Payments
, How regulation is driving the next wave of payment innovation – and what it means for corporates

Corporates need their payments to be fast, secure and cost-efficient – and a suite of regulatory initiatives is helping the industry to deliver just that.

We hear from Simone Loefgen, Global Head of Payment Platforms, and Jens Schumacher, Global Head of Trade Finance & Cash Management Sales Germany, about how the payments landscape is changing – with new standards, regulations and technological innovations. How are banks and clients responding?

The payments space is one of the fastest-evolving areas of finance, and change is driven by a number of factors. Do industry standards and regulation stifle innovation, or are they driving it?

Jens Schumacher: In some sectors, the expectation can be that regulation hinders innovation. But this couldn’t be further from the truth when it comes to payments. These two forces tend to strengthen one another, rather than pull in opposite directions. Regulation provides the guardrails and common standards that allow innovation to scale, while innovation ensures that regulation delivers better, faster and safer services for end users.

Simone Loefgen: Indeed, this dynamic is playing out on the global payments stage. Think of the G20 Roadmap for enhancing cross-border payments. The G20 has set ambitious 2027 targets to improve cross-border payments – reflecting the growing demand for payments that are fast, cost-effective, transparent and accessible. These policy goals provide an umbrella for a host of initiatives across the ecosystem, including the ongoing migration to ISO 20022 – seen as a foundational step in meeting the G20’s objectives. While not mandatory, the G20’s Roadmap acts as a guiding light for the industry, encouraging alignment and helping to foster innovation across jurisdictions.

In Europe, regulation is playing a more direct role. New rules are typically designed with client needs in mind, and the latest example of this is the Instant Payments Regulation (IPR), which, from October 2025, will help to transform instant payments from a niche product into a standard feature across Europe.

Technology, too, is accelerating change. And here again, regulation is playing a central role in shaping adoption, providing the frameworks that will determine how far and how fast these innovations can scale.

Together, these forces are reshaping payments at every level – from global standards and European regulation to the technologies now emerging on the horizon.

The global payments community has been transitioning from legacy MT messages to ISO 20022 for high-value and cross-border payments for the past few years. As the coexistence phase comes to an end, what is your view on the path ahead?

Loefgen: In July this year, we saw the final major domestic high-value system complete its migration to ISO 20022 – the Fedwire Funds Service. The next big milestone for the new standard comes in November as Swift’s two-year transition phase ends, closing the chapter in which legacy MT and ISO 20022 messages could be used in parallel for cross-border payments.

Ahead of the end of coexistence, challenges remain. By September, Swift reported that 54 percent of payment instruction traffic had shifted to ISO 20022 – well short of the ubiquity expected by November.1 There are several factors behind this lag in adoption, including the migration’s high capital demands and significant technological complexity. Larger banks, with greater resources, have generally achieved higher rates of adoption – but work is needed to supercharge this across the entire cross-border ecosystem in the coming weeks.

Schumacher: Corporate migrations are underway too, but progress is slower. While treasurers recognise the benefits of ISO 20022, they face practical hurdles such as budget constraints, enterprise resource planning (ERP) system upgrades, and competing priorities. In a context of geopolitical uncertainty and supply chain disruption, it is understandable that attention has been drawn elsewhere.

Starting November 2026, unstructured postal addresses will no longer be supported for cross-border payments – meaning that banks will need to adopt either a fully structured or hybrid address format to become compliant. The challenge extends beyond banks: corporate clients will also need to review and update the addresses they hold on file, as well as adapt their systems to process richer data.

Loefgen: Looking beyond the migration and upcoming milestones, the focus will be on how the full benefits of ISO 20022’s richer, more structured data can be realised. As advantages such as faster compliance checks and enhanced information for invoicing and internal processes become clear, adoption will gather pace – creating a virtuous cycle of progress.

For example, next on the horizon is the introduction of new ISO 20022 messages for exceptions and investigations, alongside a central orchestration model with a two-year phased roll-out set to start in November 2025. Together, these developments will greatly enhance the automation of E&I processes and help eliminate the delays and lack of transparency traditionally associated with them.

Europe’s Instant Payment Regulation (IPR) is also prompting innovation in the industry. How are banks preparing for the upcoming introduction of verification of payee rules, and do these new rules present challenges for corporates?

Loefgen: Historically speaking, in Europe regulation has repeatedly acted as a catalyst for change in payments – from the creation of the Single Euro Payments Area (SEPA) to the opening of banking services under the revised Payment Services Directive (PSD2). That trajectory continues with the Instant Payments Regulation (IPR), in force since April 2024, which aims at accelerating the roll-out of instant payments in Europe.2 The next milestone arrives on 9 October 2025, when payment service providers (PSPs) that offer the service of sending and receiving credit transfers must also be able to send instant payments and offer the Verification of Payee (VOP) service, that latter of which compares the combination of payee name and IBAN with the data stored at the recipient bank.

Schumacher: The IPR brings with it clear benefits: it catalyses innovation and creates opportunities for corporate customers that might not otherwise have been available. For example, while a typical German Mittelstand manufacturer may have been adequately served by classic SEPA Credit Transfers, making instant payments the "new normal" gives businesses access to faster settlement and greater efficiency – unlocking business models that were previously out of reach.

By the same token, large-scale regulatory pushes of this nature do come with challenges. For example, the mandatory introduction of VOP offers a clear value proposition for retail banking customers – strengthening protection against misdirected or fraudulent payments. For corporates, however, VOP can introduce unwanted complexity, potentially requiring investment and adjustments to their internal systems and processes. To support this transition, we have been running advisory sessions, some of which have attracted great interest. Ultimately, open communication and close collaboration will be essential to ensuring effective implementation.

There are also other factors shaping change in the payments space. How are technological developments influencing corporate expectations, and what are banks doing to help clients stay ahead?

Schumacher: Technological developments have prompted advancements in speed and transparency across the financial sector, redefining client expectations and setting new benchmarks for banks to meet.

Loefgen: Distributed ledger technology has, for example, moved into the mainstream, giving rise to new payment rails. As a result, the payments landscape is becoming increasingly complex, with the world seemingly shifting towards a more "multi-polar" model that includes options such as stablecoins and, potentially, central bank digital currencies (CBDCs). Stablecoins have gained the most traction in the United States, where CBDCs are not being pursued, while in Europe the focus remains on a potential digital euro – though discussions on this have been ongoing for years without a clear conclusion in sight.

Ultimately, it remains to be seen to what extent these new rails will take hold. Digital money still needs to demonstrate that it can match the cost-efficiency of existing payment methods. Meanwhile, initiatives such as ISO 20022 are already laying the groundwork for faster, more reliable cross-border payments – raising the question of what unique value a completely new approach can offer.

Schumacher: Clients rightly expect major banks to be ready to support emerging payment options. The challenge is that while additional rails create opportunities, they also add complexity. The key will be for financial institutions to remain flexible and open to innovation, while maintaining robust safety controls. Achieving this will require continued investment in resilient IT infrastructure and reliable platform strategies. Crucially, the approach must be technology-agnostic – able to manage multiple layers with minimal friction and without creating silos.

Payments are the heartbeat of the banking system. Whether due to regulatory pressure or technological innovation, this is one of the areas where change happens fastest. Here, banks have a key role to play to help corporates adapt by providing education, online resources and tailored advice. We will continue to help clients realise the benefits of innovation.

Loefgen: Ultimately, innovation in the payments space should continue to serve the requirements of users – making payments easier, faster and more secure. The task for banks is to ensure that the infrastructure, platforms and guidance are in place to make this vision a reality.

You might also be interested in