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Introduction to ISO 20022 – Universal financial industry message scheme

ISO 20022. Introduction to ISO 20022 – Universal financial industry message scheme. Agenda. ISO 20022: Value proposition The standard The actors The registration process The Repository ISO 20022 registration platform Cross industry harmonisation

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Introduction to ISO 20022 – Universal financial industry message scheme

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  1. ISO 20022 Introduction to ISO 20022 – Universal financial industry message scheme ISO_20022_LV_v111

  2. Agenda • ISO 20022: • Value proposition • The standard • The actors • The registration process • The Repository • ISO 20022 registration platform • Cross industry harmonisation • Interoperability within the financial industry • Q&A ISO_20022_LV_v111

  3. The ISO 20022 value proposition (1/5) Objective To enable communication interoperability between financial institutions , their market infrastructures and their end-user communities Major obstacle Numerous overlapping standardization initiatives looking at XML financial messages: MDDL, FIX, FinXML, VRXML, RIXML, XBRL, FpML, IFX, TWIST, SWIFT, RosettaNet, EPC, OAGi, ACORD, CIDX, etc. ISO_20022_LV_v111

  4. The ISO 20022 value proposition (2/5) Proposed solution A single standardisation approach (methodology, process, repository) to be used by all financial standards initiatives ISO 20022 ISO_20022_LV_v111

  5. The ISO 20022 value proposition (3/5) Convergence into ONE standard is the long term objective… … but in the interim several standards need to coexist to enable quick response to competitive pressures and regulatory demands ISO_20022_LV_v111

  6. The ISO 20022 value proposition (4/5) Growth adds exponential complexity and expense… Without common building blocks: • Point-to-point connection • Data is mapped directly from one application to another • Costly, unscalable and difficult to implement and maintain • Process, routing, rules logic needs to be coded to specific message types EDIFACT RosettaNet IFX SWIFT Proprietary format OAGi TWIST 42 interfaces = n * (n-1) Source: John Mersberg, IBM Corporation ISO_20022_LV_v111

  7. The ISO 20022 value proposition (5/5) Standardized implementation reduces cost, time to effect change and improves overall performance… Canonical message model = • True process integration • Reduced brittleness, faster to respond to change • Shared message services – single/shared parser, message independent rules engine, etc. • Unified monitoring / audit trail RosettaNet EDIFACT SWIFT IFX Proprietary format Canonical Message Model (i.e. ISO 20022) OAGi 14 interfaces = n * 2 TWIST ISO aims at long term convergence, while facilitating short term coexistence… ISO_20022_LV_v111

  8. Date Account Order All institutions have their own sets of data objects Order Date …and groups them into ‘syntax-neutral’ message models, which... Date … can be ‘transformed’ in message formats in the desired syntax ASN.1 XML ISO 15022 FIX ISO 20022Illustrating business modelling ISO standardizes common data objects… ISO_20022_LV_v111

  9. The ISO 20022 recipeMain ingredients (1/2): • Modelling-based standards development • Syntax-independent business standard • Validated by the industry • Syntax-specific design rules for XML and ASN.1 • Predictable and ‘automatable’ • Protect standard from technology evolution • Reverse engineering approach • Protect industry investment and ease interoperability • Prepare for future migration ISO_20022_LV_v111

  10. The ISO 20022 recipeMain ingredients (2/2): • Development / registration process • Clearly identified activities and roles • Business experts and future users involved upfront • Technical experts involved when required • Repository on the ISO 20022 website • Business Process Catalogue & Data Dictionary • Outside of official standard (maintained by registration bodies) www.iso20022.org ISO_20022_LV_v111

  11. The eight parts of ISO 20022 Copies can be obtained from www.iso.org ISO_20022_LV_v111

  12. ISO 20022: The actors (1/2) Submitting organisations Communities of users or organisations that want to develop ISO 20022 compliant messages to support their financial transactions Could be ISO_20022_LV_v111

  13. ISO 20022: The actors (2/2) • Registration Management Group, RMG • Overall governance, court of appeal • Approve business justifications for new standards • Create Standard Evaluation Groups (SEGs) • Standards Evaluation Groups, SEGs • Represent future users in specific financial areas • Validate candidate message standards • Approve change requests • Registration Authority, RA • Ensure compliance • Maintain and publish ISO 20022 Repository • Technical Support Group, TSG • Assist RMG, SEGs, RA and submitting organisations ISO_20022_LV_v111

