In this episode of The Connector Podcast, host Koen Vanderhoydonk interviews Karim from FinHouse about the industry‑wide transition to ISO 20022, the new XML‑based financial messaging standard that will replace the legacy MT format by 2025. Karim explains the global convergence of banks and clearinghouses on ISO 20022, detailing rollout schedules for SWIFT (gradual 2022‑2025), the EU’s TARGET2/Euro1, the UK clearinghouse (April 2023), and the US public and private clearinghouses (big‑bang 2025 and phased 2022‑2023). He highlights the coexistence period where both MT and MX messages will circulate, creating operational and compliance headaches for institutions that must support legacy systems while leveraging the richer data in ISO 20022 for fraud detection and regulatory reporting. The discussion then shifts to FinHouse’s payment‑hub solution, which can ingest, translate, route, and enrich messages across formats, providing rule‑based decision‑making to satisfy both operational throughput and compliance visibility during the migration. Karim closes by offering contact channels for FinHouse and emphasizing a strategic, not band‑aid, approach to the transition.
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Welcome to the Connector Podcast, an ongoing conversation connecting fintechs, banks, and regulators worldwide. Join CEO and founder Koen Vanderhoydonk as you learn more about the latest available trends and solutions in the markets.
Hello, Karim. Welcome in my podcast. How are you doing today?
I'm great. And yourself, how are you today?
Yeah, good. I heard this is your first podcast. Is that right?
Yep, this indeed is my first. So you're gonna have to walk me through this.
Ah, it's gonna be easy. We're gonna talk about what you like the most, ISO 20022. Is that correct?
Yeah, this keeps me up at night, that's for sure.
So it keeps you up at night, but what about the industry?
Well, if it keeps me up at night and I actually know what it's about, I can't even imagine like those people who are in an IT department in a financial institution somewhere in some basement trying to figure this out and how to get out of— not out of this, how to solve this problem actually, because it's such a big problem to take care of at this moment.
But still, I think for me and the audience, could you then explain a little bit more what is ISO 20022?
Well, to sum it up, ISO 20022 is basically the new standard for financial messaging.
Mm-hmm.
What has happened is that over the past few years, all financial institutions globally have converged in a way where that by the year 2025, almost every region in the world will be communicating using one standard, which is ISO 20022. Which is something that cannot even be fathomed at this point. You can't imagine the entire world finally agreeing on something for once.
And then it has to be a SWIFT format, right?
Yeah, and it has to be proprietary, somebody forcing it on everybody else.
Now, in a past life, I've been reading the old, good old ISO 15022 messages. And I really needed a manual to do so. So is that one of the biggest changes that the XML format is bringing us?
Well, ideally this format is going to be standardized, user-friendly. It's using an XML-based, basically markup language, which, which any software developer knows. And there are names and keys and values for every attribute or element in that XML. So that makes it very intuitive to understand what this corresponds to, whether this is an address field, a name field, an instruction information field. So everything is much more explicit, it's much more user-friendly. Developers do not need having spent 5 years in a financial institution to learn MT messages the hard way. They could actually— they could pick it up and read it. However, that does not mean the world is speaking exactly the same way, because let's say, let's take ISO 20022 as a language. There are still different dialects to that. So every region of the world will implement this standard in a different way. So we're getting closer, we're not 100% locked in. However, it's way closer than it was, uh, 5 years ago at least.
And earlier you said a little bit about Timelines, and I think I heard you say like 2024. But coming back from the old world, I remember being in ISO 2022 and corporate actions. Which part of the market is actually now moving into the final ISO format?
Okay, so if if we look at around mid-2025, the entire world would theoretically will have abandoned the MT standard. That's for talking everybody. However, the rollouts. are planned a bit differently and at different schedules. So we start with SWIFT, who, let's say, the most— that has the biggest global coverage. The SWIFT previously intended to start in 2021 and finish rapid in 2024. Now that has pushed the year. So the gradual rollout is between November 2022 and 2025.
Mm-hmm.
It kicks off in I believe it's November, right? Believe it or not, it kicks off in a month. Not all the messages are there. It rolls out, they're gonna roll out gradually, and there will be a coexistence period where we will be using the old MP messages and the MX messages, either or. Not that you don't have duplicates of messages. However, there will be a coexistence period that's also confusing people on what am I doing here, when will I get what. How do I deal with this? So there's a problem. Even if you're not sending MX messages, you're going to receive them as well. That is SWIFT. Let's move next to the EU. The EU, when we're talking about high-value payments, those do not travel through SEPA. Those travel through TARGET2 and Euro 1. That is targeted to shift to ISO 20022 this year.
Wow, already?
So we look at the UK, their clearinghouse is expected to adopt ISO 20022 in April 2023.
Mm-hmm.
