Deutsche Bank

Global Transaction Banking

Ultimate guide to
ISO 20022 migration

Ultimate guide to ISO 20022 migration 1

Foreword

This is the watershed moment for the industry.

Over the next five years, the world’s primary payment
market infrastructures (PMIs) will undergo huge
transformational change in response to demands for
increased automation and cost efficiencies, enhanced
market integration and real-time services

These PMIs lie at the heart of the financial ecosystem, providing infrastructure
for High Value Payments Real Time Gross Settlement (RTGS) systems, Low
Value Payments Automated Clearing Houses (ACHs) and Real-Time Retail
Payment Systems.

As part of this transformational change, major PMIs such as the Federal

Reserve and The Clearing House (US), Eurosystem and EBA Clearing
(Eurozone) and the Bank of England’s RTGS (UK) will all modernise their High
Value Payment Systems (HVPS), almost simultaneously.

Underpinning each of those modernisation programs is the migration to ISO “It is probably the
20022, widely recognised as the standard for the future. Indeed, ISO 20022 most impactful
has already been introduced for HVPS in Japan, Switzerland and China, and
is established as the de facto standard in instant payments markets following payments industry
implementations in Australia, US, Canada and Singapore. SWIFT will also undertaking since
introduce ISO 20022 for cross-border payments, with a view to phasing out
existing payment messages. the introduction
The migration to ISO 20022 lays the foundation for vastly improved payment of SEPA”
processing efficiency and interoperability among HVPS. Its benefits are
numerous from a customer experience and compliance perspective, as well as
providing the capabilities to deliver new services.

This journey therefore has far-reaching implications for all banks, corporates
and other important financial stakeholders. It is probably the most impactful
payments industry undertaking since the introduction of the Single Euro
Payments Area (SEPA) more than a decade ago, and will require CEO
commitment, allocation of appropriate budgets, resources and project
teams given that a multitude of areas will be affected across institutions.
Senior management teams could also use this as a basis for reassessing
existing business models; at the very least, they should consider redesigning
substandard business processes.

This is not simply “another IT project”. Our series of guides on this topic,
produced in collaboration with PPI, aim to outline exactly what we can expect
between now and 2025, creating awareness of its impact and sharing best
practices on approaching a project of such magnitude.

Christian Westerhaus,
Head of Cash Products, Cash Management,
Global Transaction Banking,
Deutsche Bank

Ultimate guide to ISO 20022 migration 3

 Foreword

While ISO 20022 migration may at first appear to

be technical and abstract, it will have far-reaching
implications for banks’ payment systems and processes

Of course, this is not the first initiative designed to further improve existing
payment systems. We have seen numerous regional initiatives related to bulk
payments: the introduction of SEPA or diverse instant payment schemes
(whether in Australia or Asia), for instance. However, the migration to ISO
20022 for cross-border and inter-bank payments of major central banks as well
as SWIFT, although driven by different regional infrastructures, can ultimately
be considered global in scope.

Banks’ payment systems will have to be adapted along with numerous processes.
Additionally, during the course of this migration, a number of decisions will have
to be made pertaining to future business models. Schedules will be tight with
resource requirements similar to other major projects in recent years. A wait-and-
see approach is simply not an option for banks, as they will be completely cut off
from international payment systems and access to central banks.

Some of the central banks have already begun monitoring migration measures.
Many other institutions are in the process of preparing schedules, securing
resources, allocating budgets and informing senior management.

Yet awareness and understanding about the forthcoming change appears to be

relatively weak. In order to best prepare for a timely and successful migration,
we have therefore compiled this paper together with Deutsche Bank. In the
first of a series of guides, we outline the general challenges faced. In the
following editions, we will deep-dive into the individual aspects of the initiative,
analysing the differing perspectives and opportunities of the migration to ISO
20022 for both banks and corporates alike.
We wish you a successful migration!

Dr. Hubertus von Poser,

Head of Consulting Payments,
PPI AG

4 Ultimate guide to ISO 20022 migration

Contents

1. Management summary 6

2. The significance of ISO 20022 migration 7

2.1 What is ISO 20022 and why is it important? 7

2.2 Why now? 9

2.3 What are the opportunities? 9

2.4 Reaping the benefits 10

3. What does ISO 20022 mean for banks? 11

3.1 Operational considerations 11

3.2. Infrastructure considerations 13

4. The migration of global market infrastructures 14

4.1. Eurozone 15

4.2. US dollar area 18

4.3 Sterling area 19

4.4 SWIFT 20

5. Move first, move fast 23

6. Future editions 25

References 26

Ultimate guide to ISO 20022 migration 5

1 Management summary

International payments is a global network business in

which at least three (although usually more) parties are
involved. It goes without saying that harmonised standards
and rules for the exchange of payment messages and data
are therefore of paramount importance

Over the years, there have been a number of initiatives and organisations that
have strived to achieve this standardisation – yet the decision by major central
banks and SWIFT to migrate to ISO 20022 signifies the biggest breakthrough
to date.