  14. Financial industry group or standards body Submitting organisation R M G m o n i t o r s Project approval & allocation to a SEG RMG Submitting organisation & RA Development & provisional registration SEG RA Repository Dictionary Catalogue ISO 20022 The registration process (1/3) Business justification Business justification Business validation Official registration and publication Optional pilot testing or first implementers Submitting organisation & users www.iso20022.org ISO_20022_LV_v111

  15. Financial industry group or standards body Submitting organisation R M G m o n i t o r s Project approval & allocation to a SEG RMG Submitting organisation & RA Development & provisional registration SEG RA Repository Dictionary Catalogue ISO 20022 The registration process (2/3) Business justification Business justification Candidate ISO 20022 messages Business validation ISO 20022 messages Official registration and publication Optional pilot testing or first implementers Submitting organisation & users www.iso20022.org ISO_20022_LV_v111

  16. SEG SEG SEG RA Repository Dictionary Catalogue ISO 20022 registration process (3/3)Yearly maintenance process Timing Users introduce Change Requests to the RA By June 1 Users CRs SEG screens Change Requests (CRs) By July 7 Submitting organisation prepares ‘Maintenance Change Request’ with each CR implementation Submitting organisation By August 21 By October 1 SEG approval/rejection Submitting organisation & RA Development of new versions By December 1 Validation of new versions By February 1 Registration and publication April-May First implementers Submitting organisation & users ISO_20022_LV_v111

  17. ISO 20022 - The Financial Repository • Data Dictionary • Business Concepts • Message Concepts • Data Types • Business Process Catalogue • Financial business process models • Financial business transactions, including messages • XML or ASN.1 message schemas www.iso20022.org ISO_20022_LV_v111

  18. Continuing with today’s agenda… ISO 20022 ISO 20022 Registration Platform ISO_20022_LV_v111

  19. ISO 20022 - The Deployment • Approval of the international standard  • Selection of the Registration Authority  • Set-up of the www.iso20022.org  • Creation of Registration Management Group  • Creation of the first Standards Evaluation Groups  • Registration and publication of first ‘ISO 20022 messages’  Ongoing: promotion to developers (standardizers, industry bodies) and users (vendors, end-users) ISO_20022_LV_v111

  20. ISO 20022 How does it fit into the ISO structure? ISO Technical Committee TC68 Financial Services SC2 Security SC4 Securities SC7 Banking ISO 20022 RMG TSG RA RMG members nominated by P-member countries and A-liaison organisations TSG & SEG members nominated by all member countries and liaison organisations SEG Securities SEG Trade Services SEG Payments SEG FX SEG Cards ISO_20022_LV_v111

  21. ISO 20022 Registration Management Group (RMG) • Members - 60 senior managers from: • 20 countries: AT, AU, BR, CA, CH, CN, DE, DK, FI, FR, GB, IT, JP, KR, NL, NO, SE, SG, US, ZA. • 9 liaison organisations: ECB, EPC, Euroclear, FPL, FpML, IFX, ISITC, SWIFT, VISA • Convener:James Whittle, Payments Council (GB); Vice-convener: Bob Blair, JPMorgan Chase (US); Secretary:Andre de Roy, Payments Council (GB) • Meetings:twice a year • Key decisions: • Creation of five SEGs: Payments and Securities in 2005, Trade Services and Forex in 2006, Cards & Related Retail Financial Services in 2008 • Approval of 50 development projects ISO_20022_LV_v111

