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Feb. 14, 2025
With the Federal Reserve rescheduling until July 14 the Fedwire Funds Service’s conversion to the ISO 20022 message format, community banks have four extra months to ensure they are ready. Fortunately, there are a variety of resources available to help ensure a successful transition.
ISO 20022 is a global standard for financial messaging that allows for the exchange of consistent payment data across the financial industry. Industry support for the adoption of ISO 20022 dates to 2013, when key industry players including the Federal Reserve, The Clearing House, Nacha and other industry groups decided to support the adoption of the standard.
The ISO 20022 standard is an XML language that allows for interoperability between financial institutions, their market infrastructure, and end users. Currently, Fedwire uses a proprietary format. Under ISO 20022, the same terms and fields will be used for “Debtors,” “Creditors,” “Debtor Agents,” and “Instructed Agents” across all payment rails systems.
As more systems start to convert to the ISO 20022 format, there will be more consistency across platforms. Anyone with basic bank operations experience knows the variations of name formatting and can imagine the efficiencies gained when data elements—such as names and addresses—are structured consistently across platforms.
The ISO format isn’t new to banks. FedNow—the instant payment system launched over 18 months ago—is in the ISO format. Meanwhile, CHIPS—the private-sector counterpart to Fedwire used by large banks—converted in April 2024 in a one-day conversion.
Banks connect to Fedwire by either FedLine Direct or FedLine Advantage. And Federal Reserve Bank Services (FRB Services) has reported in a public dashboard that its systems are on track for the transition.
The transition follows the Fed’s retirement of the Fedwire Funds Offline Service on Feb. 14. That service—which allows customers without an electronic connection to the Fedwire Funds Service to call the Fed to send and receive their messages—was discontinued due to declining interest.
The Fed is offering peer testing for banks and encouraging broad participation. Peer testing allows participants to exchange ISO 20022 test messages in the DIT2 environment before the migration.
All Fedwire customers are now able to mimic sending production-like traffic in the ISO 20022 message format on Tuesdays and Thursdays. Participants also may join a peer testing list managed by the Fed to test sending ISO 20022 messages at other days and times.
Additional Community Bank Considerations
In addition to peer testing and reviewing project plans with technology partners, other considerations for community banks include:
Scheduling staff training ahead of the transition.
Reviewing business continuity plans.
Ensuring documentation reflects changes to Fedwire.
As community banks get down to the wire, take advantage of all the resources available.
FRB Services offers videos, checklists, frequently asked questions, and more on its webpage dedicated to the transition as well as on its central Fedwire Funds Service page. Further, community banks should check with their core processors and other technology providers for their specific support.
While the ISO 20022 transition presents a near-term challenge for many community banks, ultimately it will provide efficiencies that will support back-office operations. The need to have a staff Rosetta Stone who translates the various system names and fields across different systems is going away, offering some relief to help community banks continue to thrive.
Kari Mitchum is vice president, payments policy for the Independent Community Bankers of America (ICBA).