With a globally-recognised standard, banks and their clients can effect

payments far more efficiently and economically, accompanied by more
voluminous and granular data. The result should be far greater customer
satisfaction, improved digital fulfilment of compliance requirements, and
faster, more flexible implementation or deployment of new services or
regulatory requirements.

However, making the most of ISO 20022 requires a significant and complex
migration, affecting not just core payments processing, but many other
banking systems and departments.

A strategic review of all internal bank information flows is strongly recommended

in order to be best prepared for meeting the challenges of any future regulatory
requirements. Moreover, individual characteristics of different regional ISO 20022
migration projects also have to be taken into consideration.

ISO 20022 migration is not mandatory from a regulatory perspective, but those
that do not act now risk being excluded from international payment systems.
That said, it should also be used as an opportunity for a robust and future-
proofed standardisation strategy and, for some, a reassessment of market
positioning and business models. Given this, it is crucial that ISO 200022 is on
senior management and board agendas.

6 Ultimate guide to ISO 20022 migration

2 The significance of ISO 20022 migration

2.1 What is ISO 20022 and why is it important?

The International Organization for Standardization (ISO) first published ISO
20022, a global standard for payments messaging, in 2004. This standard
creates a common language for payments data across the globe, enabling
faster processing and improved reconciliation (see Figures 1 and 2 showing
ISO 20022 message structures).

Figure 1: A simplified business information model for a payment transaction

using ISO 20022
BusinessComponent BusinessComponent
Debtor PostalAddress

BusinessComponent BusinessComponent
Payment Party

BusinessComponent BusinessComponent
Creditor Account

BusinessComponent
CreditorAgent

BusinessComponent
FinancialInstitution

BusinessComponent BusinessComponent
CreditTransfer DebtorAgent

Source: SWIFT Standards

Figure 2: Part of the logical message structure for a credit transfer using ISO 20022

Message CreditTransactionInformation
component

{
InterbankSettlementAmount: USD 12500
Containing InterbankSettlementDate: 2009-10-09
message Debtor
elements DebtorAgent

Message
Message FinancialInstitutionIdentification PartyIdentification component
component

Containing
BIC: EXABNL2U
ClearingSystemMemberIdentification
Name: ACME NV
{ Containing
message
message PostalAddress
Name elements
elements PostalAddress
Other
Message
component PostalAddress

{
Containing AddressLine: 344 Amstel
message TownName: Amsterdam
elements Country: NL

Source: SWIFT Standards

Ultimate guide to ISO 20022 migration 7

 With the launch of SEPA, European banks were the first in the world to deploy
ISO 20022 for mass payment transactions. Yet individual standards remain
commonplace in many markets, with SWIFT messaging established as the
common standard for cross-border payments.

Payments systems based on different standards means a lack of

interoperability and poses a barrier to data automation capabilities. In many
cases, payments are converted at payment gateways, often leading to the loss
of relevant information. In instances where internal bank processing is not
based on data-rich formats, information often has to be truncated and, after
processing, once again enriched.

The decision by major central banks as well as SWIFT to migrate to ISO 20022
therefore marks a major breakthrough in standardisation efforts.* With the
global introduction of ISO 20022 standards for cross-border payments, a
common basis will be introduced allowing data rich transmission which has
previously not been possible under current message standards (see Figure 3
for a comparison of MT and ISO 20022 message granularity).

This promises a future where banks and their clients can effect payments far
more efficiently and economically. Information from payer to beneficiary will
flow seamlessly with full data content, meaning greater customer satisfaction
and an improved digital fulfilment of compliance requirements.

Figure 3: Granularity of information in an MT103 vs ISO 20022 credit transfer

MT 103 pacs.008.001.02
Example 1: <DbtrAgt>
Identification of the <FinInstnld>
debtor agent :52A:EXABNL2U <BIC>EXABNL2U</BIC>
</FinInstnld>
</DbtrAgt>
Example 2: <DbtrAcct>
Account number of :50K:/8754219990 <ld>
the debtor <Othr>
ACME NV.
<Id>8754219990</ld>
AMSTEL344
AMSTERDAM, </Othr>
</ld>
NETHERLANDS </DbtrAcct>
Example 3: <Dbtr>
Name and contact <Nm>ACME NV.</Nm>
details of the debtor 50K:/8754219990
<PstlAdr>
ACME NV. <StrtNm>Amstel</StrtNm>
AMSTEL344 <BldgNb>344</BldgNb>
AMSTERDAM, <TwnNm>Amsterdam</TwnNm>
<Ctry>NL</Ctry>
NETHERLANDS
</PstlAdr>
</Dbtr>
Source: SWIFT Standards
*
SWIFT will also assume the role of Registration Authority, incorporating the administration and
opening of a central ISO 20022 repository, in which the components of the messages, business
process models and the derived XML schemes are contained

8 Ultimate guide to ISO 20022 migration

2.2 Why now?
Stephen Lindsay, Head of SWIFT Standards, remarked back in 2015 that “even
the best designed standards only take off if they meet real and immediate
needs in the market. For ISO 20022, that moment has clearly arrived.”1

While globalisation and the increasing need for interoperability of payment

flows has put the strain on differing standards, the tipping point has been
reached as a result of the banking industry’s relatively recent digitalisation,
which is driving demand for faster payments from both retail and corporate
banking customers. For banks to keep up with this expectation for near instant
payments around the clock, a next-generation market infrastructure is needed
that can offer seamless and quicker payments processing in support of digital
business models.

