The adoption of the ISO 20022 messaging standards represents the biggest change to the UK’s payments infrastructure in over 20 years. With the first enforcement deadline of May 2025 rapidly approaching, all organisations that make and receive payments must take time to understand the implications of ISO 20022 for their processes.
AccessPay’s Customer Success Director, Fiona Brown, spoke with Tanveer Bhatti, Lead Policy Analyst at the Bank of England, and AccessPay’s CEO, Anish Kapoor, to learn more about the upcoming changes and what steps organisations need to take to prepare themselves. This article summarises the key findings from that discussion.
Why is ISO 20022 being rolled out?
The adoption of ISO 20022 means that organisations will have access to richer, more structured data in payment messages. It is a big shift for anyone involved in making payments; currently, there is a limitation on how much information can be attached to a payment message and there is no standardisation as to how this information is presented.
Moving to this new, richer, standardised format is a step change for the industry and introduces several benefits for payment processes. First, it will help tackle financial crime and improve financial compliance. Compliance checks are often why payments are stopped or delayed, but the additional data should make the process flow more smoothly from end to end.
Second, enriched data will help to drive industry innovation. Bhatti states:
“We’ve consulted with industry experts over the last few years around what are the benefits [of ISO 20022] to CHAPS. Financial requirement compliance was a key theme, but it was also raised that richer, more structured data can be used to improve market intelligence and drive innovation.”
Which payment systems will ISO 20022 affect?
As of June 2023, ISO 20022 is live in CHAPS, and banks are rolling it out to their customers. PAY.UK, which operates the retail payment systems BACS and Faster Payments, has detailed its intention to move to the new standard for these payment systems, though timelines are still to be confirmed.
ISO 20022 is a global initiative, and payment systems worldwide are moving to the new framework. Cross-border payments network SWIFT has already moved over to ISO 20022, and by November 2025, other key jurisdictions, including the US, will also have made the move. “Over half of CHAPS payments have a cross-border leg,” notes Bhatti, “So it’s very important for CHAPS, in particular, to be harmonised globally.”
What are the timelines?
Timeframes vary depending on the payment system in question. There are set deadlines for using enriched data in CHAPS, with the first deadline for using Legal Entity Identifiers (LEIs) and purpose codes coming into force in May 2025. Different timeframes exist for international payments. In November 2025, SWIFT will end the coexistence period for the old MT messaging standard and ISO 20022 and shift entirely to ISO 20022.
While the deadlines might seem distant, organisations must act now. Kapoor states, “Organisations need to make the changes now and allow plenty of time for testing. There are a lot of parties that need to come together, including internal systems, banking partners and possibly third-party vendors.”
What preparations should organisations make?
There are four key steps that every organisation needs to work through systematically.
- First, organisations need to understand how they will source and collect the extra data required for the ISO 20022 format.
- Second, they will then determine how and where they will store the additional data.
- Third, they will need to understand the process for adding the data to the different payment systems that they use. The focus is currently on high-value CHAPS payments, but they should also consider implications for low-value payments.
- The fourth consideration is that organisations must determine whether their systems are set up to receive enriched data, as the new format has additional fields that organisations need to be able to receive. This is a critical step that is often forgotten.
What are the new data requirements?
In making the transition to ISO 20022, the Bank of England made the decision to enrich the data required for CHAPS payments.
“When we initially consulted on migrating to the ISO 20022 [standard], industry feedback was that institutions were keen to see new benefits from the implementation given the scale of and expense of the project,” says Bhatti. “So rather than just doing a simple like-for-like mapping of what already existed, it was decided to add new enhanced data fields to add real value.”
The new enhanced fields include LEIs, a globally standardised identifier that financial institutions already use for derivatives reporting and that can be adopted by any company. Therefore, it is important that organisations determine if they need an LEI and establish if their beneficiaries have one.
Purpose codes will also be required from May 2025. These are sourced from a standardised purpose codes list. Bhatti details, “There are lots of resources on the Bank of England’s website, including links there to the international purpose code list. Look to see how the purpose codes map to your current payments. Would it be useful for you to use them? How many would you need to use?”
Finally, organisations will also be required to use structured addresses or at least hybrid addresses by November 2026. This means that addresses cannot be captured in one single box but that each element is broken out into a separate line.
Hybrid addresses are where the town name and the country are broken into separate lines, but the rest is captured in a single block. These changes mean that organisations will need to make sure their databases are updated to collect and receive information in a structured format.
Who should organisations involve as they prepare?
Organisations need to contact their banks to understand their plans and system requirements for ISO 20022. Kapoor explains, “Banks have a large degree of flexibility in implementing ISO 20022. So, it’s important to speak to your bank to understand where they’d like you to put the additional data and how that might change over time.”
It is also essential to take stock of internal systems and their capabilities. “You need to talk internally,” says Kapoor. “You need to know if your systems can handle enhanced data or whether you need to supplement systems or transform data so that it can handle the new format and work with your bank. Some of this you can do natively; for some other parts, you may need to find and work with a partner.”
What are the consequences of non-compliance with enriched data requirements for CHAPS payments?
The consequences for non-compliance vary depending on the data point. If an organisation does not provide an LEI or purpose code for a CHAPS payment beyond the May 2025 deadline, the payment will still be accepted.
However, the Bank of England will monitor banks to check how they are using LEIs and purpose codes, and there will be follow-up where there is non-compliance. Banks should also talk with their end customers to make sure they are submitting the information.
In contrast, payments submitted after the November 2026 deadline without a structured address will be rejected and will need to be resubmitted with at least the town and country name in a structured format.
Getting ready for ISO 20022
The shift to ISO 20022 brings a significant degree of change. However, the new standard will ultimately deliver several benefits, including better financial compliance and market and customer intelligence. While the timeframes may appear distant, it is critical that organisations get to grips with the new requirements sooner rather than later.
It will likely mean that organisations must collect and store new data points, update their systems and conduct testing with their banks and other partners. Read up on the requirements, talk to your banks and take stock of your current position to begin your journey.
You can listen to the full discussion between Fiona, Anish and Tanveer by watching Navigating ISO 20022: Your questions answered, with Bank of England & AccessPay on-demand.
