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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 harmonization

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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_v172

  2. Agenda • ISO 20022: • Value proposition • The standard • The actors • The registration process • The Repository • ISO 20022 registration platform • Cross industry harmonization • Interoperability within the financial industry • Q&A ISO_20022_LV_v172

  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, etc. ISO_20022_LV_v172

  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_v172

  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_v172

  6. The ISO 20022 value proposition (4/5) Growth adds exponential complexity and expense… RosettaNet EDIFACT Without common building blocks: • Point-to-point connection • Data is mapped directly from one application to another • Costly, unsalable and difficult to implement and maintain • Process, routing, rules logic needs to be coded to specific message types IFX SWIFT Proprietary format OAGi TWIST 42 interfaces = n * (n-1) ISO_20022_LV_v172 Source: John Mersberg, IBM Corporation

  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 termconvergence, while facilitating short termcoexistence… ISO_20022_LV_v172

  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_v172

  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_v172

  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_v172

  11. The eight parts of ISO 20022 Copies can be obtained from www.iso.org ISO_20022_LV_v172

  12. ISO 20022: The actors (1/3) Submitting organizations Communities of users or organizations that want to develop ISO 20022 compliant messages to support their financial transactions Could be ISO_20022_LV_v172

  13. ISO 20022: The actors (2/3) • Registration Management Group, RMG • Overall governance, court of appeal • Approve business justifications for new message standards • Approve new member entities • Create Standard Evaluation Groups (SEGs) and SubSEGs • Standards Evaluation Groups, SEGs and SubSEGs • Represent future users in specific financial areas • Validate new candidate messages and change requests ISO_20022_LV_v172

  14. ISO 20022: The actors (3/3) • 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_v172

  15. Submitting organisation R M G m o n i t o r s RMG Submitting organisation & RA SEG RA ISO 20022 The registration process (1/3) Financial industry group or standards body Business justification Business justification Project approval & allocation to a SEG Development & provisional registration Business validation Repository Official registration and publication Dictionary Catalogue Optional pilot testing or first implementers Submitting organisation & users www.iso20022.org ISO_20022_LV_v172

  16. Submitting organisation R M G m o n i t o r s RMG Submitting organisation & RA SEG RA ISO 20022 The registration process (2/3) Financial industry group or standards body Business justification Business justification Project approval & allocation to a SEG Candidate ISO 20022 messages Development & provisional registration Business validation ISO 20022 messages Official registration and publication Repository Dictionary Optional pilot testing or first implementers Submitting organisation & users Catalogue www.iso20022.org ISO_20022_LV_v172

  17. SEG SEG SEG RA 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 Development of candidate new versions Provisional publication Submitting organisation & RA By December 1 Validation of new versions By February 1 Registration and publication By February - May www.iso20022.org First implementers Submitting organisation & users ISO_20022_LV_v172

  18. 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_v172

  19. Continuingwithtoday’s agenda… ISO20022 ISO 20022 Registration Platform ISO_20022_LV_v172

  20. ISO 20022 - The Deployment • Approval of the international standard  • Selection of the Registration Authority and set-up of thewww.iso20022.org • Creation of Registration Management Group  • Creation of Standards Evaluation Groups  • Registration and publication of first ‘ISO 20022 messages’  • Approval of a new edition of the international standard in 2013  Ongoing: promotion to developers (standardizers, industry bodies) and users (market infrastructures, end-users, vendors) ISO_20022_LV_v172

  21. ISO 20022 Registration Management Group (RMG) • Members : • 21 countries: AT, AU, BR, CA, CH, CN, DE, DK, FI, FR, GB, IN, IT, JP, KR, NL, NO, SE, SG, US, ZA. • 17 organisations: ACTUS, Bank of England, CFTC, Clearstream, DTCC, ECB, EPC, Euroclear, FPL, ISDA/FpML, ISITC, MasterCard, NACHA/IFX, nexo, OMG, SWIFT, VISA • Convenor:James Whittle (GB); Vice-convenor: Mike Tagai (JP); Secretary: Lindsay Curtis (GB) • Meetings:twice a year • Key decisions: • Creation of six SEGs: Payments and Securities in 2005, Trade Services and Forex in 2006, Cards & Related Retail Financial Services in 2008, Derivatives SubSEG in 2016 • Approval of ISO 20022 message development projects • Approval of new ISO 20022 Member Entities ISO_20022_LV_v172

  22. ISO 20022 – The Payments SEG (1/3) • Members: • 18 countries: AU, AT, BR, CA, CH, CN, DE, DK, FR, GB, IT, JP, NL, NO, SE, SG, US, ZA • 7 organisations: ECB, Euroclear, ISITC, MasterCard, NACHA/IFX, nexo, SWIFT • Convenor: Peter Hoogervorst (SG); Vice-convenors: Charlie Clarke/Neil Buchan; Secretary: Aurelie Steeno, SWIFT • Approved:C2B payment initiation (SWIFT/ISTH), Interbank credit transfers and direct debits (SWIFT, EPC), Exceptions and investigations (SWIFT), B2C cash management (SWIFT/ISTH), Mandates (SWIFT, SABS) , 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), Cross-border Transactions Currency Control Reporting (RU-CMPG), Account switching (Payments UK), Cash management (SWIFT) • Under evaluation: None • Next: Payment pre-authorization (Early Warning Services), Proxy for bank account numbers (SPRING), EMIP (Deutsche Bundesbank, Banca D’Italia & SWIFT) ISO_20022_LV_v172

