ISO 20022, the new global messaging standard for financial transactions, is emerging as a cornerstone of payment modernisation in the financial industry. However, the adoption of the standard presents significant complexities and challenges, as it demands not just financial institutions (FIs) but regulators to harmonise relevant national requirements, upgrade legacy systems, and adapt infrastructure to support the standard’s enhanced capabilities. These efforts require substantial investments in technology and resources, underscoring the importance of strategic planning during implementation. The migration to ISO 20022 therefore marks a transformative shift in the industry, fundamentally redefining how FIs process payments and transact with each other. It enhances processing speed, improves reconciliation accuracy and provides deeper customer insights. The standard also supports compliance initiatives, enabling advanced capabilities in areas such as anti-money laundering (AML), fraud detection and regulatory reporting. The enriched data generated by ISO 20022 also fosters innovation in financial services. “The enriched data fuels innovation, particularly through artificial intelligence (AI) and machine learning (ML),” noted Conor Colleary, senior vice president of financial services at Oracle, emphasising the critical link and synergy between ISO 20022 and emerging technologies. Conor Colleary, Senior Vice President of Financial Services, Oracle The transition is being managed through a coexistence period, during which both legacy messaging standards, such as SWIFT MT (message type), can be used with the new MX (message XML) messages. This phase, which began in March 2023, is set to end in November 2025, giving FIs time to upgrade their systems, adapt processes and ensure interoperability. However, managing dual systems during this period increases operational complexity and costs. As the end of the coexistence period approaches, FIs face mounting pressure to complete the transition. At the same time, they are confronted by the choice between a strategic overhaul of infrastructures or tactical short-term adjustments. While the former unlocks the standard’s full potential, the latter reflects the immediate resource constraints many face. Timing remains a critical concern. “We are not yet where we need to be,” said Julie Bolan, head of payments for Asia Pacific, Go to Market (GTM), at SWIFT, pointing out that only 27% of messages are currently ISO 20022 compliant. However, there is optimism that this figure will reach 40% by the end of 2024, as banks intensify their migration efforts. Despite this progress, significant hurdles remain, particularly in achieving universal compliance. Variations in regional regulations, readiness levels and infrastructure capabilities contribute to these challenges. However, the long-term benefits of the standard—enhanced interoperability, operational efficiency and improved risk management—far outweigh these complexities. Frankie Wai, business solution director at Temenos, emphasised the importance of prioritising long-term benefits over immediate pressures. “We are helping banks harmonise communication and standardise payment solutions across countries, ensuring that the transition not only meets regulatory requirements but also unlocks the full potential of enhanced data for operational efficiency and risk management.” To streamline this transition, an entire ecosystem of technology solution providers is addressing challenges such as infrastructure upgrades, certification and compliance audits. Vitus Rotzer, chief product officer of financial messaging at Bottomline highlighted the shift from deployed architectures to more agile-hosted services. “It’s all about economies of scale and skills,” he explained, underscoring the importance of scalable solutions in supporting FIs through the migration. The AI revolution in financial services AI continues to revolutionise banking operations, driving efficiency and innovation across multiple areas. From automating risk management and fraud detection to personalising customer interactions, AI is enabling FIs to streamline operations and unlock new value propositions. One prominent example is the use of generative AI in fraud management, where it reduces the time required to draft suspicious activity reports (SARs) by up to 70%, freeing up resources for strategic priorities. It also enhances customer service by diagnosing recurring issues and automating complex processes like invoice handling. “The ability to process data in any form and connect disparate pieces is a game-changer,” observed ACI CEO Tom Warsop, highlighting a 15% to 30% productivity boost in software development through human-AI collaboration. AI’s impact extends to compliance, where banks are leveraging the technology for AML checks, fraud detection and sanction screening. Wai noted its transformative potential in reducing false positives and improving risk management accuracy. “AI enables banks to achieve higher compliance levels while lowering costs,” he emphasised. However, implementing AI at scale comes with challenges, particularly in maintaining data privacy and complying with regulatory requirements. Adam Lieberman, Finastra’s chief AI officer, emphasised the importance of trustworthiness and transparency in AI deployment, alongside robust data governance. “Data is the soil in which machine learning grows,” he stated, underscoring that clean, high-quality data is essential for successful AI outcomes. The adoption of ISO 20022, coupled with advancements in AI, is enabling the industry to leverage richer payment data for enhanced customer experiences and innovative solutions. For example, automating invoice processing has become a tangible application of these combined technologies. “AI plays a key role in accelerating these innovations,” Warsop said. However, he emphasised the importance of maintaining a ‘human in the loop’ approach to balance AI’s efficiency with human oversight, ensuring both accuracy and productivity across operations. As banks increasingly adopt a measured approach to AI, beginning with proof-of-concept trials to test and validate its potential before scaling, this cautious strategy helps mitigate risks while demonstrating tangible benefits. “It’s all about identifying where AI can create real value,” noted Colleary, reinforcing the need for strategic prioritisation in AI deployment. The customer-centric imperative While automation in banking has progressed significantly, particularly in core services, there remains untapped potential in back-office functions. Jonathan Tanner, industry principal at Pegasystems, outlined the company’s vision of an “autonomous enterprise”, where AI-driven systems manage routine operations, allowing human intervention to focus on high-value tasks. This approach aims to balance operational efficiency with a customer-centric focus. Tanner also addressed the increasing emphasis on personalisation in banking services, noting that automation alone is insufficient to meet customer expectations. While processes like credit approvals have been streamlined, meaningful customer engagement requires more than speed. One example is the concept of a ‘five-minute mortgage’, which has gained traction in consumer banking. Tanner offered a nuanced perspective, emphasising flexibility, “It should take as long as the customer wants it to. Quick decisions are ideal for seasoned investors seeking the best rates, but first-time homebuyers exploring options may need more time.” He stressed that while automation must ensure swift credit decisions, the broader customer journey must be personalised. This tailored approach builds trust and enables lenders to forge meaningful long-term relationships by aligning services with customer preferences and pacing. Jonathan Tanner, Industry Principal, Pegasystems Building resilience by design into the technology architecture As financial services become more digital, the need for security and resilience has never been more critical. Wai stressed that resilience should be “by design”, integrated into the architecture of financial services technologies rather than addressed as an afterthought. This proactive approach ensures that systems are prepared to handle disruptions effectively. His discussion with a European bank highlighted the importance of operational resilience as a strategic priority. Resilience must span operational, technical and quality dimensions to enable FIs to maintain uninterrupted services, even during incidents or disruptions. “We need to make sure that in any situation, banks can stay active and continue to offer their services without compromising security or performance,” Wai explained, underscoring the importance of building robust systems from the ground up. Balancing efficiency, security and customer-centricity With the ongoing transition to ISO 20022, deployment of sophisticated AI models, and integration of resilience-focused architectures, the industry is preparing for a future of enhanced operational effectiveness. These advancements enable FIs to address market challenges and meet evolving customer needs with greater agility and precision. Sibos 2024 highlighted a shared vision of leveraging innovation to achieve a balance between efficiency, security and customer-centricity. Moving forward, the industry’s success will depend on fostering collaboration, embracing adaptability and committing to the responsible deployment of these transformative technologies.
