How ISO Standards Could Reshape Cross-Border Payments

Since the inception of global trade, the world’s financial systems have largely talked past and around each other.

The reason? Diverse payment systems and communication protocols across countries and financial institutions have led to fragmentation and a lack of standardization across the world’s economies and marketplaces. This, in turn, has historically created friction in cross-border payments.

Against this backdrop, the ISO 20022 messaging standard, set for adoption this upcoming March 2025 by Federal Reserve banks, has emerged as a potentially transformative standard for improving data richness and fostering interoperability, reducing friction and paving the way for innovations in the way money moves globally.

ISO 20022 is fundamentally about standardization — a universal messaging framework that enhances the richness, structure and quality of payment data. Unlike legacy formats, it enables the transmission of more detailed and structured data, reducing errors and improving reconciliation processes. Major global financial players, including SWIFT, have championed its adoption to align disparate systems and bring cohesion to a fractured ecosystem.

As PYMNTS reported at the start of the month, more than 1 million ISO 20022-formatted messages are already being sent over the Swift network every day. These messages are being sent to 220 countries and territories around the world.

Yet, for industry leaders and technologists alike, the adoption of ISO 20022 is not an end in itself but a critical steppingstone toward greater interoperability in global payments systems.

Combined with other advancements such as blockchain and artificial intelligence (AI), ISO 20022 could offer an unparalleled opportunity to modernize cross-border payments and address long-standing inefficiencies.

Read more: More Than 75% of Banks Not Ready for ISO 20022 Mandates. The Question Is: Why?

Messaging Standardization as a Cornerstone of Better Cross-Border Payments

Messaging standardization ensures consistent data formats, giving all parties a clear view of fees applied at each step, exchange rates and estimated delivery times. This transparency helps build trust among participants and enhances the end-user experience.

Standardized messages also include fields for compliance-related data, such as Know Your Customer (KYC), anti-money laundering (AML) and sanction screening. At the same time, automated processing becomes increasingly feasible with standardized messages, reducing the need for manual intervention.

Still, as Jenny Lee, head of U.S. Wire Product at Bank of America, emphasized to PYMNTS, the potential of the ISO 20022 format cannot be fully realized without the participation of all market players, including banks, corporates and financial institutions.

Without synchronized timelines and policies, an interoperability gap persists.

Payment systems built on proprietary frameworks or outdated technologies may struggle to align with ISO 20022’s demands. Here, technologies like APIs (application programming interfaces) and machine learning can play a vital role in bridging gaps. APIs, in particular, can facilitate the translation of non-ISO data formats into compliant messages, enabling broader participation in a standardized ecosystem.

ISO 20022 is also a foundation for unlocking value-added services that go beyond payment processing. The rich data capabilities it provides can support advanced analytics, fraud detection and customer personalization. Coupled with AI, ISO 20022 can transform how payment service providers deliver insights to businesses, helping them optimize cash flow, manage risk and plan strategically.

Read more: Can Blockchain Solve the Cross-Border Payments Puzzle?

Unlocking the Intersection of ISO 20022 and Blockchain

While PYMNTS has covered the benefits that ISO 20022’s richer messaging data could bring to technologies like AI, there also exist opportunities within blockchain-based digital currencies.

Cryptocurrencies are surging in popularity in the U.S., but for their eventual regulation to be effective, the establishment of a robust and universally accepted identifier system will be increasingly essential for the smooth functioning of the global financial ecosystem.

A key issue of bringing blockchain assets more cleanly into the financial fold is the fact that, unlike fiat currencies, cryptocurrencies like bitcoin and ethereum lack universally recognized identifiers, making them difficult for banks to track and process.

While a bank’s system can easily identify transactions involving euros, dollars and most global currencies, it may struggle to differentiate between transactions involving crypto assets like ethereum and ethereum classic.

That’s where Digital Token Identifiers (DTIs), another ISO standard, comes in. DTIs could be crucial for distinguishing between different digital currencies. The intersection of DTIs and the ISO 20022 messaging standard could help to transform the landscape of cross-border payments by fostering greater interoperability between traditional and digital financial systems.