[Basic Knowledge] The Financial Revolution Brought about by the ISO 20022 International Standard

Good morning. This is Fennec.

In this blog, I recommend investing in crypto currency assets that are closely related to the ISO 20022 standard. So today, I would like to talk about ISO 20022, which is a preliminary knowledge of the ISO 20022 standard.

ISO 20022 is an international standard that specifies rules and procedures for the format of telegrams used in the transmission of financial services information. Simply put, it is a rule that says, “When exchanging money, send and receive this information in this manner. Messaging that complies with this standard is called ISO20022 compliant messaging. ISO20022 is developed and managed by the Technical Committee on Financial Services (TC 68) of the International Organization for Standardization (ISO).

Some crypto currencies have stocks that directly or indirectly comply with this rule.

There are many people who are investing in ISO 20022 crypto currencies, and I am one of them, but it is quite difficult to find a systematic document on the standard.

This article provides an explanation of the IS020022 standard and the role of ISO20022 in realizing a digital society, while looking back at the past history of electronic payment services.

The Birth of ISO 20022

The ISO 20022 standard was born in 2004, when it was proposed by ISO/TC 68.

The International Organization for Standardization (ISO) is a non-profit corporation under Swiss civil law, headquartered in Geneva, Switzerland. It is an organization that conducts standardization activities based on guidelines called “ISO Directives”.

ISO currently has about 300 Technical Committees (TC) in different industrial fields, and TC 68 is the 68th TC in charge of standardization of financial services.

ISO 20022 was created by Technical Committee 68 Financial Services, commonly known as TC 68, as a new international standard for communication messages used in financial services in general, transcending the boundaries between banking and securities.

Full-scale operation has not yet started even in August 2021, and everyone is still working hard under disparate rules.
Because it is a large organization, it is difficult to find out if there are any negative effects on the current system, so it is difficult to spread.

Basic Information on ISO 20022


What is achieved by ISO 20022

Compliance with the ISO 20022 standard improves the quality of information and enables transparent global financial transactions to be automated and processed faster.

As a result, fraud is prevented, compliance, data analysis accuracy, and system maintainability are improved.

Also, if ISO 20022 becomes widely used, it will promote cashless transactions even more than now.

In addition, compliance with the standard will ensure convenient and safe transactions, which is expected to encourage foreign investors to enter the market and strengthen the market competitiveness of countries that have adopted ISO 20022.

So why does compliance with the ISO 20022 standard improve the quality of information?

The reason for this is that by modeling and mandating compliance with ISO 20022, a common language, they can avoid a lack of transaction information. And it makes it easier to automate the exchange of messages, facilitating interoperability. In addition, if it is clear who sent the message and when, criminal acts such as money laundering are less likely to occur.

The initiative to automate the contact for money received from the Bank of Okinawa for overseas remittances via SWIFT gpi, introduced by Nihon Unisys at the end of 2020, can be said to be a precursor to the ISO 20022 initiative. The Bank of Okinawa has long focused on the field of remittances due to the characteristics of the region surrounded by the sea.
gpi (Global Payment Innovation) is a norm that allows visualization of the processing status at the financial institution that relays the remittance and the status of money received within the receiving bank.

ISO 20022 philosophy based on STP

The understanding of the concept of ISO 20022 can be deepened by knowing STP (Straight-through Processing).

STP, also known as “Securities STP,” is, as the name implies, a mechanism to go through unnecessary processes and make them direct.

Specifically, it refers to the process of automating electronic trading to perform securities transactions without the need for human intervention.

ISO 20022 is a continuation of this STP standard, and in the future, the majority of banking and securities communication messages will converge on ISO 20022.

Figure 1: History of communication message standards

The oldest format of a communication message is a “letter”, followed by a “fax”, and then this diagram.


Overview of ISO 20022

The greatest strength of ISO 20022 is its interoperability. This will help promote “Society 5.0”, which is proposed by the Japanese Cabinet Office as the next generation digital society.

Figure 2: Society 5.0

Society 5.0, which was set forth by the government in the Fifth Science and Technology Basic Plan in January 2016, aims to create a “human-centered society that balances economic development and the resolution of social issues through a system that highly integrates cyberspace (virtual space) and physical space (real space).

Simply put, it is a national policy to use information to promote innovation while working on economic development and solving social issues.

The ISO 20022 standardized messaging, or business model, has a flexible structure that is suitable for encompassing and linking systems from various fields.

