ISO20022 Implementation: Challenges & Future Benefits for Financial Firms.

As the November 2025 deadline for ISO20022 implementation approaches, financial institutions face a critical juncture in payment messaging standardization. This long-awaited transition promises significant improvements in data richness and interoperability, but adoption challenges remain. Are firms fully prepared to embrace the standard, or will we see continued workarounds that diminish its potential benefits?

The Last Chance Saloon for Standardization

ISO20022 represents the culmination of a 15-year journey. Created in 2010, these messaging standards were originally scheduled for implementation in 2020, but the industry has been operating in a transitional phase where both old and new message formats were acceptable. Come November, this flexibility ends. Financial firms will be forced to adopt the new message standards, with only nine months remaining to complete their preparations.

Despite the approaching deadline, compliance issues persist. We're seeing institutions implement partial solutions or shortcuts:

"We're already seeing a few banks changing and going off-piste, making it up as they go along... we need the industry to come together on this to deliver on the ISO20022 hype.

These deviations from the standard create data exceptions that undermine the very purpose of standardization. When exceptions become accepted in the first year of implementation, they tend to persist and multiply over time, eroding the benefits the industry hoped to achieve.

The Budget Barrier

At its core, the compliance issue stems from budget constraints. Organizations face difficult decisions about where to allocate their limited resources:

"The firm might not want to make the investment they need to fix that one system. It is not on top of our priorities."

This financial calculus leads to compromises that ripple through the entire financial ecosystem. Data providers may not even be aware of all the issues with the information they transmit, leaving downstream partners to manage the consequences. At Gresham, we've observed that approximately 100 out of 4,000 feeds processed daily contain data problems that prevent customers from handling that data correctly.

The Promise of ISO20022

Despite these challenges, ISO20022 represents a significant leap forward for the industry:

"ISO20022 should be a real panacea to a lot of the interchange of data problems that we currently have with the SWIFT standard... We're going to end up in a much better place than we are now."

The new standards offer considerably richer information capacity compared to their predecessors. This enhanced data capacity can be transformational, particularly for post-trade reconciliation, where reference data is often lost in transit between systems:

"One of the reasons why reconciliation becomes difficult is that we managed to lose all of the clues as to how this set of data goes together with this set of data, we lose all the references or we lose most of the references. In our new ISO20022 world, that shouldn't happen. There's enough data space."

Cross-border payments stand to benefit significantly from this increased information capacity. The Cross-border Payments and Reporting Plus (CBPR+) messages will provide far more contextual information than previously available, improving both operational efficiency and fraud prevention capabilities.

Taking Action Now

With the ISO20022 deadline in November 2025 approaching rapidly, firms need to act quickly to ensure proper implementation:

"It does require more of a rework and a proper analysis of where that data can be sourced from and how do you retain all of that data through most of the flow through all the parts of the flow that you need to."

The complexity of modern financial infrastructures, often comprising hundreds of interconnected systems, creates numerous points where data can be lost or altered. Organizations must identify these vulnerable points and remediate them to preserve data integrity throughout their processes.

Perhaps most importantly, data providers need to take responsibility for validating their own output rather than relying on recipients to identify issues:

"Check your own homework. It's not difficult, firms can validate it. We find problems within seconds of a custodian sending US data, within seconds of a bank sending a statement."

Beyond ISO20022

While ISO20022 implementation represents a significant step forward, it won't resolve all data challenges in the financial sector. As markets prepare for T+1 settlement cycles, other issues will come to the forefront:

"They're specifically calling out standard settlement instructions as being a problem... We know there are problems there and those problems are kind of OK at the moment because we live in a T+2 world, but when we leave to T+1 we just won't have enough time to correct those SSI problems."

This suggests that the industry's data standardization journey will continue beyond the ISO20022 implementation, with standard settlement instructions (SSIs) likely to become the next focus area.

Conclusion

ISO20022 implementation presents a pivotal opportunity for the financial industry to enhance data quality, improve operational efficiency, and strengthen fraud prevention. However, realizing these benefits requires genuine commitment to the standards rather than superficial compliance.

Financial institutions must validate their own data outputs, invest in necessary system upgrades, and maintain the integrity of data throughout their processing chains. Only through this disciplined approach can the industry fully capitalize on the potential of ISO20022 and prepare for future challenges like T+1 settlement.

The question remains: Will firms fully adapt to ISO20022, or will workarounds continue past the November deadline? The answer will significantly shape the efficiency and reliability of financial data exchanges for years to come.