The payment landscape constantly evolves, but some leaps are more significant. In our globalized world, where commerce transcends borders, payment transactions are becoming increasingly diverse, numerous, and intricate. To address this complexity, the industry is gearing up for its most significant migration yet: the transition to ISO 20022.

The MT standard, introduced in 1977, is being phased out in favor of the MX standard due to its increased compliance with the modern ISO 20022 messaging standard.

This concise version highlights the key reason for the shift: achieving better alignment with the current industry standard (ISO 20022).

Swift Mt To Mx Message Formats

The MT format will be phased out gradually, with most messages no longer accepted by 2025.

Here’s a breakdown of the timeline:

  • November 2022: The European Union begins transitioning to the MX format for specific high-value transactions.
  • November 2023: The U.S. Federal Reserve follows suit.
  • 2025 (deadline): SWIFT will no longer accept most MT messages, and the MX format will become the standard.

What is the main difference between MT and MX messages?

Message type (MT) messages are structured according to the specifications of the ISO 15022 standard using the FIN protocol. MX messages are structured according to the ISO 20022 standard and use the XML protocol.

Message structures

A three-digit number follows MT messages:

  • The first digit indicates the message category
  • The second digit indicates the message group
  • The third digit specifies the message type

The MX message is composed of four parts:

  • Four alpha characters indicate the message type
  • Three alphanumeric characters identify the message number
  • Three numeric characters highlight the message variant
  • Two numeric characters indicate the version number

For example, a single customer credit transfer MT 103 will appear as pacs.008.001.0x in MX format.

MX messages will comprise 940 separate fields and incorporate more structured, robust, and comprehensive data.

The MX format offers several advantages over the traditional MT format, making it a more suitable standard for today’s complex and globalized financial landscape. Here are some key benefits:

  • Richer Data: MX messages can carry significantly more information than MT messages. It allows for more transparent communication and reduces the need for additional messages or clarification requests.
  • Improved Efficiency: The structured data format of MX messages makes them easier to process and automate, leading to faster transactions and reduced operational costs.
  • Enhanced Transparency: The increased data detail in MX messages provides better transparency for all parties involved in a transaction, reducing the risk of errors and fraud.
  • Global Standardization: The ISO 20022 standard behind MX ensures consistency across regions and financial institutions, simplifying cross-border payments.
  • Flexibility: The MX format allows for customization to accommodate specific needs and future changes in the financial industry.
  • Improved Compliance: The richer data allows for easier compliance with regulatory requirements, particularly for complex transactions.

The ISO 20022 migration, with its shift from the MT to MX format, affects a wide range of players in the financial ecosystem, each experiencing its impact differently. Here’s a breakdown:

Affected Parties:

  • Financial Institutions (Banks, Credit Unions) need to update their internal systems and processes to handle MX messages. It can involve significant investments in technology and training. However, in the long run, the benefits outweigh the costs through automation and improved efficiency.
  • Corporates and Businesses: Businesses that make or receive international payments must adapt their systems to generate and receive MX messages. It may require collaboration with their banks for a smooth transition.
  • Fintech Companies: Fintech companies involved in payment processing must adapt their systems to the new standard. However, the move towards richer data formats can open up opportunities for innovation in financial services.
  • Payment Service Providers (PSPs): PSPs, such as remittance companies, will need to adjust their infrastructure to handle MX messages. It could lead to faster and more efficient transactions for their customers.
  • SWIFT Network: SWIFT, the global messaging platform for financial transactions, is a significant driver of the migration. By the deadline, it will update its infrastructure to handle MX messages exclusively.

How They Are Affected:

  • Technology Updates: All parties must invest in upgrading their technology infrastructure to be compatible with the MX format. It may involve new software, hardware, or system integrations.
  • Process Changes: Existing workflows related to payment processing may need to be adjusted to accommodate the new data structure and functionalities of MX messages.
  • Training: Employees involved in payment processing will likely require training on the new format and any related procedure changes.
  • Potential Disruptions: During the migration period, temporary disruptions might occur due to system adjustments and potential compatibility issues. However, industry-wide planning aims to minimize these disruptions.
  • Long-Term Benefits: Despite the initial challenges, the ISO 2022 migration will significantly benefit all parties involved. These include increased efficiency, improved transparency, reduced costs, and a more streamlined global payments system.