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#10 in the LEI Lightbulb Blog Series - Optimizing ISO 20022 for Cross-Border Payments: Why the LEI and BIC are a Perfect Fit for a Truly Global Identification Scheme

A consultation by the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) has been launched inviting industry feedback on proposed ISO 20022 harmonization requirements intended to enhance cross-border payments. This presents a vital and urgent opportunity for payments ecosystem participants across the globe to advocate for the mandatory use of the Legal Entity Identifier (LEI) alongside the Business Identifier Code (BIC) to identify financial institutions and companies. GLEIF explains why, as the only established universal entity identifier globally, the LEI is uniquely positioned to make cross-border transactions faster, cheaper, more transparent and inclusive.

Author: Clare Rowley

  • Date: 2023-03-30
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*** UPDATE - 2023-05-24 ***

Following the publication of this post in March 2023, GLEIF has engaged extensively with various stakeholder groups across the industry on the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) consultation on ISO 20022 harmonization requirements.

As a result of this dialog, GLEIF has published a response to the consultation that evolves the original position outlined in this post.

For a complete overview, the full response is available to view here. In summary, GLEIF contends that:

  • The identification of financial institutions should be performed with the combination of the BIC and LEI, as the global nature of both the BIC and LEI makes them particularly effective for identifying sanctioned entities or discarding potential hits.
  • The LEI should be introduced as the identifier of the debtor/creditor in payment messages. Mandatory use of the LEI can be achieved in a phased manner, such as by prioritizing higher payment amounts and lowering the threshold over time. Both The Reserve Bank of India and The Bank of England have demonstrated phased approaches.
  • At a minimum, the Legal Entity Identifier (LEI) must be allocated the same status as the Business Identifier Code (BIC) regarding the substitution of name and postal address. Currently, the CPMI proposes the minimum required data for name and postal address may be substituted by the BIC, whereas it may only be complemented (not substituted) by an LEI. The LEI must also fulfill the minimum required data of name and postal address, given that it enables clear and unique identification of legal entities; is based on an international ISO standard; is globally accessible and open; offers high data quality; and is supported by a system subject to regulatory oversight.


Challenges in the cross-border payments market include high costs, low speed, limited access, and insufficient transparency. In October 2020, the G20 endorsed a roadmap to enhance cross-border payments. The roadmap was developed by the Financial Stability Board (FSB) in coordination with the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and other international organizations and standard-setting bodies.

The aim of this collaborative work effort is to address the key challenges facing cross-border payments, and buy-in of this collaborative work by the private sector and end users is crucial to its success. A formal consultation launched by the CPMI on harmonization requirements for the use of ISO 20022 in cross-border payments now provides an important opportunity for industry stakeholders to advocate for the unique benefits delivered by the LEI.

Addressing the challenges of cross-border payments

The fragmentation and mixed use of standards in payment messaging is a major point of friction in cross-border payments. Happily, the adoption of common message formats promises to mitigate the significant challenges that have traditionally constrained cross-border payments.

Payment systems around the world are increasingly adopting ISO 20022 as a common messaging standard. ISO 20022 is an international standard for exchanging electronic messages between financial institutions that has the potential to allow more consistent and structured data in payment processing, promoting greater interoperability in cross-border payments in support of the G20 targets.

Yet issues remain. Current implementations of ISO 20022 vary across regions and jurisdictions, which has the potential to undercut the benefits. To address this challenge, the CPMI and the global industry Payments Market Practice Group (PMPG) have established a joint task force to ‘define and harmonize the data fields being transmitted along the payment chain’. These requirements are anticipated to come into effect in 2025 when the period of co-existence between the legacy SWIFT MT standard and ISO 20022 ends.

The proposed harmonization requirements provide overarching guidance for global and domestic market practices guidelines to ensure that the ISO 20022 messaging standard, where adopted, is consistently used to facilitate faster, cheaper, more accessible, and more transparent cross-border payments. They establish specific expectations for the use of ISO 20022 messages in cross-border payments related to specific functions, the transparency and clarity of key data elements, and use of structured and coded data to support automated processing.

In an initial update published in September 2022, the CPMI outlined one of the high-level requirements under consideration by the task force was ‘the use of a common single structured way to identify persons, entities and financial institutions involved in cross-border payments’. The initial report rationalized that defining minimum data requirements while restricting options to structured data, such as ISO identifiers, including the Legal Entity Identifier (LEI), would help to enhance efficiency and transparency in cross-border transactions.

