The Federal Reserve Board said Thursday that it is seeking comments about its proposal to adopt the ISO 20022 messaging format for the Fedwire Funds Service.
If approved, the format would replace the Fedwire’s current, proprietary messaging system. ISO 20022 enables payment providers to add more detailed instructions and other information to payment messages. Federal Reserve banks are encouraging the standard’s use. Major current users include the new Real-Time Payments service from The Clearing House, payment networks such as Visa Inc., and participants within the European Union’s Single European Payments Area (SEPA).
“Potential benefits to the adoption of the ISO 20022 message format include enhanced efficiency of both domestic and cross-border payments between the Fedwire Funds Service and other payment or messaging systems as well as a richer set of payment data that could help banks and other entities meet evolving requirements to screen payments for sanctions and anti-money laundering purposes,” the Fed said in a news release.
The Fedwire Funds Service is a real-time gross settlement system owned and operated by the 12 Federal Reserve banks. Fedwire transactions are commonly used to send or receive individual payments, settle commercial payments, settle positions with other financial institutions or clearing houses, submit federal tax payments, or buy and sell federal funds, according to American Express Co.
Under the Fed’s plan, the migration to ISO 20022 would occur in three phases beginning in 2020 and ending in 2023. Comments on the proposal are due 60 days after its publication in the Federal Register, which the Fed expects to do shortly.