Banking institutions race to comply with the new ISO 20022 standard
As cross-border payment digitalization accelerates, the new ISO 20022 messaging standard will replace traditional formats in November 2025. Despite a preparation period spanning several years, many U.S. banks are still cramming, facing skill gaps and compliance challenges. Leaders have already leveraged the new standard to optimize pre-validation of international payments, while laggards may lose innovation and business opportunities.
Robert Turner is Senior Vice President and General Manager of the U.S. Financial Services sector at Kyndryl, an IT infrastructure services provider based in New York, and is based in Chester, Virginia.
The surging wave of digitalization is reshaping the global payments industry. Significant growth in real-time transfers and international payments, coupled with the rapid rise of fintech companies, has together opened a new era of digital finance. Faced with this dramatic change, financial institutions that fail to keep pace may fall behind in the competition against their rivals.
This persistent threat is becoming a focus of attention for many banking leaders—especially as a major compliance deadline draws near. Cross-border payments involve a complex ecosystem, and financial institutions need a messaging standard that can serve as a "common language," enabling payment information to be understood across different countries and institutions. A new messaging standard—ISO 20022—is about to take effect.
For banks, this messaging format upgrade will support faster processing and real-time transactions, enhance interoperability across the payments ecosystem, and provide better structured data. By improving data quality, the upgrade is also expected to boost the output of AI solutions, give rise to new payment products and services, and help banks improve customer satisfaction and stimulate innovation.
However, standing in the way of these benefits is a significant obstacle: industry inertia.
Although companies have had years to prepare—and some have indeed taken proactive action—too many institutions are still scrambling to respond. Swift, the cross-border payment communication system used by financial institutions for international payments, has already taken the lead in adopting the standard. Some companies have followed suit, but U.S. companies are clearly lagging behind. Time is running out: the legacy message format is set to be officially retired in November 2025.
This current "last-minute rush" reflects a broader industry trend. Leaders in the banking and financial sectors seem to realize that their organizations struggle to keep up with the pace of technological change, and many do not feel well-prepared for various external risks.
In the case of the ISO 20022 transition, reasonable modernization challenges and skills gaps are slowing companies' progress. Companies also need to balance compliance with the many competing demands on their modernization task lists while meeting the new standard.
But leaders cannot catch up overnight with plug-and-play solutions. Instead, companies need to adopt compliant platforms, address data issues, modernize applications, and fill gaps in their payment systems to achieve end-to-end integration. In addition, they must ensure that their payment service partners are equally compliant to keep payment processes running smoothly.
Companies that delay action may miss opportunities to improve the payment experience and lose potential business with firms whose systems are no longer compatible. What's more, postponing the transition means giving up the chance to leverage innovation: those that completed the transition early are already exploring how to use new features, such as pre-validation for international payments. If companies already feel behind now, the gap will only widen as proactive players continue to make technological leaps.