The message that carries a payment instruction determines what information travels with the money. Replacing older formats with structured ones affects far more than the technology.
What the old formats could not carry
Legacy messages were designed when bandwidth was expensive and used short fields, often with free text for names, addresses and references. Information was present but unstructured.
Automated systems could not reliably parse which part of a text field was a street and which was a company name. Screening and reconciliation therefore required human intervention.
Different institutions used the same fields differently, and data was truncated when passed between systems. Detail was lost at each hop in a correspondent chain.
Why structure matters for screening
Sanctions and compliance systems compare parties against lists. Matching a structured name and address is far more accurate than matching a block of free text.
Better matching reduces false positives, which are the main cause of payments being held for manual review. Fewer holds means faster settlement without any change to the underlying rails.
It also means genuine matches are less likely to be missed. The improvement runs in both directions.
What richer data does for the business using it
Structured remittance information allows an incoming payment to be matched automatically to the invoice it settles. Reconciliation moves from a manual task to an automated one.
For companies receiving many cross-border payments, this changes the cost of operating internationally. The saving is in accounts receivable rather than in payment fees.
Purpose codes and structured references also support regulatory reporting requirements that some countries impose on cross-border flows. The data is captured once rather than reconstructed later.
Why migration is difficult
A payment passes through several institutions, and the message is only as rich as the weakest link. A single participant truncating data degrades it for everyone downstream.
Migration therefore requires coordination across many institutions and jurisdictions, with long coexistence periods where both formats are supported. Timetables have been extended repeatedly.
Domestic systems and cross-border systems must migrate together to realise the benefit. Where they have diverged, data is lost at the boundary.
What it does not solve
Better data does not shorten the chain of intermediaries or remove the need to settle in some currency. The structural cost of correspondent banking remains.
Nor does it harmonise compliance requirements, which continue to differ by jurisdiction and change over time. It makes existing checks cheaper rather than fewer.
The gains are concentrated in reduced friction and better information. They are real but incremental rather than transformative.