For Landsbankinn’s customers, the ISO 20022 standard will directly impact international payments and account statements. Corporate customers will primarily notice that they’ll receive a .camt53 message instead of MT940 and will need to respond with .pain001 instead of MT101, as only one transfer is sent at a time.

These changes will in time lead to more detailed payment information, receipts and account statements for customers who only use Landsbankinn online banking, app and web-based services.  The standard allows for longer references, more fields and improves processing rates. Customers with direct connections to the SWIFT portal and who do not rely on bank intermediation are encouraged to make appropriate changes to their systems in order to take full advantage of the ISO standard.

Banks are not obligated to adopt ISO 20022 until the end of the transitional period in November 2025. Until that time, SWIFT will translate the MT messages to the new ISO format. Banks are nevertheless strongly encouraged to implement the standard in their owns systems and Landsbankinn aims to migrate to the new standard in a timely manner. Once the transitional period is over, support for the older message format will cease.

They will be replaced by pacs.008 which looks like the current SEPA messages. With time, the data will become richer and more detailed.

ISO is the acronym of the International Organisation for Standardisation. ISO develops and issues international standards for a vast spectrum of activities, including payment service. Design and development of ISO standards takes place in collaboration with stakeholders. Icelandic Standards (IST) is a member of ISO and a forum for stakeholder involvement in standardisation in Iceland.

CAMT is short for cash management. This is a message format under ISO 20022 and there are three message types:

• Camt.052 provides intraday information about movements on accounts, almost in real time. The message replaces MT942.
• Camt.053 provides you with a statement of all entries booked to your account the previous business day. The message replaces MT940.
• Camt.054 is a notification the bank sends account holders to confirm account debit and credit movements. The message replaces MT900 (confirmation of debit) and MT910 (confirmation of credit).

That decision has not yet been taken by SWIFT.

The SWIFT system currently has 15-20 fields that require format translation, such as from MT101 to pain.001. The .pain format is comprised of several hundred fields that match only 15 comparable fields in MT messages. Mapping these fields is not only complex and variable from bank to bank, but there is also constant conflict over the treatment of unused fields in the mapping process. The ISO standard solves these problems by reconciling required and optional fields.

The attached image shows the effect of the ISO standard on message structure

The ISO 20022 standard can be described as a lingua franca for financial institutions around the world. It simplifies the transmission of payment instructions and account information significantly, among other things. This means that:

• Payments reach recipients faster.
• Less human agency is required (higher straight-through processing (STP) ratio).
• Better data quality.
• Improved customer access to financial service.
• Increased traceability and transparency of payments.
• Tighter security control.
• Improved ability of financial institutions to adapt to customer expectations and current market needs. 

In addition to all of the above, it will be easier to query payments. All combined, this means that banks will be able to provide customers with even better service in online banking platforms and apps. There will also be more fields to ensure a clear overview of who paid what amount to which recipient and on whose behalf.

Implementation by the banks of ISO 20022 is the foundation of the changes described above. The standard improves payment information, reduces unnecessary delay in cross-border communication between banks and increases the general efficiency of international payments while also allowing banks to enrich the fields and information available to recipients. This leads to increased traceability, improves reliability and enhances the transparency of the steps in the payment process. These points are all key to ensuring efficiency and strengthening defences against fraud.

No, companies who interact directly with the SWIFT system are not required to implement ISO 20022, neither by November 2022 nor by 2025. The new rules apply to financial institutions only. Companies are nevertheless encouraged to implement the changes in their owns systems in order to take advantage of all features introduced under the new standard.

At first glance, it might seem unnecessary for companies to take advantage of the ISO standard as the changes only impact data exchange between the banks and SWIFT. Companies can however reap significant benefits from taking direct advantage of the ISO 20022 standard. Companies who do not implement the standard are liable to experience difficulties with payment instructions and bank account statements in the future. The main reasons are:

• To date, the varied data needs of payors and recipients have been met by inputting ever-growing data in long string fields which the recipient has to read on its end. This takes the form of a string of letters and numbers.  Each bank has been able to modify this string to provide the required information. With the migration from the older FIN standard to the ISO standard, data will be expressed in a more organised manner. This leads to cleaner data.
• It should also be noted that should SWIFT and/or individual banks offer translation or mapping service between the old and new standard after 2025, it is likely (though not certain) that charges will apply.
• Regulatory demands are certainly not decreasing. This applies to both internal and external regulation of the banks and the important oversight financial supervisory authorities, central banks and authorities around the world  are responsible for. Increasingly detailed and richer information about the real payor and recipient are required. Heightened information disclosure requirements in the financial market will be better met with richer and more efficient presentation of data.

Landsbankinn encourages all customers who interact directly with the SWIFT system to implement ISO20022 in their IT systems, as data quality and efficiency requirements are no less stringent for account systems and treasury management software.

To recap, the 2007 directive dubbed PSD1 enabled banks to offer EUR-denominated payments within a single euro payment area, or SEPA. While this change had limited impact on banks outside of Europe, it was already clear at that time that more wide-reaching steps would be taken in the future. The standardisation under ISO in fall 2022 is global and comprehends all international payments routed through SWIFT. The demand for standardisation under ISO has become more insistent in the past decade, not merely because of demand for communicating richer information between payor and recipient, but also to enhance banks’ security measures, strengthen defences against fraud, support for trade sanctions, sanction screening, etc.

When SWIFT, the Society for Worldwide Interbank Financial Telecommunication, began operation in 1977 with the launch of its system to execute financial transactions and payment services, the MT message format was created and made the main data exchange language of the system. In a historic light, the change to the ISO standard is a noteworthy occurrence. As with the implementation of the MT messages all those years ago, SWIFT itself is the driver of the ISO standardisation. Yet this is no conventional system update. It is intended not only to promote interoperability between the disparate programming languages of member countries, it marks a milestone in a longer journey SWIFT is on to unite all programming languages on a global level; to create one lingua franca that encompasses the technical and communication standards of all banks.

Companies with direct connections to SWIFT are not obligated to implement ISO 20022. Considering the advantages, they may nevertheless choose to do so. This can be done by either in-house experts or by purchasing outside assistance. The change will require some initial outlay yet will lead to significant medium and long-term efficiencies and opportunities for our customers.

Financial institutions have been focused on own preparations and implementation of the ISO standard. Landsbankinn considers it important to inform and assist its customers and we want to help our customers who are directly connected with SWIFT to resolve the matter in the most advantageous manner.