This article is republished with permission from Central Bank Payments News (Off-site).
The payments industry in the U.S. reached a significant milestone this summer with the successful migration to the ISO 20022 messaging format for the Fedwire® Funds Service. This achievement marks the culmination of years of coordinated effort and preparation by the Federal Reserve, financial institutions, core processors and various industry players. The adoption of ISO 20022 is not just a technical upgrade; it represents a great industrywide accomplishment and a major advancement in the evolution of payments infrastructure, promising to deliver enhanced efficiency, innovation and security across the global payments landscape.
The ISO 20022 advantage
ISO 20022 was developed by the International Organization for Standardization, an independent nongovernmental organization that publishes standards for a broad range of industries. At its core, ISO 20022 provides a structured and data-rich common language for exchanging payment information among businesses and financial institutions. This standardization makes payments more machine-readable with defined data fields, opening the possibility of automated and more efficient transactions. The adoption of ISO 20022 aligns U.S. payment transactions with an industry standard, which is crucial as global e-commerce continues to grow and evolve.
One of the key advantages of ISO 20022 is straight-through processing efficiency. This breakthrough processing reduces manual intervention and streamlines reconciliation. Another significant benefit is risk and fraud mitigation. The richer payment data and increased information flow will facilitate banks' and other entities’ efforts to fight fraud. Because the data is structured and standardized, a system can more easily verify and detect key identification information.
The journey to ISO 20022
The Federal Reserve Board announced it would adopt the ISO 20022 message format for the Fedwire Funds Service in 2021 given the demonstrated industrywide benefits. At that time, the Federal Reserve System also invited public comment from the industry surrounding the forthcoming migration. In the years leading up to the July 2025 migration, Federal Reserve Financial Services collaborated with the industry, providing resources such as ISO 20022 testing environments, preparation checklists, webinars, training sessions, drop-in calls, documented testing requirements and monthly newsletters to help ensure migration readiness for banks, credit unions and the broader payment community.
Leveraging ISO 20022 for future growth
Now that ISO 20022 is live for the Fedwire Funds Service, which settles over $4.7 trillion in wire transfers daily, the next step is to use this standard to create value and further modernize payments. Broad industry adoption of the ISO 20022 messaging standard and the benefits of its highly structured data made it the logical choice for the FedNow® Service, the Federal Reserve’s instant payments infrastructure. And because the standard is designed to meet the needs of future innovation, ISO 20022 will support the FedNow Service as it evolves and adds capabilities.
The successful implementation of ISO 20022 is just the beginning. The Federal Reserve and the industry will continue to work together to ensure broad adoption and maximize the benefits of this data-rich format. This includes encouraging software and fintech companies to adopt ISO 20022 in their applications to make it easier for users to populate the necessary data.
Engaging with corporate treasurers and fintech companies to integrate ISO 20022 into their systems is crucial. The Federal Reserve is working on multiple collaborative opportunities this fall to facilitate this integration. Continuing to partner with payments associations and other industry groups to amplify messaging and education efforts will be essential in driving broader adoption.
The migration to ISO 20022 represents a significant leap forward in the global payments infrastructure. By providing a common, data-rich language for payments, ISO 20022 promises to deliver enhanced efficiency, security and innovation. As the industry continues to adopt and leverage this standard, we can expect to see a wide range of benefits that will modernize payments and set the stage for future advancements.