  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_v172

  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: ...the account servicing institutions to account owners, including reporting from the financial institution… Account opening, standing orders, transaction and account information, advices & statements from … …to the ordering & beneficiary customers, reconciliation, exceptions & investigations handling. ISO_20022_LV_v172

  25. ISO 20022 – The Securities SEG (1/3) • Members: • 17 countries: AU, BR, CH, DE, DK, FI, FR, GB, IE, IT, JP, NL, NO, SE, SG, US, ZA • 9 organisations: ACTUS, CFTC, Clearstream, DTCC, ECB, Euroclear, FPL, ISITC, SWIFT • Convenor: Axelle Wurmser (FR); Vice-convenor: Charles-Raymond Boniver, SWIFT; Secretary: Benoit Vandaele, SWIFT • Approved: Investment funds (SWIFT), Proxy voting (SWIFT), Issuer’s agents communication (Euroclear), Corporate actions (SWIFT), Settlement & reconciliation (SWIFT), Post-trade (SWIFT/Omgeo), Total portfolio valuation report (ISITC,SWIFT), CCP Clearing (FPL,SWIFT), Collateral Management (FPL, FpML, ISITC, SWIFT), Money Market Statistical Reporting (ECB/3CB), Transparency of Holdings (Clearstream), SSI for Securities, Payments & FX (ISITC, Omgeo, FPL), Financial instruments and transactions regulatory reporting - MiFID II/MiFIR v1 and v2 (ESMA), CSDR-Settlement Internaliser Report (ESMA), Target2-Securities (SWIFT/4CB), Securities MarketsRegulatory Reporting – Benchmark Reporting (ESMA) • Under evaluation: CCP supervisoryreporting (BoE), Securities Financing Transactions Regulatory Reporting – SFTR (ESMA), Target2-Securities (SWIFT/4CB), ShareholderIdentityDisclosure (SMPG/SWIFT) • Next:ASX CHESS Replacement (ASX), TripartyCollateral Management (Banco de Espana/SWIFT) ISO_20022_LV_v172

  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 Regulators Market Data Providers CSDs, ICSDs Stock exchanges, ETC providers Clearing houses, CCPs ISO_20022_LV_v172

  27. ISO 20022 – The Securities SEG (3/3) Including business areas such as: Trade, post-trade Clearing & settlement Trade Initiation, pre-trade Securities Issuance Securities Custody Account opening, standing orders, transaction and account information, advices & statements, queries & investigations Collateral management Income, corporate actions, market data, proxy voting Collateral, repos, securities lending & borrowing ISO_20022_LV_v172

  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_v172

  29. ISO 20022 – DerivativesSubSEG (1/3) • Members: • 8 countries: BR, CN, DE, DK, FR, GB, JP, US • 10 organisations: ACTUS, CFTC, Clearstream, DTCC, ECB, Euroclear, FPL, ISDA/FpML, ISITC, SWIFT • Convenor: Karel Engelen, ISDA/FpML; Vice-convenor: Joe Halberstadt, SWIFT; Secretary: Courtney McGuinn, FPL • Approved: none • Under evaluation: Financial instruments and transactions regulatory reporting – Trade Repository Reporting (ESMA) ISO_20022_LV_v172

  30. ISO 20022 – DerivativesSubSEG (2/3) Covering instruments such as: Derivatives Listed Derivatives Covering actors such as: Market Infrastructures Broker / dealers Investment managers, distributors, transfer agents, fund administrators OTC Derivatives Custodians Regulators CSDs, ICSDs Market Data Providers Confirmation, Execution platforms Clearing houses, CCPs ISO_20022_LV_v172

  31. ISO 20022 – DerivativesSubSEG (3/3) Including business areas such as: Trade, post-trade, including post-trade events such as novation, termination, increase, amendment, option events, and external events such as index and basket changes. Initiation, pre-trade including RFQ and credit limit check, clearing eligibility, margin quote Derivatives Clearing & settlement Regulatory reporting including real-time and snapshot reporting Collateral management ISO_20022_LV_v172

  32. ISO 20022 – The FX SEG (1/3) • Members: • 8 countries: CA, CH, CN, FR, GB, NO, US, ZA • 3 organisations: FPL, ISITC, SWIFT • Convenor: Zaiye XU (CN); Vice-convenor: Howard Middleton (UK); Secretary: Joe Halberstadt (SWIFT) • Kick-off meeting: in September 2006 • Approved: Forex notifications (CLS), Post Trade Foreign Exchange Messages (CLS), FX Post-Trade Trade Capture and FX Post-Trade Confirmation (CFETS) • Under evaluation: none • Next: none ISO_20022_LV_v172