  22. ISO 20022 – The Payments SEG (1/3) • Members – 62 experts • 17 countries: AU, AT, BR, CH, DE, DK, FI, FR, GB, IT, JP, KR, NL, NO, SE, US, ZA • 5 liaison organisations: ECB, Euroclear, IFX, ISITC, SWIFT • Convener: Susan Colles, BAML (US); Vice-convener: Bob Blair, JP Morgan Chase (US); Secretary:Aurelie Steeno, SWIFT • Approved: C2B payment initiation (SWIFT/ISTH), Interbank credit transfers and direct debits (SWIFT), Exceptions and investigations (SWIFT), B2C advice & statement (ISTH/ISITC), Mandates (SWIFT) , Change/verify account identification (GUF), Bank account management (SWIFT), Creditor payment activation request (CBI Consortium), Cash account reporting request and notification (SWIFT), Bank Services Billing (TWIST/SWIFT), Authorities Financial Investigations (FFI), Stand-alone remittance advice (IFX/OAGi) • Under evaluation: None • Next:Cash management (SWIFT), Real time payments & Account switching (Payments Council Ltd - UK), Financial Institution Direct Debit (SWIFT), Mandate Status List (Danish Bankers’ Association) ISO_20022_LV_v111

  23. ISO 20022 – The Payments SEG (2/3) Covering instruments such as: Payments Credit transfers Covering actors such as: Cheques Financial institutions Direct debits Clearing houses & RTG systems Private & corporate customers Central banks ISO_20022_LV_v111

  24. ISO 20022 – The Payments SEG (3/3) Clearing & settlement Including business areas such as: Interbank transfers via correspondent banking or ACHs, high value payments, low value bulk payments, RTGS, etc. Payment initiation Communications between the ordering customer and its bank, etc. Payments Cash Management between various actors: …to the ordering & beneficiary customers, reconciliation, exceptions & investigations handling. Account opening, standing orders, transaction and account information, advices & statements from … ...the account servicing institutions to account owners, including reporting from the financial institution… ISO_20022_LV_v111

  25. ISO 20022 – The Securities SEG (1/3) • Members – 53 experts • 15 countries: BR, DE, DK, FI, FR, GB, IE, JP, LU, NL, NO, SE, SG, US, ZA • 7 liaison organisations: Clearstream, ECB, Euroclear, ISDA/FpML, ISITC, FPL, SWIFT • Convener: Kevin Wooldridge, Standard Logic (GB); Vice-convener: Axelle Wurmser, BNP Paribas (FR); Secretary: Mireia Guisado-Parra, SWIFT • Approved:Investment funds (SWIFT), Transaction regulatory reporting (SWIFT), Proxy voting (SWIFT), Issuer’s agents communication for CA (Euroclear), FPP report (SWIFT) , Corporate actions (SWIFT), Settlement & reconciliation (SWIFT), Post-trade (SWIFT/Omgeo), Total portfolio valuation report (ISITC/SWIFT) • Under evaluation:CCP Clearing (FPL/SWIFT), Collateral Management (FPL, ISDA/FpML, ISITC, SWIFT) • Next: Alternative funds (SWIFT), Target2-Securities (SWIFT/4CB), Investment Fund Prospectus (ANBIMA), SSI for Securities, Payments & FX (ISITC, Omgeo, FPL), Transparency of Holdings (Clearstream) ISO_20022_LV_v111

  26. ISO 20022 – The Securities SEG (2/3) Covering instruments such as: Securities Equities Service bureaux Covering actors such as: Fixed income Investment managers, distributors, transfer agents, fund administrators Broker / dealers Funds Custodians Deriva-tives Regulators CSDs, ICSDs Stock exchanges, ETC providers Market Data Providers Clearing houses, CCPs ISO_20022_LV_v111

  27. ISO 20022 – The Securities SEG (3/3) Including business areas such as: Clearing & settlement Trade, post-trade Trade Initiation, pre-trade Securities Issuance Securities Custody Income, corporate actions, market data, proxy voting Account opening, standing orders, transaction and account information, advices & statements, queries & investigations Collateral management Collateral, repos, securities lending & borrowing ISO_20022_LV_v111

  28. Looking at the advantages ISO 20022 brings over ISO 15022 ISO 20022: • Builds on the ISO 15022 data dictionary concept and registration infrastructure, but strengthens the monitoring by the industry • Uses a more robust, syntax independent development methodology based on modelling of business processes and transactions • Uses XML or ASN.1 as the syntax for the actual physical messages • Has a wider scope than ISO 15022, which is only for securities messages Syntax independent business modelling is key to the ISO 20022 standard ! ISO_20022_LV_v111

