Federal Reserve to require ISO 20022 compliance for Fedwire by March 10, 2025

Many countries ha­­­ve already adopted ISO 20022 as their standard message format for wire transfers, and the Federal Reserve is now adopting the ISO 20022 standard in the U.S. as well.

As part of its payments modernization initiative, the Federal Reserve will require all transactions going through its Fedwire^® Funds Service to comply with the ISO 20022 standard starting March 10, 2025.

Here are six things U.S. financial institutions should understand about ISO 20022:

1. Implications of looming deadline
In June 2022, the Federal Reserve System announced that the Fedwire Funds Service would replace its existing proprietary Fedwire Application Interface Manual (FAIM) format with ISO 20022 messages on March 10, 2025. In a single-day implementation, all U.S. financial institutions must begin using the ISO 20022 message format when using the real-time gross settlement system for both domestic and cross-border payments.  

2. Covers more than payments
ISO 20022 is a global financial messaging standard implemented by the International Organization for Standardization. ISO 20022 goes beyond payments, however, offering a single, standardized approach to support all aspects of a financial interaction. Payments is only one of five financial service domains covered by the standard. It also covers securities, trade services, cards and foreign exchange.

3. Improves wire transfers
ISO 20022 transforms wire transfers by enhancing efficiency, standardization and data richness, ultimately benefiting both financial institutions and their corporate customers.

Here’s how:

• Efficiency and speed: ISO 20022 enables faster, more secure and more efficient payments. It facilitates real-time processing, which reduces transaction time.
• Standardization: ISO 20022 provides a common language for financial messages. By standardizing data elements and structures, it enhances interoperability across different systems and institutions. 
• Richer data: ISO 20022 messages carry more detailed information. This includes additional context, remittance details and structured addresses. The richer data improves transparency, reconciliation and compliance.
• Benefits for corporates: Corporates benefit from ISO 20022 by lowering IT support costs and raising levels of straight-through processing. It also facilitates mobility of cash across financial institutions and regions.

4. Supports payments modernization
Banking is centered on payments. ISO 20022 benefits financial institutions by providing a structured and data-rich common language that is readily exchanged among corporates and banking systems.

ISO 20022 is foundational for innovations such as moving from end-of-day batch file processing to real-time payment processing. And ISO 20022 provides the opportunity for enhanced analytics, which can lead to offering valuable new levels of payment services to financial institutions’ customers and members.

5. Offers stronger fraud protection
Cybercrime perpetrators can flourish by leveraging weaknesses in proprietary messaging standards for payments. For example, strict character limits make it difficult to clarify payment beneficiaries. For fraudsters, less information traveling with a transaction means there are more opportunities to deceive payers and payees.

ISO 20022 can help crack down on payment fraud and cybercrime by increasing information flow and coordination between parties. For example, the new message format increases the number of characters that financial institutions can use to send remittance information from approximately one hundred to nearly 9,000 characters.

6. Easier with an ISO 20022–native solution
The Fedwire switch to ISO 20022 goes beyond compliance with a new messaging format. Implementation can be complex. Financial institutions can benefit from investing in a single, intelligent and secure platform that meets immediate regulatory needs and is responsive to change.

With an enterprise view of all payments, financial institutions can leverage payment-rich information to customize new products and services. Starting with one functionality and one access point at a time, financial institutions can progressively transform their payments infrastructure.

The standard for financial messaging

ISO 20022 is already the global payment messaging standard, in use by financial institutions in more than 70 countries. It’s vital to instant payments and plays an important role in the modernization of payment processes. 

Beyond improved compliance and regulatory reporting, however, forward-thinking financial institutions are looking to ISO 20022 as the right opportunity to get faster, more accurate and more complete data along with reduced risk exposure. Corporate customers also benefit, including faster transactions and greater visibility into their accounts for an improved service experience.

Find out how Fiserv can help you comply with the ISO 20022 mandate.