Introduction to ISO 20022 – Universal financial industry message scheme

Introduction to ISO 20022 – Universal financial industry message scheme

ISO_20022_LV_v64

ISO 20022

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_v64

The ISO 20022 value proposition (1/5)

Objective To enable communication interoperability

between financial institutions , their market infrastructures and their end-user communities

ISO_20022_LV_v64

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_v64


Proposed solutionA single standardisation approach (methodology, process, repository) to be used by all financial standards initiatives

ISO 20022

ISO_20022_LV_v64


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_v64


RosettaNet

TWIST

Proprietary format

SWIFTIFX

EDIFACT 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 types42 interfaces = n * (n-1)

OAGi

Source: John Mersberg, IBM Corporation

Growth adds exponential complexity and expense…

ISO_20022_LV_v64


SWIFT

Canonical Message Model(i.e. ISO 20022)

14 interfaces = n * 2

Proprietary format

RosettaNet

TWIST

IFX

EDIFACT

OAGi

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

Standardized implementation reduces cost, time to effect change and improves overall performance…

ISO aims at long term convergence, while facilitating short term coexistence…

ISO 20022Illustrating business modelling

All institutions have their own sets of data objects

…and groups them into ‘syntax-neutral’ message models, which...

Order

DateDate

XML ISO 15022

… can be ‘transformed’ in message formats in the desired syntax

FIX

ASN.1

ISO standardizes common data objects…

Account

Order

Date

ISO_20022_LV_v64

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– Predictable and ‘automatable’

– Protect standard from technology evolution

Reverse engineering approach– Protect industry investment and ease interoperability

– Prepare for future migration

ISO_20022_LV_v64

The ISO 20022 recipeMain ingredients (2/2):

ISO_20022_LV_v64

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

The six parts of ISO 20022

PART 1: International Standard: Overall methodology and format specifications for inputs to and outputs for the ISO 20022 Repository

PART 2: International Standard: Roles and responsibilities of the registration bodies

PART 3: Technical specification: ISO 20022 modelling guidelines

PART 4: Technical specification: ISO 20022 XML design rules

PART 5: Technical specification: ISO 20022 reverse engineering

PART 6: International Standard: Message transport characteristics

ISO_20022_LV_v64

Copies can be obtained from www.iso.org

ISO 20022: The actors (1/2)

ISO_20022_LV_v64

Submitting organisations

Could be

Communities of users or organisations that want to develop ISO 20022 compliant messages to support their financial transactions

ANBIMABerlin GroupCBI ConsortiumClearstreamCLSEPASOrg

EPCEuroclearFPLISDA/FpMLIFXISITC

FISDNBBOAGIOmgeoSC7/WG9SWIFT

TBG5TWISTPayments Council4CB etc.

ISO_20022_LV_v64

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

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_v64

ISO 20022 The registration process (1/3)

Submittingorganisation

Financial industry group or standards body

Business justification


RMGProject approval & allocation to a SEG

Submitter & RA

Development & provisional registration

SEGBusiness validation

RAOfficial registrationand publication

Repository

Dictionary

CatalogueOptional pilot testingor first implementers

www.iso20022.org

RMG

monitors

Submitter& users

ISO_20022_LV_v64


www.iso20022.org

Submittingorganisation

Financial industry group or standards body



RMGProject approval & allocation to a SEG

Submitter & RA

Development & provisional registration

SEGBusiness validation

RAOfficial registrationand publication

Repository

Dictionary

CatalogueOptional pilot testingor first implementers

Submitter& users

Candidate ISO 20022 messages

ISO 20022 messages

RMG

monitors

ISO_20022_LV_v64

RegistrationManagement

Group

RegistrationAuthority

Standards Evaluation

Groups

Securities

Payments

Trade services

Forex

Cards


Business models

Candidate ISO 20022 messagesISO 20022

messages

IFX

FPL

CLS

SWIFT

Euroclear

EPASOrg

ISO 20022 users

ISO 20022 Financial Repository

Data Dictionary

Business Process

Catalogue

www.iso20022.org

4

2

3

1


ISO 20022 - The Financial Repository

Data Dictionary

– Business Concepts

– Message Concepts

– Data Types

Business Process Catalogue– Financial business process modelsFinancial business process models

– Financial business transactions, including messagesFinancial business transactions, including messages

– XML message schemasXML message schemas

ISO_20022_LV_v64

www.iso20022.org

ISO 20022

ISO 20022 Registration Platform

ISO_20022_LV_v64

Continuing with today’s agenda…

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’

ISO_20022_LV_v64

Ongoing: promotion to developers (standardizers, industry bodies) and users (vendors, end-users)

ISO 20022 How does it fit into the ISO structure?

