In a recent episode of Volante Elevate, Vinay Prabhakar, Chief Marketing Officer at Volante Technologies, spoke with Michael Knorr, Transformation Lead for Wells Fargo Shared Services Operation, about the evolving ISO 20022 landscape and what financial institutions must do to move beyond compliance to tap into ISO 20022’s data-rich potential.

Can you tell us about your background and experience with ISO 20022?

Michael Knorr: I’ve been with Wells Fargo for 10 years and before that, more than 18 years with Citibank, always in the payments space. Throughout my career, I’ve been involved with major market infrastructure initiatives like CLS and Target2. I was part of the High-Value Plus Working Group that defined many of the base messages for ISO 20022, and I’ve worked with the Payment Market Practice Group, particularly in helping define how we handle the coexistence period in the US market where we have ISO already happening in the interbank space.

My involvement with payment standards goes back to the introduction of the euro in 1999, where we worked on standardizing clearing systems for the Economic and Monetary Union (EMU). This experience taught me the importance of industry cooperation and setting standards that work for all market participants.

What’s happening with Fedwire’s ISO 20022 migration?

Michael Knorr: Fedwire’s migration to ISO is part of a larger roadmap for modernizing the US payment system. The industry is preparing for March 25, 2025, when Fedwire will conduct a single-day migration from legacy format to ISO 20022. This follows the successful CHIPS migration in April 2024.

The timing was carefully planned to spread out major changes in the US payments landscape:

• FedNow launch in the summer of 2023
• CHIPS ISO migration in 2024
• Fedwire migration in March 2025
• SWIFT’s phase-out of legacy payment messages starting November 2025

What options do financial institutions have for implementing ISO 20022?

Michael Knorr: There are several approaches:

Full ISO Native Implementation: The ideal target state is a fully ISO-compliant wire transfer backend system. However, given the remaining timeline, this might not be feasible.

Translation Solutions: Banks can implement translation components between their internal wire formats and Fedwire formats. This allows them to:

• Translate outbound messages into Fedwire-compliant format
• Convert incoming messages to formats their backend can support

Third-Party Vendor Solutions: Many banks, especially smaller ones, rely on technology vendors for wire transfer processing. These vendors might offer:

• Native ISO 20022 solutions
• Translation components
• Hybrid approaches

A key consideration is that translation solutions might limit the ability to leverage the full data richness of ISO 20022 messages initially, as some newer data elements might not have equivalents in legacy systems.

What’s happening with cross-border payments and SWIFT?

Michael Knorr: The global community is driving the “everything all at once” approach. While Fedwire as a domestic system might not have needed ISO 20022, the US dollar’s position as the leading cross-border currency makes it crucial for US market infrastructure to be compatible with global financial mechanics.

SWIFT’s migration timeline includes:

• March 2023 – started with market infrastructure migrations in Europe, Asia, and Canada
• Present – Coexistence period supporting both MX (ISO 20022) and MT (legacy) messages
• November 2025 – Retiring payment messages (MT 101s, 102s, 103s, etc.)
• TBD – Reporting messages (MT 940s, 950s, etc.) timeline

How is the correspondent banking landscape evolving?

Michael Knorr: The competitive landscape has changed dramatically over the past decade. While banks used to primarily compete with other banks in correspondent banking, we’re now seeing competition from multiple directions, particularly FinTechs in remittance payments and companies like Visa and Mastercard building propositions in the corporate-to-corporate space.

Beyond competition, correspondent banking faces significant challenges from regulatory burdens, particularly around sanctions and AML compliance. The associated risk management programs create substantial cost pressures that only larger banks can easily absorb. However, ISO 20022 adoption could help address these challenges through standardization and automation – imagine replacing manual lookups of varying country names like “Deutschland” with standardized ISO country codes that can be automatically processed.

Despite these challenges, correspondent banking remains essential to the global financial system, and we need to maintain enough viable players in each currency for risk mitigation. What we learned during various financial crises is that there’s a limit to how much these services can be concentrated. I believe the combination of ISO 20022 adoption and regulatory initiatives under the G20 could help level the playing field by enabling better data standardization and automation possibilities.

What are the benefits of ISO 20022 adoption?

Michael Knorr: The primary advantages include:

1. Reduced Translation Needs: Historically, each payment system had its format, requiring complex translations. ISO 20022 provides a universal language for financial services.
2. Standardized Data: This includes consistent meaning of data elements across systems; standardized reference data (like country codes); clearer party identification through Legal Entity Identifiers (LEIs); and improved automation potential.
3. Enhanced Compliance and Risk Management: These benefits include better-structured data for sanctions screening; improved ability to identify parties in transactions; potential for automated entity resolution; and reduced manual lookups and data preparation.
4. Fraud Prevention: Prevention measures include easier validation of unique identifiers, more reliable party identification, and a clearer separation of corporate and retail flows.

What’s next for ISO 20022 and payments?

Michael Knorr: The future holds exciting possibilities:

1. Integration with real-time payment networks like FedNow and RTP
2. Enhanced supply chain integration through request-for-pay capabilities
3. Potential for truly real-time cross-border payments
4. Improved payment intelligence through standardized data analysis
5. Greater automation through AI and machine learning
6. Reduced friction in global payment flows

The key is moving beyond mere compliance to tap into the true potential of standardized, data-rich messaging across all payment types and regions.

To hear more insights from this conversation, listen to the full interview on the Volante Elevate podcast at www.volantetech.com/volante-elevate.