Lynx achieves full adoption of ISO 20022 messaging standard (MX) and implementation of hybrid postal address format

End of coexistence period aligns with the global initiative from Swift to discontinue payment instruction MT messages

Canada’s high-value payment system, Lynx, has reached a pivotal milestone, fully transitioning to the ISO 20022 financial message standard (MX messages), marking a significant leap forward for payment innovation across the country. This achievement aligns with the global initiative to discontinue legacy MT payment messages.

This period signifies the “end of coexistence” of MT and MX payment messages on Lynx.

Lynx, which replaced the Large Value Transfer System (LVTS) in 2021, serves as Canada’s electronic wire system for high-value payments. Built on the real-time gross settlement (RTGS) model, Lynx ensures payments are fast, irrevocable and settled with real-time finality. Its design is compliant with both Canadian and international risk standards and supports the ISO 20022 global financial messaging standard.

The second release of Lynx in March 2023 initially introduced the ISO 20022 standard (MX messages) to enable data-rich payments. MX messages, which are enabled with XML protocol, allow for seamless and straight-through payment processing. While participant financial institutions were required to support legacy MT messaging during this coexistence period, the decommissioning solidifies ISO 20022 as the message format for high-value payments.

In addition to the discontinuation of MT messages, the Lynx MX messages are also being updated to introduce the new hybrid postal address related changes. This new address format was introduced by Swift's Payment Market Practice Group (PMPG) and allows for payments to contain a combination of structured elements (town name and country) with unstructured elements (address lines). This hybrid structure will help organizations with unstructured data comply without needing an all-or-nothing shift to structured data.

Further, more structured formats for addresses will help reduce errors, improve efficiency, enhance automated recognition and improve data extraction, making it easier to meet compliance requirements like sanctions screening and anti-money laundering (AML) monitoring.

ISO 20022: Enabling more efficient, reliable and innovative modern payments

The adoption of ISO 20022 is an important step in modernizing Canada's payment landscape. This global financial messaging standard allows electronic payments to carry significantly more information, which is crucial for the future of payments. The rich data traveling with payments offers numerous benefits:

• Smoother cross-border exchanges
• Increased innovation in payment products and services
• Reduced reliance on manual processes and older technologies, like cheques
• Faster adaptability to evolving technology and enhanced opportunities for automation

As more businesses and countries worldwide embrace this standard, these benefits are expected to amplify. Payments Canada emphasizes that to fully realize these advantages, financial institutions need to be capable of sending and receiving Lynx MX payment messages.

Payments Canada is committed to the pursuit of end-to-end adoption of ISO 20022 payment messages. This commitment is underscored by our ISO 20022 centre of excellence playing a leading role in Canada’s adoption of ISO 20022 by:

• Actively participating in global ISO 20022 standard-setting communities and consultation processes.
• Leading the implementation of ISO 20022 payment messages for its operated systems, including Lynx and the forthcoming Real-Time Rail.
• Collaborating with members and stakeholders to streamline the use of ISO 20022 messages in Canada.
• Providing industry training and education on the benefits and adoption of ISO 20022.

Payments Canada would like to thank all Lynx participants and the broader payment industry for their dedication and collaborative efforts in achieving this milestone. This collective achievement underscores a shared commitment to making payments easier, smarter and safer for Canadians.