The logic behind including the LEI in ISO 20022 payments messaging is simple. When the LEI is added as a data attribute in payment messages, any originator or beneficiary legal entity can be precisely, instantly, and automatically identified across borders. Moreover, the LEI is already an optional field in the ISO20022 messaging standard. Therefore there is little operational and technical implementation needed compared to introducing of a new identifier. Including the LEI as a structured data element required within ISO 20022, messages would create cascading benefits, significantly increasing transparency and therefore trust while creating efficiencies that ease Know-Your-Customer (KYC) and compliance burdens.

As payment market infrastructures across the world move to support instant payments, the ability to verify and validate the originator and beneficiary of a transaction in near real-time is imperative. In addition, increasing global scrutiny of sanctions regimes has exposed compliance challenges and made clear that the only route to effective enforcement is to be precise in terms of who is sanctioned. The LEI is the only global identifier that can provide this precise identity verification to enable meaningful transaction screening.

Consultation: Harmonizing ISO 20022 requirements

Following the initial update, the CPMI published a full official consultation in March 2023, which, among other things, seeks feedback from payments stakeholders to inform the specific data fields to be harmonized within the ISO 20022 payment messaging standard.

Within the consultation, the CPMI “proposes to require identification of all FIs involved in cross-border payments via the business identifier code (BIC)”. Importantly, it is GLEIF’s position that the LEI should be required along with the BIC. As noted by SWIFT, BICs, and LEIs are global in nature and particularly effective for identifying sanctioned entities or discarding potential hits, for example. Yet, while BICs are the primary means of identification for financial institutions on the SWIFT network, they are not necessarily a clear identifier of the actual legal entity involved in a transaction. For example, BIC codes are also assigned to entities such as bank branches, trading desks, departments, or test and development systems. The open-source mapping file collaboratively produced by GLEIF and SWIFT demonstrates the complexity of cross-referencing these key entity identifiers and the benefits of having this complementary information readily available in the payment message.

This consultation presents a vital and urgent opportunity for payments ecosystem participants across the globe to advocate for the complementary use of the LEI alongside the BIC. Only the combination of both identifiers will support the realization of enhanced cross-border payments for all. While BICs identify financial institutions on the SWIFT network, LEIs can verify the identities of all legal entities involved in a transaction. Only this complete set of information within a payment message will provide enhanced certainty and transparency.

GLEIF would also like to highlight the pitfalls of recommending the LEI on an ‘if available’ or ‘where available’ basis. Allowing multiple data sources is a major problem in today’s payments ecosystems, significantly reducing the ability to conduct straight-through processing and achieve the goals of faster and cheaper cross-border payments. Moreover, GLEIF understands that name and postal address are considered as mandatory data requirements from CPMI, and LEI as a complementary identifier. Here, GLEIF wants to emphasize that all mandatory considered data fields, including the legal name, local business registry information, headquarter and legal address can be retrieved from the LEI reference data in an automated manner.

Understanding the value of the LEI in cross-border payments

It is clear that the industry needs a truly global identification scheme for involved entities to maximize the benefits of transitioning to the ISO 20022 payment messaging, given the objective of this transition is not routing the payments but rather creating a more efficient, inclusive, cheaper, and transparent cross-border payments ecosystem.

GLEIF strongly supports the identification of all entities involved in a cross-border payment in a standardized and structured way. This is a foundational step toward ensuring an efficient, secure, and trusted cross-border payment ecosystem. A standardized identification and verification approach allows consumers, businesses, and financial institutions to conduct due diligence on the entity they are transferring funds to, delivering huge benefits to the broader payments ecosystem:

  • Driving transparency and efficiency

The LEI should be used to identify any originator or beneficiary legal entity, especially in complex scenarios where many entities are involved.

Improved transparency is paramount for all users and facilitators in payments networks. This is particularly pertinent for cross-border transactions, where tracking the status of payments involves lengthy and manual processes for both senders and recipients due to differing time zones, reliance on multiple intermediaries, and limitations in consistent tracking information. If the LEI were the global unique identifier for originators, beneficiaries and intermediary financial institutions, manual processes would be eliminated, contributing to faster and cheaper payments.

The benefits can also be expanded to business-to-business (B2B) transactions, which often require manual reconciliation of receivables. If the LEI is added as a structured data element in the data model that CPMI designs, financial institutions or payment service providers would not need manual efforts to locate the beneficiary.

