance efficiency, enabling institutions to meet compliance requirements while maintaining operational reliability. 

It also provides the flexibility needed for global interoperability, enabling financial businesses to scale their operations without the burden of managing infrastructure. For example, using ISO 20022 with PaaS can enhance payment accuracy, speed, and transparency, offering businesses a seamless way to modernize their systems. This integration empowers institutions to focus on innovation and customer satisfaction rather than technological challenges.

Cloud-native architectures are critical in enabling FIs to scale their operations effectively. By offering flexibility and cost efficiency, cloud solutions ensure institutions can process increasing volumes of enriched data without significant infrastructure overhauls. The scalability these architectures provide also supports real-time processing, a key requirement of ISO 20022, and ensures seamless interoperability with global payment networks.

Integrating new data formats is one of the biggest challenges in adopting ISO 20022. Traditionally, this process required manual coding and configuration, which could be time-consuming and error-prone. However, AI and machine learning (ML) advancements are changing the game.

AI can automate the mapping and integration of ISO 20022 data, learning from incoming messages and predicting how fields should be mapped to payment elements. This reduces manual intervention, accelerates integration, and ensures compliance without compromising accuracy or efficiency.

By leveraging AI and ML, financial businesses can meet ISO 20022 deadlines while simultaneously unlocking the full potential of their data-rich messaging capabilities.

Real-Time Integration with Legacy Systems and Enhanced Data ManagementTransitioning to ISO 20022 often involves integrating new standards with existing legacy infrastructure. Many modern solutions act as intermediaries, bridging the gap between traditional systems and the new messaging framework. This ensures operational continuity by enabling FIs to process transactions in real time without interruptions or downtime during the migration phase.

ISO 20022 introduces a rich data format that unlocks new opportunities for analytics and reporting. Advanced solutions offer data transformation and enrichment capabilities, helping FIs handle the increased complexity of ISO 20022 messages. These capabilities allow institutions to extract meaningful insights from transaction data, improving decision-making, compliance reporting, and customer experience.

Aligning ISO 20022 with Strategic GrowthTo fully realize ISO 20022's potential, FIs should adopt a strategic approach that aligns with their long-term goals. By integrating ISO 20022 into their broader strategic plans, institutions can enhance customer experience, drive innovation, and improve operational efficiency.

Given the widespread impact of ISO 20022, effective communication and collaboration with all stakeholders are essential for a successful transition. This includes engaging with internal teams, external partners, and customers to ensure a smooth adoption process and maximize the benefits of the standard.

Compliance vs. ModernizationWhile compliance remains a priority, FIs that view ISO 20022 solely as a regulatory requirement risk falling behind more innovative competitors. By embracing ISO 20022’s power capabilities as a modernization opportunity, businesses can unlock new revenue streams, improve operational efficiency, and deliver superior customer experiences.

FIs that move beyond a short-term compliance mindset and recognize ISO 20022's transformative potential will be well-equipped to navigate the future of payments. They can transform operations, drive growth, and redefine their role in the global payments sphere.

About the Author

Nadish Lad heads up Volante’s Product Management organization, and he has over 20 years of design and advisory experience in Payments and related areas like Funds check, Liquidity, FATF, FX and Sanctions. Nadish started his career working on cheque Payments within the UK and has worked in leading organizations such as Jack Henry Associates, Citi London, and more recently in the Payments Advisory practice of EY, where he has implemented core products like payment hubs and corporate online channels. Nadish has extensive experience in retail and transaction banking products as well as experience developing branch and central clearings products from scratch and taking them to market. He has a 1st Class Honours degree in Electronics Engineering from Bombay University and an MBA from the Open University.