From ISO 8583 to 20022:

Modernizing the card

payment messaging
standard

1 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
Table of contents

Need for revisit of Cards

Payments messaging .................................................. 03
Standardization

How the two standards .................................................. 04

stack up?

Benefits to stakeholders .................................................. 05

Challenges for various .................................................. 05
stakeholders

Enabling newer use-case ..................................................

06
Where does Market stand? .................................................. 07
• International Standards
Organization
• Regulators
• Big Payment schemes
• Independent Software
Vendor

Our point of view on the

migration .................................................. 08

2 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
Need for revisit of Cards The expansion of new payment products and
technologies drives the need for a more flexible
Payments messaging and expandable messaging standard that
standardization handles richer data. While ISO 8583 allows for
some flexibility, it is not always able to pass
Globally, we are seeing an explosion of along enough information for modern use
electronic retail payments driven by a jump in cases. As they work to modernize payment
card usage,1 which is now as simple as a tap systems, many governments and the financial
of a card or wearable token. This growth is sector are looking to address some of these
expected to continue, attracting various bad issues by using the ISO 20022 standard.
actors and leading to an increase in fraud
paybacks across the value chain.2 1 https://www.mastercard.com/news/eemea/en/newsroom/
press-releases/press-releases/en/2022/august/mastercard-
new-payments-index-2022-consumers-in-mena-embrace-
At the same time, laypeople can fail to digital-payments/
appreciate how complex and difficult it is to
connect disparate payment systems around
2
Report from study done by LexisNexis Risk Solutions ‘Fraud
and Digital Payments Study in High-Growth Markets’
the world — that, ensure payment system
interoperability — until they experience
Governments and regulators across the
impediments. Historically, the elements that
world are critical stakeholders with firsthand
supported automated, real-time payment
experience in the journey from evolution to
authorization were the various electronic
realization of ISO 20022 in the context of cross-
payment messaging systems and their
border payments. This period, when the cross-
corresponding standards. Developed decades
border payment migration to ISO 20022 is at
ago, the ISO 8583 messaging standard has
full steam, offers the momentum to overcome
been the key driver for card-based payments.
current challenges in the next big payment
streams for various customer bases.
While ISO 8583 continues to provide a
framework, it has limitations in its support of
The landscape of card-based payments is
modern digital payments.
already filled with multiple parties before
considering authorization, payment and
settlement flows.

Stakeholders in card-based payments

Debit Card

Acquirer/Processor Network Schemes

(Bancontact, (e.g., Visa,
Girocard, Worldline) Mastercard)

Credit Card

Cardholder

E-Commerce Payment Gateways Issuer/Processor

(Adyen, (ABN Amro,
Worldpay) BNP Paribas)

3 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
How the two standards stack up?
The International Standards Organization has published the relevant ISO 20022 version for
card payments.

Standards overview

ISO 8583 ISO 20022

In use since the 1980s to support card- First published in 2004 and driven
based financial transactions. Used by card by the introduction of Extensible Markup
issuers, financial institutions, acquirers and Language (XML)
merchants.

Uses a bitmap format, with each data Uses XML. The second edition includes
element assigned a specific position indicator the use of Abstract Syntax Notation
in a control field. One (ASN.1).

Still the dominant legacy standard but also Introduces common language with
widely customized, leading to variants and the ability to contain far more detailed
associated complexity. and richer data.

The limitations of ISO 8583 suggest the wisdom of adopting the ISO 20022 standardization.

