Federal Reserve Financial Services (FRFS) implemented the ISO 20022 message format for the Fedwire Funds Service on July 14. As global e-commerce evolves, broad adoption of this new message format aligns U.S. payment transactions with an industry standard that enables greater efficiency and encourages innovation.
Dan DeLuca is the head of payment product strategy of the FRFS Wholesale Product Management team. This team is dedicated to innovative thinking and development of next-generation products. In this article, Dan shares his insights into the value of the new ISO 20022 message format and how it will impact the Fedwire Funds Service and payments industry.
Q: Why was it important for the Fedwire Funds Service to adopt the ISO 20022 message format?
A: The Fedwire Funds Service settles more than $4.7 trillion in wire transfers on average per day. The ISO 20022 message format modernizes the message format for the U.S., helps make transactions more data rich and efficient and promotes global interoperability. This milestone is a significant achievement and a major advancement in the evolution of payments infrastructure.
Q: How will the ISO 20022 message format impact the Fedwire Funds Service?
A: Let’s start with the basics: A payment is a message with information. An ISO 20022 message not only contains more information compared to earlier messaging formats, but it also uses the same language as other payments used in the industry. More specifically, ISO 20022 provides a structured and data-rich common language that is exchanged among corporations and banking systems. So, it makes it easier to understand one another and the payments processed through the Fedwire Funds Service.
Q: What types of efficiencies will financial institutions see due to the new ISO 20022 message format?
A: There are several benefits to using messages with richer data, such as helping improve STP (straight-through processing) rates, enabling more accurate fraud detection, and improving sanction screening processes. The ISO 20022 format allows for more structured and longer fields (e.g., names and address components) compared to the former proprietary FAIM format.
Customers can modify their systems to use this information in a more accurate and timely way, enhancing STP rates. STP reduces manual intervention, streamlines reconciliation and provides access to funds sooner than other payment methods.
Learn more
Contact your relationship manager to learn more about the benefits of the ISO 20022 standard. Visit the Fedwire Funds Service ISO 20022 Implementation Center for more information.