  • Increasing trust and confidence

Imagine the benefits of a consumer-to-business (C2B) transaction where the consumer finally knows with absolute certainty the legal entity receiving their payment. Given the payee is identified with an LEI, the consumer can easily validate the LEI of the beneficiary via the open, publicly available Global LEI Index and then initiate the payment process with greater certainty and confidence. Again, this is especially important in cross-border scenarios where the payor and payee may not share the same language or even character sets, making basic due diligence impossible. And as the financial institution or fintech can fully integrate the LEI and LEI reference data into existing client interfaces via the open public GLEIF API, there is no additional effort by the consumer to obtain the rich information available in the Global LEI Index.

The LEI also reinforces a more secure payments infrastructure where all endpoints are identified by one consistent, open global identifier.

  • Promoting global interoperability and inclusion

The Global LEI System links with the local business registries that might be proprietary and in different character sets. Instead of navigating through various access points and languages, the Global LEI System allows both corporate payors, payments service providers, and consumers to conduct quick due diligence in a trusted way. With the Global LEI System, all parties can easily know and verify with whom they are transacting. Additionally, the system is endorsed by the 65 public authorities that participate in the Regulatory Oversight Committee.

  • Improving accuracy

The LEI standard can address the high rate of rejected instant payments for wrongly identified organizations if used as a data attribute for the identification of payees and within sanctions lists publications, as most recently suggested by the FSB in the context of cross-border payments.

Towards optimized cross-border payments

GLEIF reiterates that as the only established universal entity identifier globally, the LEI is uniquely positioned to make cross-border transactions faster, cheaper, more transparent and inclusive. GLEIF strongly encourages LEI supporters globally to engage with the CPMI consultation and show broad support for the LEI within ISO 20022.

This position echoes an earlier FATF industry survey, where many respondents advocated broader adoption of the LEI for cross-border payments to support widespread interoperability, reduced costs, and increased transparency. It also aligns with SWIFT’s ‘Guiding principles for screening ISO 20022 payments’, endorsed by the PMPG and Wolfsberg Group, which highlighted how the LEI can support an effective, targeted approach to sanctions screening.

Given the clear and broad benefits of including the LEI within payment messaging, there has already been movement to mandate the LEI on a national level. Back in December 2020, the Bank of England published its ‘Policy Statement: Implementing ISO 20022 Enhanced Data in CHAPS’ which confirmed the introduction of the LEI into the CHAPS payment message standard when migrating to ISO 20022.

Elsewhere, the Chinese Cross-border Interbank Payment System (CIPS) has developed the “CIPS Connector” to further the use of the LEI in cross-border transactions and facilitate cross-border trade and investment. Every CIPS Connector user is assigned with an LEI, which is used for activating the tool as well as a mandatory business element in their business transaction.

And in India, the Reserve Bank of India (RBI) issued a mandate for the LEI in all payment transactions totaling ₹ 50 crore and more undertaken by entities for Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT). From October 2022, this requirement was extended to cross-border capital or current account transactions.

All of this points to a clear opportunity. As the industry looks towards charting a path for the long-term global rollout of ISO 20022, mandating the LEI as a structured data element aligns well with the FSB recommendation that encourages increased LEI references across payments and thereby maximize benefits for payment market infrastructures, financial institutions, and corporates.

The link to the CPMI consultation can be found here.

The ‘LEI Lightbulb Blog Series’ from GLEIF aims to shine a light on the breadth of acceptance and advocacy for the LEI across the public and private sectors, geographies and use cases by highlighting which industry leaders, authorities and organizations are supportive of the LEI and for what purpose. By demonstrating how success derived from strong regulatory roots is giving rise to a ground swell of champions for further LEI regulation and voluntary LEI adoption across new and emerging applications, GLEIF hopes to educate on both the current and future potential value that ‘one global identity’ can deliver for businesses, regardless of sector, world-wide.

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About the author:

Clare Rowley is the Head of Business Operations at the Global Legal Entity Identifier Foundation (GLEIF). Prior to working with GLEIF, Ms. Rowley worked at the United States Federal Deposit Insurance Corporation where she led technology initiatives improving bank resolution programs and contributed to research on subprime mortgages. Ms. Rowley is a CFA® charter holder and holds a MS in Predictive Analytics from Northwestern University.

Tags for this article:
Global Legal Entity Identifier Foundation (GLEIF), Know-Your-Customer (KYC), Regulatory Oversight Committee (ROC), Compliance, Standards, LEI Mapping, Global LEI Index