Further, banks face regulatory challenges like at no other point in history – “Even the best
especially in the areas of anti-money-laundering (AML) compliance and fraud
prevention – making the ability to rapidly process large amounts of data crucial. designed standards
only take off if
2.3 What are the opportunities?
they meet real and
ISO 20022 migration is not regulatory mandated, yet it should be used as an immediate needs
opportunity to implement a robust and future-capable standardisation strategy
benefitting all market participants (see Figure 4 overleaf, which also notes in the market.
some inevitable challenges). For ISO 20022,
First and foremost, ISO 20022 allows for the introduction of new data that moment has
components, meaning far richer information can be transmitted alongside
the transaction in comparison to existing formats. This, in turn, increases clearly arrived“
transparency of the payment and supports financial institutions with their task
of guaranteeing secure payments processing and conforming to compliance
regulations. Further, it will allow banks to offer an enhanced customer service, Stephen Lindsay,
with the provision of rich payment data allowing digital (straight-through- SWIFT
processing; STP) reconciliation.

This offers banks the opportunity to re-evaluate their business models and
market positioning. This should be a positive development, although those that
are not ready to implement the necessary changes will have to reconsider their
participation in Clearing Systems for international payments and contemplate
alternatives such as using a partner for their high-value payments.

Corporates also stand to gain significantly from standardised formats and

processes, while being able to integrate vendors more flexibly into their own
structures. Standardised payment, reporting and exception handling messages
facilitate end-to-end automation from invoicing to liquidity management,
exception handling and reconciliation across the corporate’s banking ecosystem.

The introduction of ISO 20022 in certain currency areas to date elucidates the
potential financial benefits: the European Commission suggests, for instance,
that SEPA has resulted in €21.9bn cost-savings per annum.2 Even accounting
for the fact that SEPA migration encompassed more than just the migration to
ISO 20022, the savings associated with standardised messaging have likely
been considerable.

Ultimate guide to ISO 20022 migration 9

 Figure 4: Why ISO 20022?

Benefits identified by the industry Challenges identified by the industry

 Efficiency gains
Increased efficiencies from a standardised
Data truncation 
Potential data truncation during the coexistence period
and harmonised format of financial comes with a risk for all agents and frustration for the
messaging, increased STP rates beneficiary. Intermediary service providers must be
amongst the first movers to ensure full
Cost savings data delivery end-to-end

Potential simplification of cost Implementation costs 

+ -
intensive processes such as Significant investments and
payment processing, investigations, resources required until it
data analytics, reporting etc. releases anticipated benefits

Digital compliance
Automated analytics for various
New operation mode 
Operating model to change to the
compliance purposes (i.e. sanctions V-shape communication method (SWIFT
screening) based on structured information Y-copy service will no longer be used)

New and improved services

Enhanced customer satisfaction from improved
Industry-wide effort 
Industry-wide consensus (globally)
services for corporate clients, addressing of market requirements and
biggest pain points (e.g. reconciliation) standards required

Source: Deutsche Bank

2.4 Reaping the benefits

Reaping the benefits of ISO 20022 will require a significant and complex
migration process, comparable to those completed for SEPA or the
introduction of the euro. “A simple
The impact extends beyond just “core payments” processing, touching conversion is not
everything from booking systems to embargo and know-your-customer (KYC)
systems, through to electronic banking, liquidity management or archiving.
recommended as a
In addition to impacting IT and payments, numerous other areas – such long-term strategy“
as securities, trade finance, global markets and treasury – will also have to
process the contained information and apply it elsewhere. This wide-ranging
impact means it is crucial that ISO 20022 is firmly on board-level agendas.

Due to the richness of the information, a simple conversion – while a tactical

solution – is not recommended as a long-term strategy. Instead, best practice
would be to strategically restructure internal bank information flows in order to
be equipped to fulfil the challenges of any upcoming regulations, and to account
for differences in regional ISO 20022 migration projects (see more in Section 4).

10 Ultimate guide to ISO 20022 migration

3 What does ISO 20022 mean for banks?

Significant and complex internal changes are on the

horizon for banks. It is crucial, therefore, that senior
management are aware of the magnitude of the project
in terms of resources and budget, as well as the need
to secure appropriate prioritisation with existing
external vendors

To plan their migrations, banks should assess:

• The overall business implications beyond payment transactions;
• The number of transactions impacted;
• The bank’s own participation in affected market infrastructures (direct/
indirect);
• Whether the bank has its own indirect participants;
• Whether the bank offers correspondent banking services and
• If external providers are to be used as part of the service delivery.
Not undertaking any action is, in most cases, simply not an option – and would
risk losing access to the central bank money, affecting liquidity management
and the fulfilment of minimum reserve requirements.

