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At its core, the ISO 20022standard provides a single scheme for financial messaging, securities, trade services, cards, and foreign exchange, as well as facilitating the movement of instant payments via the RTP Network or FedNow Service. This messaging standard is crucial for the future of payments and financial innovation.
To better understand how adopting this standard affects financial institutions, it’s important to address some of the most common questions about this migration.
What is the timeline for adopting the ISO 20022 standard?
Back in 2022, the FederalReserve announced that it planned to adopt the standard for the Fedwire FundsService in a single-day implementation strategy on March 10, 2025. This migration will be a turning point in the U.S. payment system as we know it.
Why will the migration toISO 20022 be a turning point for the U.S.?
A standard like ISO 20022 is what makes it possible for different payments systems and networks to communicate and work together. Just like telecommunication standards that allow a consumer on one cellular network text and call another consumer on a different network, ISO 20022 makes it possible for financial institutions to send and receive payments, along with the associated transaction data, regardless of the system or network used.
What’s the difference between the ISO 20022 implementation for theFedWire Funds Service and the FedNow Service?
Both FedWire and FedNow services are moving to ISO 20022, but there are some key distinctions financial institutions need to consider. While both the FedWireFund Service and FedNow Service will use 20022 formatting, these are separate payment channels with separate initiatives. It’s like renovating an old house(FedWire Funds) vs. building an entirely new house (FedNow).
The FedNow Service is a brand-new payment system, and it currently uses the ISO20022 messaging system, as it has from day one. In contrast, the FedWire Funds system is replacing its current messaging format (consisting of tags and data elements) with ISO 20022. Think of it as if you’re swapping out an old engine for a new one while keeping the rest of the car intact.
While the Federal Reserve banks aim to align the implementation of the ISO 20022format for both services as closely as possible, there are going to be some differences, as they are different payment channels. For example, the FedWireFunds Service will not adopt the Request for Information feature that is part of the FedNow Service. Additionally, FedWire and FedNow will not communicate with each other, despite using similar formatting.
Does the ISO 20022 migration only apply to the FedWire Funds Service?
The ISO 20022 migration does not apply to the FedWire Securities Services or FedACH services. If your team is dealing with either of these services, rest assured, they will not change. The migration only applies to the FedWire Funds service.
Financial institutions should prepare for these changes and take advantage of all the resources that are available on the MyStandards website, and check out Pidgin.net for more information about the FedNow Service and the latest updates on ISO20022.
