Nearly all banks in Europe are experiencing difficulties implementing the ISO 20022 standard, while more than half of the organizations acknowledge that their infrastructure is outdated and doesn’t meet new requirements for enhanced data, transaction transparency, and settlement speed.
Most banking institutions in Europe and the United Kingdom face significant challenges in modernizing their payment infrastructure amid tightening regulations and faster settlement cycles. This is reflected in the results of a study by Aqua Global conducted among 150 banks — 75 in the U.K. and 75 across European countries.
According to the findings, 97% of banks reported problems transitioning to ISO 20022, while 60% admitted that their current systems can’t keep up with changing requirements. At the same time, 77% of respondents consider regulatory requirements a higher priority than customer needs and fear that missing a key regulatory milestone could lead to significant operational and reputational losses.
Against this backdrop, 75% of banks still treat each new regulatory requirement as a separate project rather than as part of a long-term infrastructure modernization strategy. As a result, 67% of banks spend more resources adapting their systems to new standards than improving the customer experience.
Moreover, 72% of banks admitted that new requirements for enriched data, including anti-money laundering and sanctions screening checks, exposed gaps in their systems.
The most challenging areas include:
- structured addresses;
- sanctions and anti-money laundering data;
- counterparty identifiers (BIC/LEI);
- beneficiary verification and payment purpose information.
Besides, 31% of respondents struggle to balance data transparency requirements with data protection regulations and data localization rules.
Additional pressure comes from the transition to T+1 settlement cycles with a deadline set for October 2027. So far, only 21% of banks have taken concrete steps to prepare for the new settlement timelines, while 52% are still in the analysis and planning phase and 23% have no action plan at all.
The shortening of the settlement cycle highlights banks’ dependence on manual processes, legacy systems, and fragmented data. Among the main barriers, banks cite the need for major investments in modernization, competition with other regulatory projects, and a shortage of internal resources.
Amid growing pressure, 81% of respondents believe that a unified financial messaging management hub across all channels will become critical for maintaining competitiveness and regulatory compliance.
Other innovations that banks are increasingly prioritizing include:
- full support for ISO 20022;
- automation of anti-money laundering, fraud detection, and exception handling processes;
- the use of application programming interfaces (API) for data exchange;
- scalable transaction reconciliation tools.
In particular, one of the most complex stages of infrastructure modernization is the transition to the new international financial messaging standard ISO 20022. Migration difficulties from legacy MT formats were reported by 97% of banks, and one in five experienced service disruptions or payment processing issues during implementation. Meanwhile, 65% of organizations continue to use software solutions that automatically convert messages from the legacy MT format into the ISO 20022 standard, viewing them as a temporary measure to meet regulatory deadlines. However, 83% of survey participants believe that such short-term solutions will ultimately prove more expensive in the long run.
Among the main reasons for moving to full ISO 20022 support, banks cite increased levels of automated transaction processing, fewer errors, reduced manual intervention, better integration with compliance systems, and lower operational costs.
More details about the ISO 20022 standard and its significance for the financial industry can be found in this article by CP Media.
According to the study’s conclusions, continued reliance on temporary solutions to support outdated systems is becoming economically impractical. In the coming years, the resilience of payment infrastructure will largely depend on banks’ ability to centrally manage data, automate processes, and quickly adapt to new regulatory requirements.