3.1 Operational considerations

From an operational perspective, there are several different aspects to
consider, not all of which may be immediately apparent.

The migration to ISO 20022 not only affects IT systems, for instance, but also
business rules and process workflows. Here, special attention should be paid
to individual business and operating models, as there are different implications
for banks that are direct clearing participants as opposed to those that process
payments via correspondent banking. These include communication methods
and ISO 20022 usage guidelines, but also coverage to accommodate new
operating hours.

The IT migration will have an impact that goes far beyond core payments
processing, affecting peripheral systems such as anti-financial-crime
applications (especially embargo/sanctions screening as well as AML systems),
liquidity management, billing, account reporting, nostro reconciliation and
archive systems.

Ultimate guide to ISO 20022 migration 11

 This is therefore not just a cash management product challenge; everyone
from top management to operations to human resources will need to be
involved. The following areas of an organisation will be typically impacted:
• Top Management;
• Transaction Banking (Payments and Securities);
• Treasury;
“This is not just a
• IT (Process Management, IT infrastructure, etc.);
cash management
• Sales / Relationship Management; product challenge“
• Vendor Management;
• Operations;
• Service;
• Risk Management and
• Legal.
Figure 5 outlines the payments architecture of a bank, clearly showing how
comprehensive the impact will be.

Figure 5: Impact of moving to ISO 20022 XML formats

Supplier: Order Order Recipient:

Acceptance: Delivery:
Banks Banks
Embargo
Enrichment Processing Clearing AML
Embargo of Data Fraud
Clearing Clearing
Internal
Booking
SWIFT SWIFT
Technical
Acceptance Preparation of Job
External
Charging/billing
Data of Management Routing Booking
+ Statement
EBICS Account EBICS
Preparation of Job Creation of
Format Processing BulkFile Technical
Functional Delivery
E- E-
& Technical
Banking Booking Preparation of Banking
Verification Request Format
Charging/billing
+ Statement of
Mobile Statistical Data:
Account Accounts
Conversion
of Format Payment Account Market Storage,
Internal Archive Internal
Static Data Number / IBAN Data Enquiry
Systems Systems

Impacted areas

Source: PPI AG

12 Ultimate guide to ISO 20022 migration

3.2 Infrastructure considerations
ISO 20022 contains substantially more data than conventional legacy formats
(two or three times the amount). Bank infrastructure (systems, databases, lines
etc.) will need to be capable of processing these larger data volumes – and
also at faster speeds for real-time payments, intraday liquidity management,
compliance checks, and fraud detection and prevention.

Given the significant impact on IT architecture, it is natural that some banks

may consider workarounds. One possibility is the use of a so-called convertor
at the inlet/outlets of the payments processing, or at the interfaces to other
systems, in order to convert existing formats into ISO 20022 or vice-versa.
This approach, however, brings a number of risks and should be considered
carefully in the context of its long-term implications. In particular, there is a
concern that it would result in important information being lost in transmission
which, in turn, may mean a competitive disadvantage or compliance problems.

For banks operating globally, or in multiple currency areas, there are

additional challenges. There will be differences between the financial market
infrastructures and their ISO 20022 specifications – some may require
certain data fields that others do not – and there are also regional or system-
determined differences in terms of migration approach (see next section for
more information).

Ultimate guide to ISO 20022 migration 13

4 The migration of global market infrastructures

ISO 20022 is already the standard in certain currency

areas, and will be rolled out in the coming years in
others (see Figure 6)

Figure 6: Global migration of market infrastructures to ISO 20022

Canada: Eurozone: Russia: Hong Kong:

planned tbd planned in 2021 planned tbd planned in 2021

China:
live 

United Kingdom: Belarus:

planned in 2022 planned tbd
Switzerland: Kosovo: Japan:
United States: live  live  live 
planned in 2020

Thailand:
India: planned in 2020
Jordan: live 
Colombia: Malaysia:
live  live 
planned in 2020

Bangladesh: Brunei:
live  live 

South Africa: Singapore:

planned tbd planned in 2021

Source: Deutsche Bank

Naturally, there is much focus on the intentions of the key currency regions
of the euro, US dollar and sterling. Here, the respective central banks have
initiated migration projects accordingly, adopting one of three approaches:

1. A one-step, or “big bang”, migration;

2. A multiple-step, or “like-for-like”, migration (where data fields and messages

are gradually moved over);

3. A participant-related migration.

Figure 7 outlines the phases of ISO 20022 migration of the major PMIs for the
euro, US dollar and sterling currencies.*

*
While in the Eurozone the migration plans are set in stone, plans remain preliminary for other currency areas