ISO_20022_LV_v64

ISO Technical Committee TC68Financial Services

ISO 20022RMG

SEGPayments

SEGSecurities

RA

SEGFX

RMG members nominated by P-member countries and A-liaison organisations

TSG & SEG members nominated by all member countries and liaison organisations

SC7Banking

SC4Securities

SC2Security WG4

ISO 20022 Review

SEGTrade Services

TSG

SEGCards

ISO 20022 Registration Management Group (RMG) Members - 70 senior managers from:

– 22 countries: AT, AU, BR, CA, CH, CN, DE, DK, FI, FR, GB, IT, JP, KR, LU, NL, NO, RU, SE, SG, US, ZA.

– 12 liaison organisations: Clearstream, ECB, Euroclear, FISD, FPL, FpML, IFX, ISITC, SWIFT, TWIST, UN/CEFACT/TBG5, VISA

Convener: Gerard Hartsink, ABN Amro (NL); Vice-convener: Bob Blair, JPMorgan Chase (US); Secretary: Cynthia Fuller, X9 (US)

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 42 development projects ISO_20022_LV_v64

ISO 20022 – The Payments SEG (1/3) Members – 55 experts

– 17 countries: AT, AU, CH, DE, DK, FI, FR, GB, IT, JP, KR, NL, NO, RU, SE, US, ZA

– 6 liaison organisations: Euroclear, IFX, ISITC, SWIFT, TWIST, UN/CEFACT/TBG5

Convener: Thomas Egner, Commerzbank (DE); Vice-convener: Bob Blair, JP Morgan Chase (US); Secretary: Deb Hjortland, FRB (US)

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)

Under evaluation: Cash account reporting request and notification (SWIFT)

Next: Cash management (SWIFT), Cash lodgement and withdrawal (NBB), Card clearing payments (Berlin Group), Real time payments (Payments Council Ltd – UK)

ISO_20022_LV_v64

ISO 20022 – The Payments SEG (2/3)

ISO_20022_LV_v64

Payments Payments Credit

transfers

Covering instruments such as:

Direct debits

Cheques

Covering actors such as:

Private & corporate customers

Financial institutions

Central banks

Clearing houses &

RTG systems

ISO_20022_LV_v64

PaymentsPayments

Including business areas such as:

Communications between the

ordering customer and its

bank, etc.

Interbank transfers via

correspondent banking or ACHs, high

value payments, low value bulk

payments, RTGS, etc.

Account opening,

standing orders, transaction and

account information, advices &

statements from …

Payment initiation

Clearing & settlement

...the account servicing

institutions to account owners,

including reporting from the financial institution…

…to the ordering & beneficiary customers,

reconciliation, exceptions & investigations

handling.

ISO 20022 – The Payments SEG (3/3)

Cash Management between various actors:

ISO 20022 – The Securities SEG (1/3) Members – 75 experts

– 20 countries: AU, BR, CA, CH, DE, DK, FI, FR, GB, IE, JP, LU, NL, NO, RU, SE, SG, TR, US, ZA

– 8 liaison organisations: Clearstream, ECB, Euroclear, ISDA/FpML, ISITC, FISD, FPL, SWIFT

Convener: Kevin Wooldridge, Standard Logic (UK); Vice-convener: Amod Dixit, Standard Chartered (SG); Secretary: Chad Spitler, BGI (ISITC)

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)

Under evaluation: Pre-trade/trade (SWIFT/FPL) Next: Total portfolio valuation statement (ISITC), Post-trade (SWIFT/Omgeo),

Registration & holder identification (Euroclear), Market claims & automatic transformations (Euroclear), Securities issuance (Euroclear), Triparty collateral management (SWIFT), Alternative funds (SWIFT) , Modification/replace & allegement response (SWIFT), Target2-Securities (SWIFT/Bundesbank on behalf of 4CB), CCP Clearing (FPL/SWIFT), Collateral Management (FPL, FpML, ISITC, SWIFT), Investment Fund Prospectus (ANBIMA)

ISO_20022_LV_v64

ISO 20022 – The Securities SEG (2/3)

ISO_20022_LV_v64

Securities Securities Equities


Funds

Fixed income


Investment managers, distributors,

transfer agents, fund

administrators

Broker / dealers

Regulators

Stock exchanges,

ETC providers

Deriva-tives

Clearing houses, CCPs

CSDs, ICSDs

Market Data

Providers

Custodians

Service bureaux

ISO 20022 – The Securities SEG (3/3)

ISO_20022_LV_v64


Account opening,

standing orders, transaction and

account information, advices &

statements, queries &

investigations

Income, corporate actions,

market data, proxy votingCollateral,

repos, securities lending & borrowing

Custody

Collateral management

Trade Initiation,

pre-trade

Trade, post-trade

Clearing &

settlement

Securities Securities

Securities Issuance

Looking at the advantages ISO 20022 brings over ISO 15022

ISO 20022: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 UML modelling of business processes and transactions

Uses XML as the syntax for the actual physical messages Has a wider scope than ISO 15022, which is only for securities

messages Is in line with directions taken by other industries (UN/CEFACT)

ISO_20022_LV_v64

Syntax independent business modelling is key to the ISO 20022 standard !

