Less than a year after meeting the ISO 20022 cutover requirements of last November, Phase 2 of this landmark financial messaging project is coming into view, promising to be a very different experience from the 2025 rush to meet new financial messaging requirements.
In the recent webinar “ISO 20022 Phase 2 - The Journey Continues for what Global Banks Need to Know for 2026 and Beyond,” expert panellists from HSBC, JP Morgan, KPMG, and Bottomline repeatedly stressed that ISO 20022 is no longer about “being live.” The big question is this: are Financial Institutions (FIs) prepared to operate, compete and innovate in a world of fully structured payments data?
Framing this discussion, Edward Ireland, Product Director for Financial Messaging at Bottomline said, “Phase 1 was translation. Phase 2 is transformation.” That fact is forcing changes across architecture, customer channels, operations, and governance.
ISO 20022 Misconceptions Persist
According to Ireland, one of the most persistent misconceptions is that ISO 20022 ended with last year’s Swift migration. “There’s a view, particularly at the senior level, that the project was completed in November 2025 and that’s the end of it,” he said. “The second big misconception is that ISO is an IT project. Increasingly, it’s a business transformation.”
That distinction proved to be a recurring theme. Phase 2 has exposed the limitations of treating ISO as a technical overlay rather than a foundational data model. As banks move beyond basic message coexistence, the real complexity is emerging not in message formats, but in how data is created, validated, stored and reused across the financial institution.
Sara Amara, Chief Product Officer for Host-to-Host at HSBC, agrees with the new definitions of complexity, saying that Phase 2 represents a profound change in how banks interact with corporate clients.
“Phase 1 proved we could speak ISO,” she said. “Phase 2 is proving we can think ISO, and that’s a very different challenge.” At HSBC, which processes around 4.5 million payments per day, the transition affects every client touchpoint, from host‑to‑host files and APIs to digital banking portals. Yet the biggest challenge is not technical. It is behavioural.
“The hard truth is that a channel is only as good as the data the client puts in,” Amara said. “Corporates are used to sending free text instructions and expecting the bank to figure it out. ISO flips that model.”
Under ISO 20022, accountability for data quality moves decisively to the originator. HSBC’s response has been heavy investment in client education, workshops and proactive enablement, explicitly linking better data to faster processing, lower investigation rates and improved reconciliation. As Amara put it, “Data quality is now a competitive advantage for clients, but we have to make that value exchange very clear.”
Justin Brearley‑Smith, Payments Industry Engagement at JP Morgan, echoed the point, highlighting that while interbank traffic is now largely ISO-native, the next frontier is payment initiation. “The focus is now on enabling clients to initiate ISO payments responsibly and consistently,” he said, pointing to upcoming changes such as the removal of unstructured addresses and the industry-wide move toward hybrid and fully structured data.
What Banks Say is Hardest: Poll Insights
A live poll taken during the session reinforced where banks are struggling most. Nearly 69% of participants identified structured data (particularly addresses and purpose fields) as their biggest barrier to becoming ‘ISO-enabled’. Far fewer cited architecture integration (14%) or case management processes (10%), and zero selected internal funding as a primary concern.
For Brearley‑Smith, the result was unsurprising. “Data quality is where the benefits and the pain both live,” he said. “Much of ISO adoption so far has been like-for-like. Over the next 12 to 18 months, improving data quality is the work everyone needs to do.”
Nowhere is that more visible than in the industry’s struggle with structured address data. With a hard rejection deadline looming in November 2026, structured addresses have become the most immediate operational risk of Phase 2.
“Structured address data sits at the intersection of every Phase 2 problem,” Amara said. “It exposes something we already knew but hadn’t fully solved, and that is that the industry’s data isn’t clean enough.”
She described how corporates are now being asked to source beneficiary address data from ERP systems, counterparties and invoicing platforms that were never designed to support consistent global standards. Without central repositories or standardisation across corridors, the burden can be significant.
HSBC has responded with a three-layered approach: enriched onboarding with structured address capture at account opening, real-time validation at channel entry, and in-flight remediation using enrichment tools combined with human review for higher risk corridors. The objective is to prevent failures at clearing time and shift quality controls “to the left”.
Ireland stated that technology alone cannot solve the issue. “There aren’t really solutions to fully automate unstructured to structured conversion without human checks,” he said. “This is a front-office and client engagement problem,” and not just a systems issue.
Case Management: Where Clients Feel the Change
While data quality dominates internal conversations, case management may be where clients experience the most tangible benefits. Historically, investigations have taken days, even as payments themselves settle in minutes.
“That gap is where trust erodes,” Amara said. “ISO-enabled case management changes the game.” She highlighted end‑to‑end transaction references, real-time case visibility, client self-service, and dramatically faster stop‑and‑recall capabilities as transformative changes already underway. Brearley‑Smith added that structured inquiry messages arriving later this year will improve processing speed, while smart routing, expected by late 2027, could eliminate serial investigations entirely.
A second audience poll revealed where banks expect the biggest near-term gains. Higher straight-through-processing rates topped the list at 38%, followed closely by ISO‑enabled case management at 29%, and improved fraud and sanctions screening at 24%. Improved liquidity reporting, despite frequent discussion, attracted zero votes. That means foundational consumption challenges remain.
Purpose Codes, Statements, and the Danger of “Like-for-Like”
Part of the ISO 20022 structured data set, purpose codes indicate the reason for a payment using standardised values rather than free text. In Phase 2, they illustrate the broader tension between compliance and the creation of real downstream value.
Ireland was openly sceptical: “People default to the lowest common denominator,” he said. “The question is what actually gets done with the information?”
Imran Ali, Payments Consulting Director at KPMG, took a different view, emphasising the regulatory and macroeconomic insight that purpose codes can enable when consistently applied. Brearley‑Smith aligned the two positions, arguing that value, consistency and proportionality must guide what data banks ask clients to provide.
The same logic extends to ISO statements. Several panellists warned against simply converting MT statements into MX format. “Like‑for‑like perpetuates complexity,” said Brearley‑Smith. “ISO statements are designed to make reconciliation easier, but only if we embrace them properly.”
As the session closed, Ali drew a clear distinction between banks that will struggle through Phase 2, and those that will benefit. “The difference is using ISO end-to-end,” he said. “Not just for payments, but across your entire infrastructure, including non-payment processes.”
Amara put it more bluntly, saying, “If investigation turnaround times in 2027 look like they do today, then we didn’t really deliver on ISO’s promise.”
Clearly, Phase 2 is not another deadline to survive, but a once-in-a-generation opportunity to rebuild payments around structured data, automation and transparency. For banks willing to move beyond translation and truly think ISO, the journey will be more rewarding.
Watch the webinar in full here.