14 Ultimate guide to ISO 20022 migration

Figure 7: Migration of Euro, US dollar and Sterling regions to ISO 20022

2019 2020 2021 2022 2023 2024 2025

p
ISO 20022 for cross-border
Go-live 4 years coexistence phase + SWIFT central translation service
Global

payments specifications
in
Nov ‘21 p
From Q3 ‘23 only structured
address data for Parties
p
Development User
Go-live in
Europe

phase testing
Nov ‘21
p
ISO 20022 guidelines Go-live in
Nov ‘21

Preparation p
Enhance-
UK

Introductory phase Go-live Mature phase

phase ment phase
in
‘22

ISO 20022 ISO

ISO 20022 Legacy changes like-for-like enhance-
US

specifications (from Nov ‘20) + 3 months ment

stability phase phase

Source: Deutsche Bank

4.1 Eurozone

Where do we stand?
Euro payments in the eurozone can be cleared on both a domestic and cross-
border basis via the respective payment systems:

1. Eurosystem* TARGET 2: a RTGS system for the eurozone;

2. Eurosystem TARGET Instant Payment Settlement (TIPS): a payment system

for the processing of instant/real-time payments;

3. EBA** EURO 1, operating on a multilateral net basis: a RTGS-equivalent large-

value payment system that settles single euro transactions of high priority and
urgency. It settles its end of day balances in central bank money via TARGET 2;

4. EBA STEP 2, for the processing of mass payments: This is a pan-European

Automated Clearing House (PE-ACH);

5. EBA RT1: a payment system for the processing of instant/real-time

payments. It provides the European payments industry with a pan-European
infrastructure platform for real-time payments in euro under the SEPA Instant
Credit Transfer scheme.

*
Comprising ECB and central banks that have adopted the euro
**
Owned by shareholders of the main European banks

Ultimate guide to ISO 20022 migration 15

 What’s the vision?
The Eurosystem has set out its “Vision 2020” on further integration of the
European financial markets3, initiating three projects to further develop the
market infrastructure:

1. TIPS;

2. The consolidation of TARGET 2 (T2) and TARGET2-Securites (T2S);

3. Eurosystem Collateral Management System (ECMS).

Going forward, the services provided by the Eurosystem will be named

TARGET Services, incorporating T2, T2S and TIPS. The technical
consolidation of T2 and T2S platforms, as well as the renewal of the RTGS
services, aim to increase efficiency, drive synergies, reduce operating costs
and boost cyber resilience. As part of this consolidation, the communication
mode will also change from the current single network provider via Y-copy to a
multi-network provider via the V-shape model. This requires future messages
to be addressed to the Eurosystem directly which, upon receipt, will use the
financial data not only for the settlement, but also initiate a new message for
the receiver based on the receiver’s reachability.

The T2/T2S consolidation will take place on the basis of ISO 20022 (T2S
has been using the standard since 2015). Hereby, the current decentralised
access to the individual central bank systems will be replaced by a central
entrance (see Figure 8). The consolidation has significant implications for all
T2 participants, fundamentally altering the entire handling of central bank
operations, minimum reserve requirements, payment transactions, secondary
systems and access to all T2 services.

Figure 8: New centralised access to T2 services

Central Liquidity Management

T2S RTGS TIPS

Securities High-value Instant
Settlement Payments Payments

Common Reference Data (CRD)

Shared Operational Services (Billing, Scheduler, etc)
Data Warehouse

Eurosystem Single Market Infrastructure Gateway

Source: Eurosystem

16 Ultimate guide to ISO 20022 migration

As with T2, EBA Clearing will also start with ISO 20022, and is currently
working on the respective guidelines for migration. The migration will take
place in form of a “Big Bang”.

Timeline for migration

Eurosystem participants have been informed that a “Big Bang” migration will
take place, with communication with the T2 system only possible via the new
access method and exclusively with the new formats as of 22 November 2021.

Participants are responsible for adapting their own systems and processes.
To help, 13 milestones have been defined (see Figure 9), with the Eurosystem
already monitoring adherence.

Figure 9: Eurosystem migration to ISO 20022

2018 2019 2020 2021
Dec Mar Jul Oct Dec Mar Sep Oct Nov
1. T2/T2S consolidation project set-up

2. Internal adaptation/assessment is started

3. Network Service Providers procured

4. Completion of the software development for the required
adaptation changes to T2 (CLM and RTGS)
5. Completion of the internal testing before end-to-end market testing
6. Completion of network connectivity tests and ready to start the end-to-end market
Milestones

testing activities
7. Completion of user testing activities (including community and dress rehearsals for the
migration)
8. Completion of contractual and legal adaptation

9. Internal staff trained

10. Completion of operational procedures adaptation

11. Ready to start migration activities on production environment

12. Completion of migration activities

13. Go-live of T2

Source: PPI AG

EBA Clearing is scheduled to move its Euro 1/STEP 1 system to the ISO 20022
messaging standard in line with the Eurosystem’s migration timelines for the
TARGET2 platform.

Ultimate guide to ISO 20022 migration 17

 4.2 US dollar area

Where do we stand?
International US dollar payments are either cleared via Fedwire, the RTGS
funds transfer system operated by the Federal Reserve Banks, or via CHIPS of
The Clearing House (TCH), a clearing house organised under private law.*

What’s the vision?

