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Payment and Settlement Systems in Japan - heading for ISO20022 migration-

Workshop at Queen Mary College 02 Nov. 2009 13:00 ～. Payment and Settlement Systems in Japan - heading for ISO20022 migration-. Takahito Yamada Head of International Standardization Institute for Monetary and Economic Studies Bank of Japan. Agenda for today. 1. Who we are?

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Payment and Settlement Systems in Japan - heading for ISO20022 migration-

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  1. Workshop at Queen Mary College 02 Nov. 2009 13:00～ Payment and Settlement Systems in Japan- heading for ISO20022 migration- Takahito Yamada Head of International Standardization Institute for Monetary and Economic Studies Bank of Japan

  2. Agenda for today 1. Who we are? 2. ISO/TC68 national committee 3. Payment Systems in Japan 4. Securities Settlement Systems in Japan 5. e-Money in Japan 6. Payment Services Act

  3. >Focuses on Standardization for the financial service, > Secretariat for national committees for TC/68 International Standardization (6 staff) 1. Who we are? Conducts fundamental research for the economic and financial domain from mid- and longer-term perspectives. IMES (about 70 staff) (Institute for Monetary and Economic Studies) BoJ (Bank of Japan)

  4. 2. ISO/TC68 national committee(1) Japan active in ISO/TC68 ISO (International Organization for Standardization) TC68 (financial services) WG4 (ISO20022) SC2 (IT security) SC4 (securities) SC7 (core banking)

  5. (2) ISO20022 and its Actors TC68/ WG4 Registration Management Group (RMG)  Business justification Technical Support Group (TSG) Standards Evaluation Groups (SEGs) Registration Authority (RA) ISTH Omgeo ISO20022 Financial Repository Payments  Business models CLS ISO20022 Users SWIFT Data Dictionary Securities  Candidate ISO20022 messages Euroclear Cards  ISO20022 messages Business Process Catalogue Zengin Forex JASDEC www.iso20022.org Trade Finance Source: www.iso20022.org, edited by the presenter.

  6. (3) Central Bankers Active in ISO20022 Communities • ECB and NCBs: T2, SEPA, T2-S, CCBM2 • RMG as L-Member • Securities SEG (+TC68/SC4) • Fed NY: Fedwire Funds/ Securities Services • RMG as L-member • Payment SEG, Securities SEG • BoJ: BOJ-Net • RMG as P-member • Payment SEG, Securities SEG • Technical Support Group (TSG) Followed by;People’s Bank of China, Bank of Korea, Bank of Brazil, Bank of Russia…

  7. (4) Why ISO20022? Reverse Engineering for Migration > Semantics layer < Repository of ISO２００２２ ・Data Dictionary ・Business Process Catalogue Restructure & integrate Analyze & extract ISO20022-XML Legacy SystemsZengin, BoJ-Net… > Syntax layer <

  8. > Semantics layer < XBRL ISO２００２２ integrate integrate UN/ CEFACT ・ Data Dictionary ・Business Process Catalogue ・Core data components ・Business-Process XBRL Taxonomy STP STP EDINET (JFSA), e-Tax Cross Industry e-Invoice, etc. ISO20022-XML, etc. > Syntax layer < (5) Why ISO20022? Collaboration with other standards

  9. 3. Payment Systems in Japan Source: BoJ “Payment and Settlement Systems Report 2007-2008”

  10. (1) Payment Systems/ Messaging Networks Settlement Account Management Clearing, Netting, Queue-offsetting Messaging Network BOJ-NET IP-VPN BOJ-NET Zengin network(to be ISO 20022) Zengin System (RTGS) FEDNET Fedwire Funds IAS (Integrated Accounting System) CHIPS network CHIPS SWIFT SWIFT TARGET2 NCBs (NationalCentral Banks) Euro1/STEP1, etc. Source: Edited from the information on the websites of the respective operators.

  11. (2) Zengin System & BOJ-NET (Nov. 2011-) ISO20022 ISO20022 Source: Bank of Japan Review 2009-E-4 “BOJ-NET Funds Transfers after the Implementation of Phase 1 of the Next-Generation RTGS Project”

  12. 4. Securities Settlement Systems in Japan Source: BoJ “Payment and Settlement Systems Report 2007-2008”

  13. (1) DVP for Asset Classes - Chronological Source: BoJ “Payment and Settlement Systems Report 2007-2008”

  14. BoJ Prepayment of intraday overdraft JGB pledged Release of the pledged JGB Intraday overdraft drawn Funds transfer Seller Buyer JGB transfer (2) Simultaneous Processing of DVP & Collateralization

  15. 5. e-Money in Japan (1) Channels and Types of e-Money in Circulation Stored value （e-Money） IC (smart) card Contactless Pre-paid Post-pay Contact Network (Server-based)

  16. (2) e-Money Brands Source: Edited from thePublic information on the websites of the respective card brands.

  17. EdySuica WAONPASMO (3) Decreasing Coins in Circulation Growth rate of the coins circulated in Japan is decreasing replaced by e-Money. increase decrease

  18. (4) Performance of Contact-less IC Card Stored fare cards are now circulating as e-Money in Japan. Strict requirements need to be satisfied as following: • to passthrough fare gates more than 50 passengers/ minute, contact-less smart card has to complete whole transaction within 0.1 second. • to access to the target card in multiple in the same purse, collision detection/prevention measures shall be implemented. Communication speed FeliCa ： 212Kbps MIFARE (ISO14443 Type A) : 106Kbps Photo: Dr. Inui (NTT Data). 18 18 18

  19. 6. Payment Services Act (effective; June/2010) - Epoch for Innovation in Payment Business - • 1. Prepaid payment instruments (“e-Money”) • Server-based money is equivalent with stored-valueIC card as long as; (1) once balance exceeds \ 10 mil., half to be reserved, (2) cash exchange/ refunds are not allowed in principle, while (3) cash exchange/ refunds areobliged to get out of business. • 2. Funds transfer services • Non-banks can also provide payment services (remittances). • Full value of funds to be reserved. • 3. Interbank clearing • Interbank clearing institutions are to be licensed.

  20. Thankyoufor yourattention! Takahito Yamada Bank of Japan (E-mail: takahito.yamada@boj.or.jp)

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