The story of payment processing has always been one of constant evolution. In its earliest days, authorizations were handled manually. Yes, merchants had to call the cardholder’s bank or a switching center to get approval for a transaction. As credit cards became mainstream and transaction volumes surged, this approach quickly became unsustainable.

To address this, card networks built centralized electronic systems that linked merchants, acquiring centers, and issuing banks through a central switch. These systems revolutionized payments and have been in play for the better part of 50 years. While the technology behind payment messaging has advanced significantly, its foundations remain rooted in systems like ISO 8583—a messaging standard developed to streamline transaction exchanges.

ISO 8583: The Backbone of Payments

For decades, ISO 8583 has served as the backbone of card-based electronic payments. It defines a structured message format and communication flow, enabling systems like acquirers, issuers, and card schemes to exchange transaction data seamlessly. Whether it’s a purchase, refund, withdrawal, or balance inquiry, ISO 8583 facilitates the exchange of vital information, including transaction type, amount, card details, and merchant specifics.

A typical transaction under ISO 8583 involves multiple systems exchanging requests and responses, such as authorizations or declines. The protocol ensures that these exchanges follow standard formats for integration, interoperability, and accuracy, using up to 63 or even 127 data fields processed linearly.

The Shift Toward ISO 20022: A New Era in Payment Messaging

While ISO 8583 remains crucial for card transactions, the payments industry is transitioning to ISO 20022 to address the demands of a digital-first world. Unlike ISO 8583, which is specific to card-based payments, ISO 20022 is a more general messaging standard used across various financial transactions. It introduces richer, more flexible data structures, enabling faster, more secure, and transparent exchanges.

Modern payment systems, driven by real-time transactions and API-based messaging, require these advanced formats to deliver seamless integration and enhanced insights. Much like how the original authorisations system addressed the limitations of manual authorizations, ISO 20022 is designed to meet the challenges of today’s global payments landscape.

Why the Shift Matters

This evolution in payment language is about more than just technological upgrades—it’s about preparing the ecosystem for a future where payment systems are interconnected, real-time, and data-rich. As standards like ISO 20022 take center stage, payments will become faster, smarter, and more secure, paving the way for innovation and improved customer experiences.

Key Concept Digest

ISO 8583 Explained (The Non-Technical Way):

• What It Is: ISO 8583 is the global standard for card-based transactions, ensuring systems like acquirers, issuers, and schemes can exchange transaction data seamlessly.
• Key Features: Supports purchases, refunds, reversals, and more, using a structured message format with up to 127 fields.
• How It Works: Ensures data like transaction type, amount, card details, and merchant info are exchanged accurately across systems.

Related Standards:

• ISO 20022: A modern messaging standard enabling rich data exchange for financial transactions across institutions.
• ISO 7810: Defines standards for identification cards.
• ISO 7811: Specifies how data is recorded on identification cards.

The Takeaway

As the payments industry evolves, so does its language. The shift from ISO 8583 to ISO 20022 marks a pivotal moment, transforming how systems communicate and paving the way for faster, more dynamic, and future-ready payments.