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Payment transactions are undergoing a fundamental transformation worldwide. A key driver of this development is the international standard ISO 20022, which is increasingly becoming the uniform communication format between banks, financial institutions and companies.
While many banks have already modernised their systems in recent years, companies are now entering the next phase of this transformation. By November 2026, structured payment data and modern XML-based pain message formats will be a prerequisite for smooth payment processing.
For companies that handle their payment processes via ERP systems such as SAP, this primarily means one thing: payment formats, master data and bank communication should be reviewed at an early stage and adjusted where necessary.
The international standard for modern payment formats
What is ISO 20022?
ISO 20022 is a global standard for the electronic exchange of financial messages. It was developed to create a common language for payment transactions and to simplify communication between banks, companies and financial service providers.
Unlike older formats, ISO 20022 is based on structured XML messages that can contain significantly more information. This enables payment data to be transmitted more precisely and processed automatically.
This structured data foundation offers several advantages:
- Improved automation of payment processes
- Greater transparency of payment information
- Simplified compliance and audit processes
- Globally harmonised messaging standards
Today, the standard is used in many areas of the financial system, including international transfers, securities transactions and the European SEPA payment scheme.
The implementation of ISO 20022 is gradual
The introduction of ISO 20022 is not a single project with a fixed start date. Rather, it is a multi-year global migration implemented in stages.
An important milestone has already been reached, as banks have migrated their internal payment messages to ISO 20022. This phase primarily affected interbank communication.
The next phase now follows, which more directly impacts companies. Banks increasingly expect payment files to comply with current ISO 20022 standards.
Particularly relevant aspects include:
- Modern pain payment formats
- Structured payment data
- Current format versions
Companies should therefore review whether their existing payment formats still meet their banks’ requirements.
SEPA payments are already based on ISO 20022
A well-known example of ISO 20022-based payment formats is the SEPA payment scheme in Europe.
SEPA stands for Single Euro Payments Area and enables standardised transfers and direct debits across Europe. Technically, these payments are processed using XML files.
The most important SEPA message formats include:
- pain.001: payment instruction for credit transfers
- pain.008: payment instruction for direct debits
These files contain structured information such as:
- Payee
- Amount
- IBAN and BIC
- Payment reference (remittance information)
- Payment references
In most companies, these files are generated automatically from SAP systems and then transmitted to the bank.
The importance of the pain format in payment transactions
What is the pain format?
A particularly important element of the ISO 20022 standard is the pain message set.
The term “pain” stands for Payment Initiation and describes messages used by companies to submit payment instructions to banks.
The most important pain formats are:
- pain.001: Customer Credit Transfer Initiation
→ used for credit transfers - pain.008: Customer Direct Debit Initiation
→ used for direct debits - pain.002: Payment Status Report
→ used for feedback on payment status information
In particular, pain.001 is one of the central formats in corporate payment transactions.
Typical contents of a pain.001 file include:
- Information about the payer
- Information about the payee
- Payment amount
- References and remittance information
- Payment date
This structure enables banks to process and validate payments automatically.
New pain versions are becoming the standard
As ISO 20022 payment formats continue to evolve, the underlying XML messages are updated. For companies, this means that not only the format itself but also the version used is crucial.
From November 2026, the following formats will be considered the current reference:
- pain.001.001.09 → credit transfers, SEPA and international payments
- pain.008.001.08 → direct debits
- pain.002.001.10 → payment status messages
Older versions such as pain.001.001.03 or pain.008.001.02 will be gradually phased out and may no longer be accepted by banks in the long term.
Companies should therefore review:
- Whether their ERP systems (SAP S/4HANA or ECC) can generate the current pain versions
- Whether existing interfaces to banks are compatible
- Whether tests with their house banks can be carried out prior to any changes
Structured addresses in payment transactions
With the introduction of ISO 20022 in interbank payment processing, certain address information must be transmitted in a structured format from November 2026. This applies to all parties involved in a payment, including the debtor, the beneficiary, as well as the ultimate debtor or ultimate creditor.
Particularly relevant fields include:
- Town (Town Name / TwnNm)
- Country (Country / Ctry)
From that point onwards, only structured or hybrid address data will be accepted. Free-text (unstructured) addresses will no longer be supported and may result in payment orders being rejected by banks.
Types of address data:
Fully structured address data
- Each piece of information has its own XML field: street name, house number, postcode, town, country
- Town and country are mandatory, postcode is optional
- No additional free-text lines (AddressLine) permitted
- Advantage: maximum automation, reduced risk of errors, supports AML and AFC checks
Hybrid address data
- Combination of dedicated XML fields and up to two address lines for additional information
- Town and country are mandatory, postcode is optional
- Suitable for cases where not all address information is available in a fully structured format
Companies should review and cleanse their address data at an early stage to ensure that, in all payment files, at least the town and country are transmitted correctly in a structured format. It is advisable to validate the implementation within pain messages through test runs with the banks. In this context, functionalities in SAP ECC or S/4HANA can be used to clearly separate street and house number, postcode, town and country, and to assign them correctly to the respective XML fields.
Impact on SAP
As payment files are typically generated directly from ERP systems, the ISO 20022 migration primarily affects a company’s IT landscape. In many organisations, SEPA and pain files are generated automatically from SAP.
Payment formats
The SAP system must be capable of generating current XML formats.
This includes, among other things:
- Correct structure of pain messages
- Supported format versions
- Bank-specific requirements
Master data
Structured payment files require clean master data.
Particularly relevant are:
- Complete IBAN data
- Accurate business partner information
- Structured address data
Bank communication
Communication between companies and banks must also be compatible. Typical communication channels include:
- EBICS
- SWIFT
- Bank portals
New or updated pain formats should always be tested in collaboration with the bank.
Myth: cryptocurrency
In discussions around modern financial technologies, ISO 20022 is occasionally associated with cryptocurrencies or blockchain projects. In reality, however, it is not a cryptocurrency but a standard for financial messaging.
ISO 20022 merely defines:
- Data structures
- Message formats
- Information models
The standard can, in principle, be used with various technologies but is primarily applied in traditional banking and payment transactions. Its key role is to enable consistent, structured communication between financial systems.
How PIKON can support you in payment transactions
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