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What ISO 20022 Means for Retail Payments

ISO 20022
What ISO 20022 Means for Retail Payments
8:53

March 10, 2025, marks a transformative moment for the financial industry as ISO 20022 becomes the universal messaging standard for high-value payments.

While this milestone primarily applies to systems like SWIFT messaging, it underscores a broader industry shift toward modernization and interoperability - a shift that will inevitably influence the retail payments domain in the future. 

This article explores how ISO 20022 impacts the payment ecosystem, draws parallels to the retail payments industry's eventual migration from ISO 8583, and highlights the importance of preparing for future changes.

 

What is ISO 20022?

First introduced in 2014, ISO 20022 provides a unified global standard for payment messaging. It leverages a robust modeling methodology, a central dictionary, and XML/ASN.1 protocols to create a data-rich messaging framework.

According to SWIFT, "ISO 20022 is an open global standard for financial information. It provides consistent, rich, and structured data that can be used for every kind of financial business transaction."

For the wholesale payments sector, this standard enhances efficiency, decision-making, and transparency. The benefits - such as interoperability and rich data - have implications for retail payments as well, even though no formal migration away from ISO 8583 has been announced.

J.P. Morgan predicts that by 2025, ISO 20022 will be the “common language of the global financial industry." To leverage its full potential, J.P. Morgan recommends adopting the standard sooner rather than later.

“By 2025, ISO 20022 will be the common language of the global financial industry. We recommend onboarding the standard sooner to take advantage of benefits, structured data to understand your payments and your clients, and to have sufficient time to plan, test and launch ... ISO 20022 processes...”

- J.P. Morgan

 

You can find more about how ISO 20022 compares to ISO 8583 in this previous Paragon blog.

 

ISO 20022 vs. ISO 8583: Drawing Parallels

While ISO 20022 is transforming the high-value payments space, the retail payments domain continues to rely primarily on ISO 8583, a messaging protocol used in card transactions and point-of-sale payments.

Established decades ago, ISO 8583 has served the industry well, but lacks the scalability and data richness that ISO 20022 offers.

Organizations like nexo are working toward modernizing retail payments by aligning them with ISO 20022. Nexo’s protocols - including the Nexo Acquirer Protocol - aim to replace ISO 8583 with a next-generation card payment standard. These advancements will allow for:

  • Real-time and batch processing.

  • Direct connections between merchants and acquirers or through payment service providers (PSPs).

  • Greater interoperability and richer data exchange across the payment ecosystem.

Although major card brands or payment networks have not established concrete timelines for ISO 8583’s transition to ISO 20022, the groundwork is being laid. Retail payment stakeholders must stay informed and proactive to ensure readiness when the shift occurs.

 

Why ISO 20022 Matters for Retail Payments

The move toward ISO 20022 reflects a broader industry trend… the push for modernization and future-proofing payment systems. For retail payments, adopting a similar standard would bring several key benefits:

1. Rich, Structured Data

ISO 20022 enables detailed, standardized data formats, improving analytics, fraud detection, and compliance. For retail payments, this could mean better customer insights and streamlined operations.

2. Enhanced Interoperability

A universal messaging standard reduces friction in cross-border transactions, simplifies integrations, and enables seamless communication between merchants, acquirers, and financial institutions.

3. Future-Ready Systems

As payment volumes grow and transactions become more complex, modern standards ensure scalability and adaptability for evolving industry needs.

 

The Added Value of ISO 20022 

Many financial institutions have already begun making significant strides toward ISO 20022 readiness. For example, TD Bank is implementing the standard with a focus on customer-centric solutions.

Christopher Chazin, Head of Treasury and Trade Products and Services at TD Bank, highlighted how the rules will improve information sharing across banks.

He said: “These ISO rules will make information sharing more consistent across the banks, more robust, and easier to understand. This will be particularly impactful on international wires and other payments that cross borders.”

This focus on seamless, accurate data exchange is one of the key advantages of ISO 20022. As international payments become more commonplace, the ability to share detailed and structured payment data across borders will be crucial.

 

Preparing for the Future of Retail Payments

The transition to ISO 20022 in corporate banking offers a look at what the future holds for retail payments. While the timelines and specifics for retail banking remain uncertain, the parallels between the two sectors provide actionable insights for preparing for this inevitable shift.

Lessons from corporate banking’s experience with ISO 20022 migration can guide retail payment stakeholders in their readiness strategies:

1. Assess Your Current Infrastructure

In corporate banking, early evaluations revealed gaps in legacy systems that required extensive updates. Retail banking stakeholders should start by assessing whether their current systems can handle the richer data and interoperability requirements of future standards

2. Engage Key Stakeholders

Corporate banking’s success in adopting ISO 20022 depended on involving all relevant stakeholders, from IT teams to compliance officers. Similarly, retail payment providers must collaborate across internal and external teams to ensure smooth planning and execution.

3. Plan for Testing and Rollout

Testing has proven to be a cornerstone of successful ISO 20022 adoption in corporate banking. Retail stakeholders should learn the importance of leaving sufficient time to conduct end-to-end testing, ensuring that your systems and processes work seamlessly with those of your partners, vendors, and customers. Rushed implementations often lead to errors, increased costs, and reputational damage. 

4. Educate Your Teams and Customers

Another thing we’ve learned about the ISO 20022 migration is that corporate banking leaders prioritized educating teams and clients about ISO 20022’s benefits and changes. Retail stakeholders can adopt a similar approach to build confidence and awareness among internal teams and external users.

5. Monitor Industry Developments

Last, but not least, ISO 20022 was shaped by evolving regulations and best practices. Retail payment stakeholders will benefit significantly by staying informed on initiatives like nexo standards to adapt their strategies accordingly.

 

The Importance of Leaving Time for Testing

One of the biggest pitfalls organizations face during major transitions like ISO 20022 is underestimating the time required for testing. The new standard doesn’t just affect one part of the payment process - it impacts the entire ecosystem.

To ensure a smooth rollout, organizations must allocate ample time to test the flow of data across all systems involved in the process, including messaging networks, banks, compatibility, and identity issues early.

Organizations that dedicate sufficient time and resources to testing will be better positioned to avoid disruptions and fully leverage the benefits of ISO 20022.

Paragon Application Systems is uniquely positioned to help assist retail payment stakeholders in preparing for the future. Our tools and expertise in payment systems testing help organizations:

  • Validate message formats.

  • Conduct stress and interoperability tests.

  • Identify and resolve compatibility issues.

By partnering with Paragon, businesses gain access to unparalleled support and expertise, allowing them to focus on strategic priorities while leaving the technical complexities of testing to trusted professionals.

Reach out to our team of payment testing professionals today for a free consultation.

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