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Liz Carroll, Senior Product Manager, Financial Marketplaces at Finastra

As organisations and financial institutions look for new ways to pay in a growing payments landscape, using a common language for all financial messages allows participants and systems in different markets to communicate in a single, consistent format using agreed terminology. ISO 20022 is a global standard for exchanging electronic messages between financial institutions. It is rapidly becoming the go-to message format for handling payment communications due to the rich payment data it supports.

Benefits of ISO 20022

Operational flexibility & efficiency – having one standard across different payment rails allows transactions to be transmitted via different schemes without changing the format of the data. This gives flexibility to organisations – for example if you missed the deadline for one payment method, you could easily utilise a different payment rail using the same data.

Processing efficiencies – simplifying your payments procedures results in processing efficiencies, fewer rejections and exceptions, better reconciliations and risk management.

Efficient sanctions screening – ISO 20022 has a number of structured fields, such as for an Address, which hold information in a specific way according to well-defined rules. This structured format enables more efficient sanctions screening as it can pinpoint specific data, such as the payer’s country, reducing the amount of processing needed by sanctions systems.

Reduced fraud – there are five data points within the ISO 20022 message that can be used to identify potentially fraudulent transactions: Purpose Code, Age of Account Holder, Tenure of Account, Turnover of Account, and Type of Account. Together they are categorised as Enhanced Fraud Data (EFD). These fields are being explored at an industry level as potentially helping to reduce Authorised Push Payment (APP) fraud. If you want to read more there is an APP document by the Payment Services Regulator giving additional information.

Rich datasets – ISO 20022 enhances how corporates can interact with their data. This facilitates better decision-making within the company and could help firms understand their customers and market better. Being able to transmit additional data enables organisations to operate on a more real-time basis with customers. Additionally, it allows inclusion of relevant data and documentation about the payment, such as the purpose, originator, beneficiary, and intermediaries.

What does it mean for UK payments?

Pay.UK say “the payments industry in the UK has a long history of being committed to common industry standards and this commitment continues with the use of ISO 20022.

Pay.UK and the Bank of England are publicly committed to working together on the implementation and maintenance of ISO 20022 in UK Payments to maximise the benefits for the UK’s main interbank payment systems.”

Swift introduced ISO 20022 in March 2023 and by November 2025, all payments messages between
banks, both for sending and receiving, must be based on ISO 20022.

Currently Faster Payments uses the ISO 8583 standard, and Bacs payment messages use a format known as Standard 18. Both Bacs and Faster Payments are in scope of Pay.UK NPA (New Payment Architecture) migration to ISO 20022, but as discussed in the “New Payments Architecture and Bacs article” there is uncertainty around delivery dates. 

Implementing ISO 20022 within your organisation

Implementing changes to an organisation’s data structures can be a daunting and time-consuming task, with involvement of many teams and interfaces from various software applications. Careful consideration is needed to ensure you extract maximum benefit from the new rich data structure available. For example, what data allows you to perform more efficient reconciliation, track customer trends, and communicate better with your customers? How can you ensure your data is compatible with all the payment rails you use, or plan to use?

Finastra’s approach is to facilitate ISO 20022 without mandating it. For those that simply want to keep using their legacy formats, Finastra’s Bacsactive-IP service will allow users to upload data in their existing format, which will then be automatically converted into the Bacs specified ISO format when required. For those that plan to use the enhanced data fields available, Bacsactive-IP will allow you to upload your data in the ISO 20022 format.

If you decide to move to ISO 20022 before Bacs switches, bear in mind that legacy formats cannot handle rich data, so a significant amount of the information in your file will be lost when it is converted to the Bacs Standard 18 format currently used by the Bacs scheme.

Keeping up to date with Bacs scheme changes

You can read more about the ISO 20022 standard at www.iso20022.org.

Pay.UK will inform Bacs Service Users of any changes to the Bacs message structure, but you can also keep an eye out for the latest news at the Bacs area of the Finastra website.