Banking’s Jurassic Tech: Why Decades-Old Core Systems Are Failing ISO 20022
The financial world's new language is breaking its oldest machines.
### The Data Tsunami Hits a Paper Boat
ISO 20022 isn't just an update; it's a revolution in how financial messages are structured. It demands rich, structured data—sender details, purpose codes, layered remittance information—where old systems only handled basic strings of text. Think of it as asking a telegraph operator to stream a 4K video. The pipes are too narrow, and the logic simply isn't there.
### The Cost of Legacy Glue
Banks aren't sitting idle. They're deploying armies of middleware—digital duct tape and virtual baling wire—to translate between the new standard and their creaking core ledgers. Each patchwork solution adds latency, cost, and a new point of failure. It's a tribute to human ingenuity and a damning indictment of institutional inertia. The bill for all this 'integration'? Let's just say it makes a blockchain transaction fee look like a rounding error.
### A Window for the Disruptors
This structural fatigue creates a glaring opportunity. Newer financial networks and digital asset platforms built on programmable ledgers are natively compatible with rich data standards. They don't need to retrofit; they're born ready. While legacy banks spend billions making their past talk to the future, agile competitors are already speaking the language fluently.
The irony is thick enough to trade. An industry obsessed with backward compatibility is now struggling to move forward. The very systems designed for permanence have become the greatest barrier to progress. One might call it poetic—if you weren't paying for it with every interbank transfer.
Decades-old core banking systems struggle to handle ISO 20022’s data structures
According to reports, poor data quality is often attributed to hybrid address formats. Enhanced fields, like structured addresses, go beyond the old limits. This cuts off data in transitions and creates compliance holes in sanctions screening.
BREAKING: Banks appear to be experiencing issues with the hybrid address introduced in #ISO20022. As reported by @DPS_Gruppe, the Payments Market Practice Group (PMPG) has therefore published guidelines aimed at addressing the lack of data quality. https://t.co/LUnnBK2sR3
— Payment Infrastructure News (@payment_infrast) December 10, 2025
Non-compliant messages are also being rejected immediately. This causes delays in cross-border transactions and forces manual interventions. Banks that rely on Swift’s short-term translation solutions experience “lossy” changes, which means important data is either cut off or lost. This has led to many failed payments.
As of early December, “ripple effects” in correspondent banking networks, with isolated non-adopters causing problems in whole chains. Smaller US banks and those in developing markets report that up to 10% of payments are stalling, which is harming customer trust and incurring recovery costs.
Additionally, decades-old Core banking systems can’t natively handle ISO 20022’s XML-based data structures. This is causing costly middleware or full replacements. Batch-to-real-time processing shifts have exposed vulnerabilities in end-to-end chains, with 48% of banks identifying this as their top hurdle.
Regional differences make it challenging to perform multiple transfers simultaneously. Emerging markets are lagging, forcing non-STP processes to adapt. According to BIS data, 50% of central banks were behind schedule by mid-2025, which caused “operational headaches” such as payments that couldn’t be processed.
If partners demand native ISO support, banks say they will be cut off from global flows, and their image will suffer. However, 97% of compliant cross-border flows now benefit from reduced failures and STP rates up 20-30%.
PMPG puts out a new Hybrid Postal Address
The Payments Market Practice Group (PMPG) has released a new guide for banks on Hybrid Postal Addresses, including a grace period. This gave banks helpful guidance on how to get through the ISO 20022 transition period, which runs from November 2025 to November 2026.
The guide addresses increasing data quality issues surrounding hybrid addresses, including the misuse of fields, missing mandatory information, and duplicate information. These issues can lead to rework, delays, and increased screening risk.
By 2026, all unorganized addresses will be thrown away as part of the change. By 2027, new E&I messages camt.110/111 will be in use, and the MOVE of MT101, MT9xx, and other message groups will be done by 2028 at the latest.
Some banks are already on the move. For instance, Deutsche Bank stressed that starting in 2026, there will be yearly changes based on ISO 20022. This means that new validation rules and stricter data quality standards will come into effect.
Market platforms like T2 are changing their policies and release cycles to make sure they follow ISO 20022 requirements. The new FATF standards and CPMI harmonization criteria also mean that the data model needs to be changed.
To that end, the industry is now transitioning from migration to harmonization, focusing on data quality and the comprehensive utilization of the structured standard.
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