SWIFT community migration to ISO 20022 for payments traffic

In September 2018 following a consultation with the SWIFT community the SWIFT board approved the migration of cross-border payments traffic to the ISO 20022 standard. The migration is mandatory and will affect MT category 1, 2, and 9 messages sent over the SWIFT network. The timeframe for the migration runs from November 2021 until November 2025. During these four years the MT and ISO 20022 cross-border payment messages will coexist on the SWIFT network. From November 2025 onward all cross-border payment messages sent and received over the SWIFT network will be ISO 20022 messages.

The coexistence period affords members of the SWIFT community the time to implement the changes required to their own systems. MT messages will continue to be sent over the FIN service and ISO 20022 messages over the InterAct service during this period. SWIFT have also formed the Cross-Border Payments and Reporting Plus (CBPR+) group to create a market practice for usage of the ISO 20022 messages. The CBPR+ recently published the first market practice guides for a subset of ISO 20022 messages and will publish further guides for the remaining messages in the future.

During the coexistence period messages will be delivered in the form input by the sender. Message receivers will not necessarily know the form the sender intends to use and so must be ready to receive both from the SWIFT network. The receiver’s gateway will need to accept messages over both the FIN and InterAct services. SWIFT will offer two types of translation services to help ease the burden of supporting both message protocols during this period.

The first is aimed at more sophisticated users and provides a local or central API to translate in both directions between MT and ISO 20022. A user will be able to use this service to translate the received message, be that MT over FIN or ISO 20022 over InterAct, into the protocol which best suits the user at their current stage of migration. The flexibility of using an API for this translation will allow the user to stage the migration over different timeframes for different systems within the overall coexistence period.

For smaller users SWIFT intends to provide an in-flow translation service. This service will translate from ISO 20022 to MT only. A user will receive the message as originally input but where this was ISO 20022 the user can opt to receive an additional MT translation of the ISO 20022 message. Such a user will need to maintain the MT route into their systems until the end of the coexistence period as there can be no guarantee that MT messages will not be received until the end of this period. The potential complications of providing both MT and ISO 20022 routes into the user’s system will depend on the approach taken to accommodate ISO 20022 message traffic into that system.

Users may also adopt a third approach that is either an alternative to the SWIFT supplied transaction services or a compliment to those services. This third approach would be to contract the services of a third-party translation service either locally or as a service. The advantages of this may be to decouple the user from the coexistence period by providing the translation service earlier or to continue the services use after the end of the coexistence period thereby creating a bespoke timeframe for the migration.

The translation from ISO 20022 to MT is also a translation from more to less information. The dataset for a MT message is a subset of the ISO 20022 dataset. The reverse is not true there can be an absence of information when translating from MT to ISO 20022. This is a constraint on the user’s migration strategy as the system changes must be in one direction to always facilitate the production and receipt of ISO 20022 messages. To produce ISO 20022 messages this pushes changes deeper into the system where the necessary data is available. A third-party translation service can break this constraint by allowing translation from MT to ISO 20022 to occur closer to the gateway. Third party translation services can do this by allowing bespoke translations which can take advantage of supplementary messages, standing data or the use of existing and new calls into the user's system to retrieve the required additional data.

However the individual users in the SWIFT community choose to get there and over what timeframe the eventual changes to back-office systems to incorporate ISO 20022 take place. In the long run all users will benefit from the richer dataset that will be provided by ISO 20022. Laying a foundation for new services and opportunities for the benefit of the SWIFT community of users and their clients.