In October 2017, the Fed announced the migration of Fedwire to ISO 20022 –
deeming it a strategic initiative to improve the US payment system.4

In contrast to the eurozone, the US is to follow a phased-implementation, meaning

that after an initial preparation period, existing data fields will be migrated to the
new format in a “like-for-like” approach. The standard will then be extended to
become fully fledged once the whole community has migrated to ISO 20022.

Anticipated timeline
Following the preparation period, Fedwire will offer conversion services in
both directions (Fedwire proprietary format vs. ISO 20022) to allow banks that
have already migrated to communicate with those who have not (see Figure
10). In the final phase (phase 3, as of November 2023) all banks will gradually
complete the ISO 20022 migration.

TCH is following the phased approach of the Fed both from a timing and content
perspective. As a deviation to the Fed, however, TCH is advocating a full migration to
ISO 20022 (phase 3) after SWIFT has made the necessary ISO messages available.

Figure 10: US migration to ISO 20022

Legacy Changes ISO like for like Stability ISO Enhancements

November 23, (18 months – Period
2020 begins in Q1 2022) Q4 2023
(3 months)
Phase 1 Phase 2 Phase 3
• “Big bang” • Migrate Fedwire Funds • “Big bang”
implementation to Service participants in implementation to enable
accommodate SWIFT MT waves over 18 months participants to send
changes to originator and to send and receive ISO optional enhancements
beneficiary fields 20022 messages that have
fields and character lengths
• To prepare for and that are comparable to the
simplify the Fedwire legacy format
Funds Service’s migration
to ISO 20022 messages • The Fedwire Funds
Service will translate the
legacy format to ISO
20022 and vice versa
when necessary
• The Fed will sunset legacy
format at end of this phase

ISO 20022 implementation to be completed by the end of 2023

Source: Deutsche Bank

*
Low value, bulk and direct debits are cleared via the ACHs. These along with the clearing of
paper-based payment methods (such as cheques) are not being considered in this paper

18 Ultimate guide to ISO 20022 migration

US correspondent banks granting domestic US banks access to incoming
international dollar payments may face a challenge after the like-for-like ISO
20022 migration. In compliance with the “Travel Rule” they must provide all
data received to the next party in the payment chain for their own transaction
due diligence related to anti-financial-crime compliance. However, in cases
where the next in the chain is unable to receive extended ISO 20022 data, an
alternative communication method must be agreed.

4.3 Sterling area

Where do we stand?
In the UK, Sterling payments can be cleared via multiple clearing houses.
There are clearing houses organised under private law, such as Bacs, Faster
Payments and the Cheque and Credit Clearing Company (subsidiaries of Pay.
UK, the national retail payments authority), as well as the CHAPS, the RTGS
system for the clearing of central bank money of the Bank of England (BoE).
This paper focuses primarily on CHAPS, the retail payments system, Faster
Payments and Bacs.

Currently, payments are exchanged in different formats: Bacs uses the

proprietary Standard 18 format, CHAPS uses SWIFT formats. In CHAPS each
payment is separately settled and debited; the offsetting of daily balances in
Bacs takes place via an account at the BoE.

What’s the vision?

In summer 2018, the BoE published a consultation paper on the modernisation
of the UK payments system, in which it outlined its intention to establish a new
architecture based on ISO 20022. The national Payment Systems Regulator
(PSR), the economic regulator for the payment systems industry, announced
that Bacs and Faster Payments would also have to migrate.

Anticipated timeline
The BoE has set out four phases for the migration (see Figure 11 overleaf).
The preparation phase is set to be completed by the beginning of 2022, with
the introductory phase (like-for-like) running until mid-2023. The third phase,
termed the “enhancement phase”, is due to be completed by the first quarter
of 2024, to be followed by the “mature phase”.

Ultimate guide to ISO 20022 migration 19

 Figure 11: UK migration to ISO 20022
Preparation phase Introductory phase Enhancement phase Mature phase

Phase 1 Phase 2 Phase 3 Phase 4

Publish final Migrate to Require all CHAPS Update CHAPS

ISO 20022 message ISO 20022 in Direct Participants scheme rules to
schema for CHAPS on a to migrate to mandate certain
use in CHAPS like-for-like basis the enhanced additional data in
ISO 20022 CHAPS payment
Introduce an optional message messages
Closed User Group in
CHAPS for Direct
Participants who
wish to exchange
enhanced data early,
among others in the
same position

By end 2019 H1 2022 H1 2023 H1 2024 and beyond

Throughout this process, the Bank will issue further guidance to industry on ISO 20022 implementation

Source: Bank of England

The BoE, Pay.UK and PSR plan to work together on executing the migration,
tendering for a partner that can support with the development of the new
payment system architecture (a process due to be completed by mid-2020).

4.4 SWIFT

Where do we stand?
Currently, SWIFT participants use MT formats for the transmission of cross-
border payment messages although, in response to industry demand, SWIFT has
already made ISO 20022-based XML messages (MX) available.* MX messages are
exchanged today within a closed user group via the SWIFT network.