The simple concept of exchanging money information is the strength of ISO 20022.

A similar initiative to Society 5.0 is the cyber-physical system (CPS) of Industry 4.0, which is being carried out under the banner of the German government.

It also may look a little like LACChain at IDB Labs in the Inter-American Development Bank Group. LACChain is a global alliance for the development of the blockchain ecosystem in Latin America and the Caribbean, working to promote innovation and improve lives in the region.

In all of these projects, interoperability between platforms is key.

LACChain participants are compliant with the norms established by ISO/TC307 (Blockchain and Distributed Ledger Technology). The committee was founded in 2016 by Gilbert Verdian, CEO of Quant Network Ltd.

Three features of ISO 20022

ISO 20022 has the following features.

  1. Highly versatile, scalable, and flexible format
  2. Hierarchical standard system
  3. Database published on a website

I will explain each one in turn.

Highly versatile, scalable, and flexible format

XML (Extensible Markup Language) has been adopted as the message format for ISO20022.

Unlike the coding in the new format (ISO 20022 Customer Credit Transfer), in SWIFT MT 103 and other conventional formats, items were not represented by “text data” such as tags, but by “binary data” representing positions.

Therefore, it was filled with a series of numbers that people could not discern the meaning of at a quick glance.

This has been replaced by XML, which is easier for people to understand, and makes it easier to connect and link between different systems and utilize data. XML is considered superior to conventional formats because of its flexibility in allowing data items and conditions to be freely defined using tags, its low system dependency, and its ease of data sharing and reuse.

In addition to XML, it also supports ASN.1 (Abstract Syntax Notation One). The adoption of JSON (JavaScript Object Notation) is also currently under consideration, allowing for flexible response to needs and environments.

・The ISO 20022 standard only supports XML 1.0 and UTF-8. UTF-16 (multi-byte characters) is not supported due to the view that it is inefficient for character transfer.

・Additional characters are being considered for use in order to support non-alphabetic, non-Western languages.

Hierarchical standard system

It is not only the telegram format that is subject to standardization in ISO 20022.

This includes the business model and the types, definitions, and conditions of message data items.

So it is not limited to those who send and receive messages that comply with the standard, for example, practitioners will comply with the business model, designers will comply with the message model, and developers will comply with the format.

Database published on a website

The standardized standards are stored in a database called a “repository.

The repository can be viewed by anyone with the latest content on the website.

It works as a handy dictionary without the need to update it like a PDF document.

Perhaps it may seem Wikipedia-like, but unlike Wikipedia, only ISO 20022 Registered Accreditation Authorities (RAs) can be added to the repository.
In other words, only SWIFT.

Technical Committee 68


TC 68 (Technical Committee 68 Financial Services) is a committee that creates global standards for the financial services industry.

TC 68’s role is to support standards for business needs, innovation, and regulatory requirements, to promote the adoption of existing international standards, and to coexist with non-ISO standards and approaches.

The main international standardization targets of TC 68 are as follows.

  • core banking system
  • Capital markets, including asset management
  • payment
  • credit card processing
  • Information Security Specific to Financial Services

Organizational structure

Organizational structure of TC 68

Figure 3: Organizational chart of ISO Technical Committee 68

TC 68 is composed of subcommittees, advisory groups, and working groups.

In addition, the subcommittee is divided into three sections: SC 2 (Security for Financial Services), SC 8 (Reference Data for Financial Services), and SC 9 (Information Exchange for Financial Services).

Each subcommittee has a Working Group (WG) and an Ad Hoc Group (AHG), which deliberate on the drafting of international standards in their respective areas of responsibility. The term “ad hoc” means “special,” and although it is established on an ad hoc basis when necessary, it is omitted from the organization chart because it must be disbanded after each report.

TC 68, in collaboration with SC 9, manages and monitors ISO 20022.

The Registration Management Group (RMG) oversees the five groups that belong to it and is responsible for reporting to TC 68 and SC 9.

These arrangements are described in detail in ISO Directives.

ISO 20022 audit

RMG: Registration Management Group

Het is de belangrijkste instantie voor ISO 20022-registratie, die toezicht houdt op het volledige registratieproces en verslag uitbrengt aan ISO TC 68 en SC 9.

Vanaf eind augustus 2021 is Japan de RMG-voorzitter en het internationale secretariaat voor ISO 20022.