  29. ISO 20022 – The FX SEG (1/3) • Members – 24 experts • 9 countries: CA, CH, CN, FR, GB, NO, SE, US, ZA • 3 liaison organisations: FPL, ISITC, SWIFT • Convener: Ram Komarraju, CLS (US); Vice-convener: ZaiyueXu, CFETS (CN); Secretary: vacant • Kick-off meeting: in September 2006 • Approved:Forex notifications (CLS) • Next: Post Trade Foreign Exchange Messages (CLS), FX Post-Trade Trade Confirmation and FX Post-Trade Trade Confirmation (CFETS) ISO_20022_LV_v111

  30. ISO 20022 – The FX SEG (2/3) Covering instruments such as: Foreign eXchange Spot Trading portals, matching services providers Covering actors such as: Swaps Hedge funds Investment managers Forward Custodians Currency Options Dealers Application providers CLS and CLS settlement members Industry associations (ISDA) Money brokers ISO_20022_LV_v111

  31. ISO 20022 – The FX SEG (3/3) Including business areas such as: Trade: order, execution, allocation, affirmation, etc. Pre-trade: IOI, quotes, etc. Post-trade: confirmation, matching, assignment, novation, etc. Foreign eXchange Notification of trades to third parties Clearing and Settlement, including netting and related reporting Trigger events, option exercises ISO_20022_LV_v111

  32. ISO 20022 The Trade Services SEG (1/3) • Members – 33 experts • 13 countries: CA, CH, DE, DK, FI, FR, GB, IS, IT, JP, NL, US, ZA • 1 liaison organisation: SWIFT • Convener: Tapani Turunen, Tieto (FI) Vice-convener:Peter Potgieser, RBS (NL); Secretary: David Dobbing, SWIFT • Kick-off meeting: in September 2006 • Approved: Invoice Financing Request (CBI Consortium), Trade Services Management (SWIFT), Financial Invoice (UN/CEFACT TBG5), Demand Guarantees and Standby Letters of Credit (SWIFT) • Under evaluation: Factoring Services(ASF) • Next: Invoice Tax Report (FFI & Tieto) ISO_20022_LV_v111

  33. ISO 20022 The Trade Services SEG (2/3) Covering products… Trade Services Collection …and services such as: Reconciliation (A/R, A/P), remittance data Documentary credit Open Account Trading Letter of credit e-Invoicing EBPP Guarantee Purchase order, transport documents Invoice financing ISO_20022_LV_v111

  34. ISO 20022 The Trade Services SEG (3/3) Including actors such as: Financial Institutions Private and corporate customers (treasurers) Associations providing rules and master agreements (eg IFSA, ICC) Trade Services Risk management entities Trade facilitators: chambers of commerce, insurance co, freight forwarders, carriers, customs, factoring co Application providers ISO_20022_LV_v111

  35. ISO 20022 – The Cards & Related Retail Financial Services SEG (1/3) • Members – 30 experts • 14 countries: AT, CA, CH, DE, DK, FI, FR, GB, JP, KR, NL, SE, US, ZA • 3 liaison organisations: IFX, Mastercard, SWIFT • Convener: William Vanobberghen, Groupement des Cartes Bancaires (FR); Vice-convener: Richard DuVall (IFX); Secretary: Reinhard Herwig, SRC (DE) • Kick-off meeting: on 23-24 October 2008 • Approved:CAPE – Acceptor to Acquirer and Terminal Management (EPASOrg) • Under evaluation: None • Next:Acquirer to Issuer Card Messages (TC68/SC7/TG1), ATM interface for transaction processing and ATM management (IFX Forum/EPASOrg),Dispute Resolution in Cards Fee Collection ISO_20022_LV_v111

  36. ISO 20022 – The Cards & Related Retail Financial Services SEG (2/3) Covering instruments… Cards and Retail Debit card Charge and credit card …and actors such as: Acceptor (merchant, retailer) Card holder Prepaid card Card issuer Hard- and Software providers Card scheme Acquirer Intermediary agent ISO_20022_LV_v111

  37. ISO 20022 – The Cards & Related Retail Financial Services SEG (3/3) Including business areas such as: Transactions between merchants and acquirers, and cardholders and issuers that support authorization, clearing, reversal, chargeback, dispute processing, etc. Transactions between acquirers and card issuers Similar messages transacted on internet or from mobiles or other personal devices ATM processes such as authorization, processing, ATM management and inventory POI messages for payments, administrative and device related services ISO_20022_LV_v111

