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Prioritizing payments modernization: ISO 20022, SEPA rulebook changes, and PSD

Nihit Ahuja
Regional Sales Head - Europe & Africa, Volante Technologies


The landscape of financial institutions is rapidly transforming, urging banks to embark on payments modernization journeys. European banks, in particular, face the daunting task of navigating through open banking initiatives, API enablement, and the challenges posed by real-time and cross-border payments. In this two-part series, we will delve into the priorities European banks should consider in their payments modernization journey.

Why Banks Should Consider Payments Modernization

Payments modernization is not just a response to regulatory shifts; it is a strategic move for banks to secure and expand their market share domestically and globally. A commitment to modernization includes adopting the ISO 20022 standards, going beyond compliance requirements to leverage the data-rich standard for operational efficiency and market growth. Modernization equips banks with the tools to navigate evolving regulatory landscapes and fosters innovation, positioning them as industry differentiators. Leveraging data for cross-selling becomes imperative in a rapidly changing financial landscape, maintaining a competitive edge and sustaining growth.

European Deadlines Impacting Banks’ Modernization Plans

a. ISO 20022

The migration to ISO 20022 for cross-border payments and reporting began coexistence in March 2023, with support for both MT and ISO 20022 until November 2025. Market practice guidelines, such as HVPS+ and CBPR+, provide consistency in adoption. However, concerns about slow migration persist, with only 15% of outgoing messages in the new ISO 20022 format. The industry faces challenges in ensuring harmonized messaging guidelines for cross-border payments, risking the potential benefits of ISO 20022.

b. SEPA Rulebook Changes

The EPC’s SEPA rulebook changes for 2023 introduce complexities, with the transition to a new ISO 20022 version and obligations for interbank communications. The Council of the EU’s instant payments proposal aims to enhance access to instant payment options, urging banks and PSPs to prepare for changes in the euro currency. The proposed PSD3 introduces checks on IBANs, fraud-related information sharing, and grants fintechs access to EU payment systems. Timelines for PSD3 enforcement are expected by 2026.

c. PSD2 and PSD3

Open banking under PSD2 and the upcoming PSD3 reshape financial institutions. The European Commission’s proposal for PSD3 aims to bring payments and the wider financial sector into the digital age, with implications for IBAN checks, fraud prevention, and open banking interfaces.

Progress of European Countries in Payments Modernization

Assessing European countries’ progress in payments modernization reveals variations. The McKinsey Global Payments Report indicates 12% of SEPA’s credit transfer volume as instant payments, with potential growth to 45% by 2027. Germany leads in SCT Inst registration, reflecting strong adoption, yet challenges persist in driving consumer usage.

Will Payments-as-a-Service Accelerate Modernization?

Payments-as-a-Service (PaaS) emerges as a vital tool, offering a cloud-based delivery model to streamline and cost-effectively manage payments. European institutions exhibit a strong appetite for cloud-based solutions, with 64% planning increased budget allocations for payments modernization in the next 12 months.

Key Factors for European Banks in Payments Modernization

A recent webinar highlighted four key pillars for successful payments modernization through PaaS: starting small and simple, redefining productivity, gaining a competitive advantage, and finding the right partner. These pillars emphasize the need for an agile and flexible approach in the evolving financial landscape.


The imperative for European banks to modernize payments is underscored by the adoption of ISO 20022 and SEPA rulebook changes. As the landscape evolves, PaaS emerges as a key enabler, reflecting a growing appetite for cloud-based solutions. In Part 2, we will further explore the challenges and opportunities in payments modernization for European banks.

To learn more about prioritizing payments modernization, download our whitepaper “What should European Banks prioritise in their payments modernisation journeys?

Nihit Ahuja
Nihit Ahuja
Regional Sales Head - Europe & Africa, Volante Technologies

Nihit has extensive experience in assisting start-ups and mid-size companies achieve sustainable growth, specializing in low code / no code platforms, open banking, payments (high value, low value, immediate/real-time and cross border), cash management, corporate payments, financial supply chain / open account trade, and migrant worker remittances.


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