Timeline for migration

From November 2021, shortly before the migration of the Eurozone, SWIFT
will start completely moving to ISO 20022 format over a four-year period.5
In order to facilitate the migration from MT to ISO 20022, there will be a
temporary co-existence phase, enabled by means of a conversion service
(Figure 12 shows the ISO 20022 equivalent of the MT messages).

Nevertheless, the responsibility for complete processing of the transmitted data

lies with the bank using conversion services. This is especially important for
conducting necessary AML, counter-terrorism financing and sanctions checks.

*
It should be noted that the migration to the new format will affect all category 1, 2 and 9 MT messages

20 Ultimate guide to ISO 20022 migration

Figure 12: SWIFT MT vs. ISO 20022 format

FIN MT Message Name ISO 20022 equivalent

MT 101 Request for Transfer pain.001
MT 102 Bulk Customer Credit Transfer (Multiple) pacs.008
MT 103 Customer Credit Transfer (Single) pacs.008
MT 104 Direct Debit And Request for Debit pacs.003
Transfer Message
MT 110 Advice Of Cheque(s) camt.029 (tbd)
MT 111 Request for Stop Payment of a Cheque camt.056
MT 112 Status of a Request for Stop Payment of a pacs.002 (tbd)
Cheque
MT 103/2 (Original payment Return of Funds pacs.004
message with RETN code in field 72)
MT 200 Financial Institution Transfer for its own pacs.009
Account
MT 201 Multiple Financial Institution Transfer for pacs.009
its own Account
MT 202 / 202 COV General Financial Institution Transfer pacs.009
MT 203 Multiple General Financial Institution Transfer pacs.009
MT 204 Financial Markets Direct Debit Message pacs.010
MT 205 Financial Institution Transfer Execution pacs.009
MT 202 (Original payment message Return of Funds pacs.004
with RTN code in field 72)
MT 900 Confirmation of Debit camt.054
MT 910 Confirmation of Credit camt.054
MT 920 Request Message camt.060
MT 940 Customer Statement Message camt.053
MT 941 Balance Report camt.052
MT 942 Interim Transaction Report camt.052
MT 950 Statement Message camt.053
MT n92 Request For Cancellation camt.056
MT n96 n99 Response for Cancellation camt.029
MT n95 n99 Queries: Unable to Apply, Request To camt.026, camt.087,
Modify, Claim Non Receipt, etc. camt.027, camt.033
MT n99 Case Management: Reject Investigation, camt.031, camt.032,
Cancel Case Assignement, Notifiication camt.030, camt.038
of Case Assignment, Notification of Case
Assignment, etc.
MT n96 n99 Answers: Resolution of Investigation, camt.029, camt.028,
Additional Payment Information, etc. camt.039
MT n90 Advice of Charges, Interest and Other tbd
Adjustments
MT n91 Request for Charges tbd

Source: Deutsche Bank

Ultimate guide to ISO 20022 migration 21

 Working groups
Migration is supported by a number of working groups (see Figure 13). In
August 2016, SWIFT, together with the largest global banks and market
infrastructures, established the High Value Payments Plus (HVPS+) working
group to define global implementation guidelines for ISO 20022, with the
goal of fostering harmonisation and unlocking the advantages of automated
processing, increased transparency and data-rich payments.

Together with the Payments Market Practice Group (PMPG), SWIFT

established the Cross Border Payments and Reporting Plus (CBPR+) group
in order to develop global usage guidelines for the exchange of cross-border
payments and reporting in the correspondent banking ecosystem. These will
be published on SWIFT’s web application, myStandards, and serve as basis for
the central conversion service made available by SWIFT during the coexistence
phase. PMPG will further complement the “toolbox” with the publication of
specific market practices for cross-border payments.

As a result of client demand for global multi-bank coordination, the Common

Global Implementation Market Practice (CGI-MP) initiative was launched as a
forum for banking associations, corporates, business associations and market
infrastructures. CGI-MP’s aim is to enable multi-bank, standardised, and global
ISO 20022 XML implementations in the corporate-to-bank business area.

22 Ultimate guide to ISO 20022 migration

5 Move first, move fast

For a mid-sized bank, the ISO 20022 migration project

can result in a high four-digit outlay in terms of “project
working days”. With larger banks the outlay is likely to be
even higher. The ISO 20022 migration project is therefore
the payment industry’s greatest challenge since the
introduction of the Euro – but also its greatest opportunity

To make the most of this, each bank requires a clear migration strategy before
it starts, and should consider:
• Should the connections to the respective infrastructures (direct / indirect)
be maintained or adapted? What are the consequences and risks associated
“It is critically
with the respective changes? important that
• Should the migration be carried out in numerous steps or should as much senior management
as possible be performed in one single step? The T2 and SWIFT migration
could, for example, be managed in a single project with a deployment close are involved from
to each other the very outset“
• Should the entire architecture be migrated to ISO 20022 or are some
tactical workaround solutions integrated into the overall strategy?
• Which IT changes are most appropriate: make, use or buy?
The answers to these questions should be clarified within the framework of a
pre-evaluation.