RippleNet (Ripple) became the first distributed ledger technology (DLT) company to join the ISO 20022 RMG in May 2020.
This does not just mean that Ripple is now compliant with ISO 20022 messaging and business flow, but that it has been authorized to develop and revise the ISO 20022 standardized format.

RA: The Registration Authority

Verify that the developed repository items comply with the approved technical specifications.

If you certify that the item complies with the specifications, store it in the repository.

ISO 20022 experts by business area

SEG: Standards Evaluation Groups

SEG’s business sector experts will evaluate the following areas.

  • fund settlement
  • Securities / Derivatives
  • Forex
  • Trade finance
  • Card and retail payments

Individuals who belong to RMG may also serve as SEG.

CSH: Cross SEG Harmonisation Group

Coordinate projects across multiple SEGs and solve problems.

RTPG: Real-Time Payments Group

Support for real-time payments.

Technical support for ISO 20022

TSG: The Technical Support Group

Provide technical support to other ISO 20022 registrars (RMG, RA, SEG) and to the community of organizations or users of ISO 20022.

Future Prospects for ISO 20022

Financial industry

ISO 20022 is already used in payment systems in more than 70 countries.

SWIFT, the registered accreditation authority (RA) for ISO 20022, says that in the next few years ISO 20022 will become the de facto standard for wholesale, supporting 80% of global transaction volume and 87% of global transaction value.

Point: SWIFT (Society for Worldwide Interbank Financial Telecommunication SC) is an interbank financial telecommunication society. It’s a privately held corporation and a provider of financial messaging services.
It’s a big company in charge of international payments all over the world.

You may be wondering, “Why send a message instead of money?” The reason is that the money you send overseas does not move overseas in reality. The banknotes remain stored in the country and their movement is recorded in each other’s ledgers. Money is data. The metal and paper money issued by the government is evidence that it has data called “value”.

SWIFT has published its own ISO 20022 migration schedule as follows.

This plan by the largest company in the industry will have a significant impact on financial services as a whole.

Table 1: SWIFT’s ISO 20022 migration schedule
2020 Check for changes in specifications and evaluate the impact.
2020 – 2021 Implementation, internal testing, and preparation for network testing in a real environment.
2021 – 2022 Network testing and preparation for operation in a real environment.
2022, Nov Gradual transition to ISO 20022.
2025, Nov Full transition to ISO 20022.

※MT categories 1, 2, and 9 abolished only for cross-border payments

Currently, the ISO 20022 standard is focused on financial institutions, large corporate transactions, and wholesale, but research is also underway for its use in the retail domain, in transactions with small and medium-sized companies and individuals.
SWIFT Go, released in July 2021, enables international money transfers of less than $10,000.
This service is the official release version of SWIFT Low Value Payments (SLVP), which was officially reported for retail use in the January 2021 issue of SWIFT News.
It is not hard to imagine that SWFT Go, built on gpi’s technology, will be ISO 20022 compliant in the future, just like other SWIFT money transfer services.

In addition to SWIFT, Fedwire (an instant gross settlement fund transfer system operated by the Federal Reserve Bank of the United States), CHIPS (a privately owned clearinghouse for large fund transfers), and CHAPS (an automated clearing and payment system) in the United Kingdom are also working on ISO 20022 compliance.

The integration of the European Central Bank’s (ECB) Target 2 funds settlement system and Target 2 Securities securities settlement system will eventually be fully migrated to an ISO 20022 compliant format.

Some so-called ISO 20022 native companies, such as FINASTRA in the UK, have had an ISO 20022 compliant payment system since the beginning of their services.

Industries other than finance

I have already reported on the high interoperability of ISO 20022.

Due to its flexibility and commitment to retail, it is likely that the company will be hired outside the financial sector in the future.

Various ISO 20022-compliant blockchain services are precedents for the use of this technology.

The use of ISO 20022 in various fields such as IOT, logistics, and the arts will develop in the future, and the linkage with blockchain will become even stronger.


What did you think? These are the contents and roles of ISO 20022.

The importance of data utilization and interoperability underpins ISO 20022.

In various business fields, I often hear the phrase “data is the new oil. In FinTech, which is currently in its infancy, data is the oil, or perhaps it is still coal.

Is it really the steam engine, ISO 20022, that accelerates the gold rush of financial development and puts people on the back of the horse?

Thank you very very much for reading all the way through!