SWIFT ISO 20022 migration:
Everything you need to know about
MT to MX conversion, mapping and more

 

The SWIFT ISO 20022 migration will see the banking and payments industry migrating from SWIFT MT messages to the new MX ISO 20022 standard. But what does this mean for banks' systems, operations and processes? Read on for all you need to know about ISO 20022 messaging, payments and transformation.

Contents

What is the new ISO 20022 message standard?

What is the difference between MT and MX messages?

ISO 20022 implementation date: When does SWIFT MT to MX migration begin?

SWIFT MT-MX conversion: Why is it so important for banks now?

Why is MT-MX mapping difficult?

SWIFT MT-MX conversion: What are the benefits and disadvantages?

Is there an ISO 20022 data dictionary?

Bank of England ISO 20022 approach: What is on the horizon?

TARGET2 ISO 20022 migration: Timeline and plans

SWIFT gpi and ISO 20022: How do they fit together?

How do High Value Payments Plus (HVPS+) and Cross-Border Payments and Reporting Plus (CBPR+) fit in with ISO 20022?

ISO 20022 Canada: How is Canada modernising payments with Lynx?

What is the new ISO 20022 message standard?

Under ISO 20022, SWIFT message types that banks commonly send and receive will undergo some changes. The old MT format will be gradually replaced by the MX format for ISO 20022, which is designed to provide a single, standardised approach across financial services.

What is the difference between MT and MX messages?

For banks, the most important difference between SWIFT MT messages and the new MX message format used for ISO 20022 is that MX messages are far richer in data. Banks have the opportunity to leverage this data to enhance everything from sanctions and compliance processes to customer analytics. One of the disadvantages of relying solely on MT-MX conversion to tackle ISO 20022 migration is that this richer data is effectively discarded when translating an MX message back into the MT format.

ISO 20022 implementation date: When does SWIFT MT to MX migration begin?

SWIFT has stated that ISO 20022 messages will be enabled for cross-border payments and cash reporting from August 2022 for those who actively choose to opt-in and then November 2022 on a general basis. This means that banks and other financial institutions will need to be able to process the MX ISO 20022 message format from this date.

However, SWIFT MT messages are heavily embedded in the systems and processes of banks, their partners and customers, meaning that MT to MX mapping and conversion capabilities (and vice versa) will be essential for most firms until 2025, when the MT message format is expected to be retired.

SWIFT MT-MX conversion: Why is it so important for banks now?

MT to MX migration will not happen overnight. MT messages are deeply entrenched in the financial services and payments ecosystem and many banks are going to find that their legacy systems and technology are not equipped to handle the new SWIFT MX ISO 20022 format without some additional work. MT-MX mapping and MT-MX conversion are going to be a critical part of banks’ operations for some time to come.

Why is MT-MX mapping difficult?

MT-MX mapping presents a number of challenges for banks, including:
- Continuous updates and changes to SWIFT MT messages, which is likely to continue with MX messages under ISO 20022.
- The complexity of SWIFT message types makes MT-MX mapping a highly technical processes requiring significant IT and payments expertise.
- Divergence in standards and practices between different countries increases complexity further.

All of the above can mean that SWIFT MT to ISO 20022 mapping and conversion becomes a costly, time-consuming burden on your IT and operations resources.

SWIFT MT-MX conversion: What are the benefits and disadvantages?

MT-MX conversion will be a critical part of banks’ message transformation toolkits as they tackle ISO 20022 migration. Using a SWIFT MT to MX converter is a quick way to ensure that banks can process MX messages and avoid interruptions to their business.

However – the MX format is designed to provide the financial services industry with one consistent standard, meaning that MT-MX conversion isn’t intended to be a long-term solution. Furthermore, the difference between MT and MX messages, with the former containing far more and richer data, means that by relying solely on MT-MX conversion, banks are discarding potentially valuable information.

In the longer term, banks should consider transforming their payment systems away from legacy technology and towards solutions with native support for MX messages in order to reap the benefits of ISO 20022.

Is there an ISO 20022 data dictionary?

As part of the migration, SWIFT has provided an ISO 20022 data dictionary and a guide to understanding it, which can be found here.

Bank of England ISO 20022 approach: What is on the horizon?

Bank of England has stated that its CHAPS high value payment system will migrate to the ISO 20022 specification in April 2023, with a pilot program running in the summer of 2022. The Bank has also set up a Standards Advisory Panel to provide industry advice on ISO 20022 implementation, MT to MX migration, and the adoption of new payments standards in the UK.

TARGET2 ISO 20022 migration: Timeline and plans

TARGET2 will migrate to the ISO 20022 specification in November 2022, however there are also bigger changes underway. The Eurosystem’s TARGET consolidation project brings together the TARGET2 settlement system and the T2S settlement platform to enhance real-time settlement capabilities and support the provision of modern, optimised services. This ‘big bang’ migration will also take place in November 2022.

SWIFT gpi and ISO 20022: How do they fit together?

SWIFT gpi, or global payment innovation, was introduced in 2016 to bring speed and transparency to cross-border payments and is a separate initiative to the ISO 20022 migration program. The adoption of ISO 20022 will enable firms to benefit further from these types of initiatives.

How do High Value Payments Plus (HVPS+) and Cross-Border Payments and Reporting Plus (CBPR+) fit in with ISO 20022?

SWIFT formed the High Value Payments Plus taskforce in 2016 to promote harmonisation and interoperability between HVPS providers around ISO 20022 implementation, whilst CBPR+ plays a similar role for cross-border payments and cash reporting. Firms looking to implement their ISO 20022 programs should ensure that any solutions or tools they work with offer support for HVPS+ and CBPR+.

ISO 20022 Canada: How is Canada modernising payments with Lynx?

Lynx, launched in August 2021, is Canada's High Value Payments System and a key part of Payments Canada's modernisation program. ISO 20022 messages for Lynx are already available, with end-to-end support for the new standard planned to be released later this year. 

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