Acting as a “first mover” may potentially result in a competitive advantage

– bringing earlier the benefits of harmonised standards, amortising the
investments on the bank side and securing end-to-end efficiency of the
payments ecosystem. Yet it will require a clear strategy and it is critically
important that senior management are involved from the very outset to secure
the necessary commitment to the project, timely resources and budget.

Moreover, it is important to incorporate clients and external partners (such as

vendors) and other stakeholders as well as compiling information that is made
available from the respective payment infrastructures (Figure 13 overleaf, as
an example, shows the different functions involved in Deutsche Bank’s T2/T2S
consolidation project).

Successful migration would be a quantum leap for banks, and for the industry
as a whole.

Ultimate guide to ISO 20022 migration 23

 Figure 13: Example of Deutsche Bank T2/T2S consolidation programme set-up

• Chair/Program Sponsor/GTB • Divisional Control Office • Chair/Program Manager • CIB Tx Processing &
• Treasury • Technology & Operations • Treasury Workstream Connectivity WL
• PCB/Postbank • Compliance, AFC, Legal, etc. Lead (WL) • PCB Tx Processing &
• Wealth Management • PCB/Postbank Connectivity WL
• ELM Liquidity
Manager WL
• T2S WL
Cross-Divisional Steering Committee • EBA & FMI Cash
Settlement WL, etc.
Operating Committee

Central Team/Project Management Office

Treasury CIB/GTB Transaction PCB Transaction Ancillary Systems & T2S

Processing Processing

• Review Treasury CIB/GTB PCB/PFK Ancillary Systems

Regions: Germany, Spain, Portugal, France, Netherlands, Belgium, Austria, Italy, Luxembourg

Operating Model • Prepare for future • Prepare for future • FM Cash Settlement:
• Change Central Bank Target RTGS/ Target RTGS/ – Account setup
Account Set Up ISO20022: ISO20022: change & adjusted
• New Liquidity • New Messaging – New Messaging settlement procedure
Management Tools Format Format • EBA Clearing:
• Interaction with Central • Payment Product – Account and format
Bank Review changes for EBA
• New Eurosystem Clearing business
Collateral Management
System (Nov22)

ELM Liquidity Manager Wealth Management T2S

• Account Handling • A2A Connectivity • Prepare for future • Change of funding
• Liquidity Transfers • Interface to Target RTGS/ messages/maintenance
ISO20022: windows/liquidity
• SOD/SED procedures • Internal Messaging
– New Messaging sourcing
• Payment Formats • Systems
format • CIB DCA consolidation
• Automated Cash
AFC Functions Forecasting for
• Sanctions screening & Embargo filtering securities settlements
• Transaction monitoring & Surveillance controls • (T2S Auto
Collateralisation)

Common Components

TARGET Services Access TARGET Common Reference Data

• Financial Messaging System • Common reference data management
• Choose a network service provider and establish • New interfaces
access
• Accessing TARGET services via new ESMIG

Source: Deutsche Bank

24 Ultimate guide to ISO 20022 migration

6 Future editions

As outlined in this paper, the ISO 20022 migration will

take years to fully implement and will not be without its
challenges. As such, our series of guides will keep you
abreast of all the latest developments and highlight key
points for consideration

Our next edition in this series will look at the migrations of the euro (with a
focus on T2/T2S consolidation and EBA Clearing), US dollar and sterling
areas, covering:
• An update on the most recent developments and communication
• Key changes to the status quo
• Project priorities and timelines
• Potential approach (tactical vs. strategic) depending on role of the bank
(direct participant, correspondent banking service provider, indirect
participant/correspondent banking user)
• Impact on the corporate customer
• Key challenges
• Final documentation
The next edition will also take a deep-dive look at SWIFT’s migration, providing:
• An update on the most recent developments and communication
• An update on decisions and output from CBPR+ and HVPS+
• Testing
• Translation/mapping rules
• Potential approach (tactical vs. strategic) depending on role of the bank
(correspondent banking service provider or correspondent banking user) as
well as impact on the corporate customer
• Key challenges
We hope that you find this series useful as you embark upon your own
migration journey.

Ultimate guide to ISO 20022 migration 25

 References
1
See SWIFT for ISO2022 presentation, https://www.slideshare.net/
SWIFTcommunity/swift-for-iso-20022-47105887
2
See “Economic analysis of SEPA” at pwc.com, https://pwc.to/2GaYUxS
3
See “The future of Europe’s financial market infrastructure: the Eurosystem’s
Vision 2020”, https://www.ecb.europa.eu/press/key/date/2015/html/
sp151014.en.html
4
See “Federal Reserve Announces ISO 20022 Migration Timeline for the
Fedwire Funds Service”, https://fedpaymentsimprovement.org/news/press-
releases/federal-reserve-announces-iso-20022-migration-timeline-fedwire-
funds-service/
5
See “SWIFT community to embark on migration to ISO 20022 for payments
traffic”, https://www.swift.com/news-events/news/swift-community-to-
embark-on-migration-to-iso-20022-for-payments-traffic

26 Ultimate guide to ISO 20022 migration

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