• Limited data capacity: ISO 8583 has • Inefficient processing: The fixed field
a fixed data field structure and limited structure of ISO 8583 can lead to inefficient
data capacity, which make it difficult processing of transactions, as it can
to accommodate new data elements result in redundant data transmission
and messages beyond basic payment and processing. This can result in slower
transactions. As financial services become transaction processing times and higher
more complex, stakeholders need a costs.
messaging standard that can support
additional data elements and messages. • Compatibility issues: As the financial
industry moves towards adopting new
• Lack of flexibility: ISO 8583 is a rigid and messaging standards like ISO 20022, the
inflexible standard that does not allow for compatibility between ISO 8583 and newer
easy customization or modifications to meet standards can become a challenge. This
specific business needs. This can result can result in interoperability issues between
in limitations on innovation and product different systems and networks, leading to
development. ISO 8583 is not specific about delays and higher costs.
how a given field is represented, so it can
have a numeric field represented as a • Inability to meet regulatory requirements:
sequence of ASCII, EBCDIC, BCD or other With the increasing regulatory requirements
character sets. Variable length fields have in the financial industry, ISO 8583 may
prefixes specifying length, but how this not be able to meet all the necessary
information is represented is not compliance requirements, leading to
defined and different vendors use potential risks and penalties.
different representations (i.e., BCD, EBCDIC,
binary value).

4 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
Benefits to stakeholders Challenges for various stakeholders
A movement to new standards will benefit At same time, any movement to new standards
stakeholders across the payment value stream will present unique challenges across the
in different ways. payment value stream.

Payment Schemes Payment Schemes

• Enabling newer revenue models • Creation of a level playing field could
• Reduction in fraud payback result in increased competition
charges • High implementation and migration
• Enabling cross-scheme capabilities costs in period where both standards
with account-based payments need to be supported

Issuers/Acquirers Issuers/Acquirers
• Reduction in complexity within • Will have higher cost of operation
technology landscape during migration
• Standardization across payment • Some may decide not to embrace
streams the change and move out
• Better dispute management of the market

Merchants Merchants
• Potential benefits from more Likely to suffer from an increase of
harmonized reporting prices in the period of both standards in
• Possibilities for new trends on the market
customer behavior

Customers Customers
Would not notice difference Merchant price increases would get
passed on to customers

5 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
Enabling newer use-case
Such a transition will enable newer use-case, an example of which is to transfer money from an
Account to Card with below payment characteristics.

• Both debtor and creditor are individuals.

• The transfer takes place cross-border and ends with funds being settled in an account linked to
the card. The card can be linked to a demand deposit account, a pre-paid card account or even a
credit card.
• The payment may or may not be in the domiciled currency of the account.

Such a use case becomes possible due to richer data elements and more streamlined messaging
across the landscape, leading to benefits, opportunities and challenges.

Benefits Opportunities Challenges

• Transparency of • Specific code words • Translation

fees and rates to indicating remittance required
both debtor and transactions; helpful between card
creditor in fighting fraud and format and
• Traceability improving KYC pacs.002 status
• Structured address report message
• Competitive
product to data • Modification of
challenge • Fee and FX front end
wallet-to-wallet transparency
payments

6 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
Where does Market stand? Regulators
At the European level, progress has been made
by the European Cards Stakeholders Group.
Considering the complexity and extended
This is in accordance with the vision of Single
journey for such a migration, various
Euro Payments Area (SEPA), wherein SEPA
stakeholders are preparing in their own ways.
Cards Standards6 are published to enable
card payment standardization and promote
International Standards Organization interoperability of card transactions in a secure
The International Organization for environment throughout the SEPA region.
Standardization (from which we get the ISO
abbreviation) has been continuously updating Big Payment schemes
the relevant messages with input from working Visa supports the ISO 20022 messaging
groups representing various business domains, standard7 by using DPS Forward to channel
including primarily the terminal-to-acquirer network traffic through a single connection.
domain via the Card Payment Exchange Combining DPS Forward APIs with the ISO
(CAPE) driven by nexo standards3, and the 20022 API from Visa enables its customers to
acquirer-to-issuer domain via Acquirer-to-Issuer build a full-service digital solution.
Card Messages (ATICA).4 The European Union
Mastercard is now leveraging the ISO 20022
spearheaded the efforts on ATICA standards,
standard for payment methods as part of
but the working group now includes industry
its Mastercard Track Decision Engine.8 This
participants from around the world.
has enabled Mastercard to move to newer
ISO integrating ATICA messaging was driven by standards in more of its digital offerings as part
three primary goals: of its Mastercard Digital Enablement Service.9