  38. ISO 20022 – Technical Support Group • Members – 26 experts • 11 countries: BR, CN, CH, DE, FI, FR, GB, JP, KR, NL, US • 5 liaison organisations: Euroclear, FPL, ISITC, Mastercard, SWIFT • Convener:Frank Dreisch, Gefeg (DE); Vice-convener:Anthony Coates (GB); Secretary: Kris Ketels, SWIFT • Kick-off meeting: on 23-24 October 2008 • Mission: help RMG, RA, SEGs and Submitting Organisations with technical matters ISO_20022_LV_v111

  39. Cross-industry harmonisation Continuing with today’s agenda… ISO 20022 ISO_20022_LV_v111

  40. Harmonising across all industries with UN/CEFACT United Nations/CEFACT – Centre for trade facilitation and e-business • Created in 1997 to improve world-wide co-ordination of trade facilitation across all industries • Focusing on international standards for electronic transactions (e.g., ebXML venture with OASIS) • Promoting technology neutral business modelling and a central library of core components Goal is to establish interoperability between ISO 20022 and UN/CEFACT repositories ISO_20022_LV_v111

  41. Harmonisation between ISO and UN/CEFACT • 2004: TC68, TBG5 and SWIFT sign a MoU to investigate harmonisation • 2005: Trial submission from ISO 20022 to UN/CEFACT • 2006: ISO TC68/WG4 takes over technological alignment • 2007: Official submission from ISO 20022 to UN/CEFACT • 2008: Customer-to-bank payment components harmonised and accepted in UN/CEFACT core component library • 2009: The cooperation is placed under the umbrella of the ‘MoU on e-Business’ • 2010: Official submission of a financial e-invoice message from UN/CEFACT to ISO 20022 ISO_20022_LV_v111

  42. Interoperability within the financial industry Continuing with today’s agenda ISO 20022 ISO_20022_LV_v111

  43. Date Account Order All institutions have their own sets of data objects Order Date …and groups them into ‘syntax-neutral’ message models, which... Date Using ISO 20022 modelling to reach interoperability ISO standardizes common data objects… … can be ‘transformed’ in message formats in the desired syntax XML ASN.1 FpML FIX ISO_20022_LV_v111

  44. ISO 20022 compliance at model level Repository ISO 20022 Dictionary Dictionary Catalogue Payments clearing & settlement ISO 20022 message models Card payments physical message representation ISO 20022 ASN.1 syntax ISO 20022 XML syntax ISO_20022_LV_v111

  45. ISO 20022 compliance at model level Repository ISO 20022 compliant ISO 20022 Dictionary Dictionary Catalogue Payments clearing & settlement ISO 20022 message models Card payments physical message representation other syntax ISO 20022 syntax ISO 20022 compliant ‘using a domain specific syntax’ ISO 20022 compliant ISO_20022_LV_v111

  46. “Investment Roadmap” for ISO, FIX, XBRL and FpML syntaxes The Investment Roadmap is maintained by the Standards Coordination Group including the following organisations: Download the Investment Roadmap and related FAQ ISO_20022_LV_v111

  47. Interoperability in the customer-to-bank payment domain Bank A IFX format Proprietary format Bank B Customer A SWIFT MT 101 Bank C Let us look at a concrete example from payments area: a customer may need to adapt to the format of the banks… ISO_20022_LV_v111

  48. Customer A Customer B Customer C Interoperability in the customer-to-bank payment domain IFX format Proprietary format Bank A SWIFT MT 101 …or banks may need to accept many formats… ISO_20022_LV_v111

  49. Interoperability in the customer-to-bank payment domain Proprietary OAGi TWIST ISO 20022 Core Payment Kernel model SWIFT MT IFX The reverse engineering produces a canonical ISO 20022 message model ISO_20022_LV_v111

  50. Interoperability in the customer-to-bank payment domain IFX Core Payment Kernel MT 101 MT 101 ISO 20022 Core Payment Kernel IFX Adopting ISO 20022 facilitates convergence and co-existence ISO_20022_LV_v111

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