  33. ISO 20022 – The FX SEG (2/3) Covering instruments such as: Foreign eXchange Trading portals, matching services providers Spot Covering actors such as: Swaps Hedge funds Investment managers Forward Custodians Currency Options Dealers CLS and CLS settlement members Application providers Money brokers Industry associations (ISDA) ISO_20022_LV_v172

  34. 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_v172

  35. ISO 20022 - The Trade Services SEG (1/3) • Members: • 10 countries: CA, CH, DE, DK, FR, IS, IT, JP, NL, US • 1 organisation: SWIFT • Convenor:Open Vice-convenor:Open Secretary: David Dobbing (SWIFT) • Kick-off meeting: in September 2006 • Approved:Invoice Financing Request (CBI Consortium), Trade Services Management (SWIFT), Demand Guarantees and Standby Letters of Credit (SWIFT), Factoring Services(ASF), Invoice Tax Report (FFI & Tieto) • Under evaluation: none • Next: none ISO_20022_LV_v172

  36. ISO 20022 - The Trade Services SEG (2/3) Covering products… Trade Services Collection …and services such as: Documentary credit Reconciliation (A/R, A/P), remittance data Letter of credit Open Account Trading e-Invoicing EBPP Guarantee Invoice financing Purchase order, transport documents ISO_20022_LV_v172

  37. 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_v172

  38. ISO 20022 – The Cards & RelatedRetail Financial Services SEG (1/3) • Members: • 16 countries: AT, CA, CH, CN, DE, DK, FI, FR, GB, JP, KR, NL, SE, SG, US, ZA • 5 organisations: Mastercard, NACHA, nexo, SWIFT, VISA • Convenor:William Vanobberghen (FR); Vice-convenor:Ian Groves (GB); Secretary:Reinhard Herwig (DE) • Kick-off meeting: on 23-24 October 2008 • Approved: CAPE – Acceptor to Acquirer and Terminal Management (nexo), ATM interface for transaction processing and ATM management (IFX Forum/nexo), Acquirer to Issuer Card Messages – version 1 (TC68/SC7/TG1), Card Sale to POI ISO20022 Protocol • Next:Payment Tokens Management Exchanges (nexo,TC68/SC7/TG1), Acquirer to Issuer Card Messages – version 2 (TC68/SC7/TG1) ISO_20022_LV_v172

  39. ISO 20022 – The Cards & RelatedRetail Financial Services SEG (2/3) Covering instruments… Cards and Retail Debit card …and actors such as: Acceptor (merchant, retailer) Charge and credit card Card holder Prepaid card Card issuer Card scheme Hard- and Software providers Intermediary agent Acquirer ISO_20022_LV_v172

  40. ISO 20022 – The Cards & RelatedRetail 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 POI messages for payments, administrative and device related services ATM processes such as authorization, processing, ATM management and inventory Similar messages transacted on internet or from mobiles or other personal devices ISO_20022_LV_v172

  41. ISO 20022 – Technical Support Group • Members: • 8 countries: BR, CA, CN, CH, DK, GB, JP, KR • 10 organisations: ACTUS, CFTC, DTCC, Euroclear, FPL, ISITC, NACHA, nexo, SWIFT, VISA • Convenor: Martin Walder (CH); Vice-convenor: vacant; Secretary: Li Jie, SWIFT • Kick-off meeting: on 23-24 October 2008 • Mission:help RMG, RA, SEGs and Submitting Organisations withtechnicalmatters ISO_20022_LV_v172

  42. Continuingwithtoday’s agenda… ISO20022 Interoperability within the financial industry ISO_20022_LV_v172

  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 ISO_20022_LV_v172 FIX

  44. ISO 20022 compliance at model level Repository ISO 20022 Dictionary Dictionary Catalogue Payments clearing & settlement ISO 20022 message models Cardpayments physical message representation ISO 20022 ASN.1 syntax ISO20022XMLsyntaxx ISO_20022_LV_v172

  45. ISO 20022 compliance at modellevel Repository ISO 20022 Dictionary ISO 20022 compliant Dictionary Catalogue Payments clearing & settlement ISO 20022 message models Card payments physical message representation other syntax ISO20022syntax ISO 20022 compliant using a domain specific syntax ISO 20022 compliant ISO_20022_LV_v172

  46. “Investment Roadmap” for ISO, FIX, XBRL and FpMLsyntaxes The Investment Roadmap is maintained by the Standards Coordination Group including the following organisations: Download the Investment Roadmap and related FAQ ISO_20022_LV_v172

  47. Interoperability in the customer-to-bank payment domain Bank A IF X 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_v172

  48. Customer A Customer B Customer C Interoperability in thecustomer-to-bank payment domain IFX format Proprietary format Bank A SWIFT MT 101 …or banks may need to accept many formats… ISO_20022_LV_v172

  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_v172

  50. Interoperability in the customer-to-bank payment domain IFX Core Payment Kernel MT 101 MT 101 ISO20022 Core Payment Kernel IFX Adopting ISO 20022 facilitates convergence and co-existence ISO_20022_LV_v172

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