Now the US has 2 clearinghouses, a public one and a private one. The public one is rolling out as a big bang in 2025, and the private one is gradually rolling it out between 2022 and 2023. So as you can see, the global financial market to a very large extent is going to become one ISO standard very soon. So this is a very exciting time and very confusing time for some other people, maybe.
Well, last week I was at a big conference and I followed a couple of sessions around ISO 15022, and I thought it was an interesting discussion about coexistence or interoperability. Maybe a question to you, Karim, if you had to choose, one or the two, which one would you pick?
Well, let's say from a challenge perspective, I would love the Big Bang approach. However, real life and the financial sector does not operate that way. There are multiple contingencies and multiple fallbacks and multiple backup cases for those. So coexistence and interoperability in this sphere of the market is natural. we have to have redundancies, and these are huge monolithic corporations that we're talking about. These are not 2-3 people sitting in an office that are processing 5 transactions a day. They process tens of thousands, and these transactions come from multiple sources. So imagine a big bank that has to do customer-to-customer transactions, bank-to-bank transactions, treasury, money market, trade finance, and informational messages on top of those, shifting those all, just flicking a switch one day using one standard, flicking another switch another day using another standard, and everything is supposed to work from day one. That's, and that's something you cannot even imagine. So, uh, that's very scary. Some people are doing it. I don't know how, how much drills they have to do before that to make sure that it works.
Mm-hmm.
Although Swift have gradually rolled those out. So in November '22, what Swift decided to do was we'd select a subset of these messages, the most crucial of them, let's say.
Uh-huh.
The ones that constitute probably to a high degree, definitely over 70% of the volume of instructions that are going back and forth. Let's move those, the main ones, get them coexisting in 2022. They're advising people not to adopt the new standard because they're scared of the readiness level. However, as of 2022, the main instructions are going to roll out, and you're going to get them in one of two ways. You can't get them in both. Swift are trying to wrap something inside between in the comments section, an attempted automated translation. However, that's a band-aid, not a solution. What happens in such cases is that the new format has much more information inside it.
Mm-hmm.
It's much richer, much more flexible so that you can design solutions around it for an automated straight-through process where this routes to this and define parameters to read this attribute to check the name, read this attribute to check the value of the payment. Whatever compliance solution that you're dealing with there, you can convert them to do that. with XML. With MT, unless it was coded for financial institutions to process MT messages, they never had that feature. And they've been operating through MT for the longest time. So now we have a lot of rich data on one side that we want to have a look at as a compliance department.
Mm-hmm.
However, we have 10 solutions that are running inside the bank that basically have been running on an old standard for I don't know how many years. And the cost and the efforts and the load required to upgrade all of those and have them securely up and running in due time is probably something too much to deal with. So the operational aspect of things need MTs, let's say, and the compliance need ISO 20022 MXs. So There you need a solution that can read anything that comes in, whether it's MTRMX, do the proper decision-making, whether on an incoming or an outgoing flow, do the proper decision-making on what to convert in what scenario, in what way, and to give the compliance guys access to the full picture in front of them so that they can make informed decisions and be more vigilant when it comes to fraud. Compliance departments, if you tell them I have to remove one character out of this instruction just so it fits, they're going to reject that because they, they fear that they might have lost some piece of information that might help them in identifying fraud.
Is this where FinHouse comes in, Karim?
Well, yeah, that's exactly where we come in. The podcast was not about FinHouse, was about ISO. However, in reality, we do solve that problem. We've approached that problem on maybe a bigger scale for the clients who need it, and as a simple solution for the clients who just need transformation. What we've done was our payment hub solution is ready for all types of messages, for all sectors, and in all regions of the world. So we're ready for all of those, and we're ready to transform from any source to any destination format depending on our needs. We're able to do multiple transformations to suit different business units within an institution. We can route those based on business rules, based on some decision-making that has to be done. So during the coexistence period, so we could provide every piece of that financial institution the information they need so that they can continue their processing and do not face any issues when they have to go live or when they have to convert from one format to the other. That our goal at the end of the day is to make banking easy with our excellent innovation. That's what we aim for, and I believe that's what we've done here.
It sounds like a nice mission to accomplish, I must say. And thank you, Karim. Where can they find you?
Finhouse is available on all social media platforms where We can be contacted directly through our website and through LinkedIn, and we're always ready to explain the topic because sometimes it's not just about putting a solution in front of somebody's face for them to adopt it. The goal is to understand what the problem is, and the more you understand, the more you can actually tackle the problem in a strategic manner where you're just not putting Band-Aids left and right just so that you can survive. You're actually surviving, functioning, and flourishing in this, in a new ecosystem, in the next generation of financial messaging.
Thank you very much, Karim, and thank you also for being part of our podcast. I think you did particularly well for your first time.
Thank you so much for having me on. It's a pleasure, and thank you, Koen.
You're very welcome. Thank you also to the audience for tuning in, and please stay tuned to our channel for more news about fintech. Thank you very much.
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