• Billions of consumers rely on card and

Independent Software Vendor
associated retail payment instruments, and
it was imperative to include them in ISO In their roles as issuers, acquirers and
20022 adoption efforts around payment processors of card-based payments,
infrastructure modernization efforts financial institutions rely on independent
software vendors (ISVs) such as ACI, FIS and
• Enabling rich data in this domain is
Fiserv to provide products that handle industry
not expected to negatively impact
standards and enable network connectivity
authorization speed
to various payment schemes. These ISVs
• Ensuring interoperability across networks and are enabling their products to support ATICA
to existing ISO 8583 standards is beneficial and CAPE messages in preparation for
The Registration Management Group is future adoption of ISO 20022 in the card
promoting and supporting the involvement payments domain.
of financial services actors to facilitate the These efforts by ISVs are allowing the
registration and maintenance of high quality, broadening of product offerings to a complete
globally relevant ISO 20022 messaging for the payment offering by bringing both account
exchange of information. They have enabled -to-account and card-based payments under
a new set of maintenance processes to cater one umbrella.
to the potential for a high number of change
requests in the initial period of ISO 20022 card 3
https://www.nexo-standards.org/sites/default/files/
messages standardization.5 cardpaymentsmessageusageguide_6.0.pdf
4
https://www.iso20022.org/sites/default/files/documents/D7/
ISO20022_BusinessAreas.pdf
5
https://www.iso20022.org/sites/default/files/documents/D7/
ISO20022_RMG_Newsletter_April2018_0.pdf
6
https://www.e-csg.eu/scs-volume
7
Visa Developer - DPS Forward
8
Release history | Mastercard Track™ Decision Engine |
Mastercard Developers
9
Mastercard Digital Enablement Service (MDES) |
Mastercard Developers

7 | From ISO 8583 to 20022: Modernizing the card payment messaging standard
 • Acquirer to Payment Scheme
Our point of view on the migration
• Payment Scheme to Issuer
Considering the complexity of the migration, • Clearing and Settlement
there has been no mandate in any of the • Terminals to Acquirer
countries towards standardization of the
Considering this transition will be a long
ISO 20022 framework. In the European
endeavor, translation capabilities between
Union, a detailed study by the European
existing ISO 8583 and ISO 20022 systems must
Cards Stakeholders Group led only to the
be available in different places.
recommendation of having a market-driven
approach to an ISO 20022 migration10. In summary, given the challenges and
benefits for various stakeholders, different
In our view, the transition to ISO 20022 can
countries must look at soft nudging towards
happen in parallel and in a different point-to-
standardization and revisit the entire migration
point connection in the entire ecosystem.
with a fresh lens towards creating a robust and
These could be in the below sequence:
uniform modern payment infrastructure.

10
https://www.ecb.europa.eu/paym/groups/erpb/shared/pdf/5th-ERPB-meeting/7a.CSG_A2I_Processing_Study.
pdf?2744430f68b46c2aeec599b0daf824b6

About the authors

Meenakshi Sundaram Arunachalam is a Director in Software and Platform Engineering at
Cognizant. He has 23 years of experience in spearheading complex digital transformation in cards
and payments as Delivery Director, Solution Architect and Developer.
Rammurthy Mudaliar is a Product Manager in Software and Platform Engineering at Cognizant.
He has 19 years of experience in implementing digital transformation in cards and payments as a
consultant overlooking product management, architecture and the business analysis phase.
Rahul Goveas is a manager consultant in the Cognizant Business Consulting Practice.
He has 16 years of experience in the payment product chain across Wholesale Banking domain
with a specialty in the SWIFT Payment Product.

Cognizant (Nasdaq-100: CTSH) engineers modern businesses. We help our clients modernize technology, reimagine processes and transform experiences so they can stay
ahead in our fast-changing world. Together, we’re improving everyday life. See how at www.cognizant.com or @cognizant.

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