Members – 29 experts

– 13 countries: AU, CA, CH, DE, FI, FR, GB, NL, NO, RU, TR, US, ZA

– 4 liaison organisations: FISD, FPL, ISITC, SWIFT

Convener: Ludy Limburg, ABN Amro (NL); Vice-convener: Tony Smith, JP Morgan Chase (UK); Secretary: vacant

Kick-off meeting: in September 2006

Approved: Forex notifications (CLS)

ISO_20022_LV_v64

ISO 20022 – The FX SEG (1/3)

ISO 20022 – The FX SEG (2/3)

ISO_20022_LV_v64

Foreign eXchangeForeign eXchangeSpot


Forward

Swaps


Investment managers

Hedge funds

Dealers

Custodians

CLS and CLS

settlement members

Currency Options

Industry associations

(ISDA)

Application providers

Money brokers

Trading portals,

matching services providers

ISO_20022_LV_v64

ISO 20022 – The FX SEG (3/3)


Clearing and Settlement, including

netting and related

reporting

Post-trade:confirmation,

matching, assignment,

novation, etc.

Notification of trades to third parties

Pre-trade: IOI,

quotes, etc.

Trigger events, option

exercises

Trade: order,

execution, allocation, affirmation,

etc.

Foreign eXchange Foreign eXchange


– 14 countries: AU, CA, CH, DE, DK, FI, FR, GB, IS, IT, JP, NL, US, ZA

– 2 liaison organisations: ISITC, SWIFT

Convener: Tapani Turunen, Tieto (FI) Vice-convener: Peter Potgieser, ABN Amro (NL); Secretary: Jim Wills, SWIFT

Kick-off meeting: in September 2006

Approved: Invoice Financing Request (CBI Consortium), Trade Services Management (SWIFT)

Under evaluation: Financial Invoice (UN/CEFACT TBG5)

ISO_20022_LV_v64

ISO 20022 The Trade Services SEG (1/3)


ISO_20022_LV_v64

Trade ServicesTrade Services

Documentary credit

…and services such as:

Open Account Trading

Reconciliation (A/R, A/P),

remittance data

Purchase order,

transport documents

Guarantee

Invoice financing

e-Invoicing

EBPP

Covering products…

Collection

Letter of credit


ISO_20022_LV_v64

Including actors such as:

Trade facilitators: chambers of

commerce, insurance co, freight forwarders,

carriers, customs, factoring co

Associations providing rules

and master agreements

(eg IFSA, ICC)

Private and corporate customers

(treasurers)

Application providers

Financial Institutions

Trade Services Trade Services

Risk management

entities

ISO 20022 – The Cards & Related Retail Financial Services SEG (1/3) Members – 30 experts

– 14 countries: AT, AU, CH, DE, FI, FR, GB, JP, KR, NL, RU, SE, US, ZA

– 4 liaison organisations: IFX, Mastercard, SWIFT, VISA Convener: Chris Starr, APACS (GB); Vice-convener: William

Vanobberghen, Groupement des Cartes Bancaires (FR); Secretary: Reinhard Herwig, SRC (DE)

Kick-off meeting: on 23-24 October 2008 Under evaluation: Card payments exchanges (EPASOrg) Next: Acquirer to Issuer Card Messages (TC68/SC7/WG9), ATM

interface for transaction processing and ATM management (IFX Forum)

ISO_20022_LV_v64

ISO 20022 – The Cards & Related Retail Financial Services SEG (2/3)

ISO_20022_LV_v64

Card issuer

Cards and RetailCards and RetailCovering instruments…

…and actors such as:

Card holder

Acceptor (merchant, retailer)

Acquirer

Intermediary agent

Card scheme

Hard- and Software providers

Debit card

Prepaid card

Charge and credit card

ISO 20022 – The Cards & Related Retail Financial Services SEG (3/3)

ISO_20022_LV_v64


POI messages for payments, administrative

and device related services

Similar messages transacted on

internet or from mobiles or other personal devices

Transactions between

acquirers and card issuers

ATM processes such as

authorization, processing, ATM

management and inventory

Transactions between merchants and acquirers,

and cardholders and issuers that support authorization,

clearing, reversal, chargeback, dispute

processing, etc.

ISO 20022 – Technical Support Group


– 11 countries: BR, CN, FI, FR, GB, JP, KR, NL, RU, US, ZA

– 5 liaison organisations: Euroclear, FPL, Mastercard, SWIFT, VISA

Convener: Derek Lasalle, JP Morgan Chase (US); Vice-convener: Paul Hojka, APACS (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_v64

Continuing with today’s agenda…

ISO_20022_LV_v64

ISO 20022

Cross-industry harmonisation

ISO_20022_LV_v64

Harmonising across all industries with UN/CEFACT

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

United Nations/CEFACT – Centre for trade facilitation and e-business

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 invoice message from

UN/CEFACT to ISO 20022

ISO_20022_LV_v64

Harmonisation between ISO and UN/CEFACT

ISO_20022_LV_v64

ISO 20022 Registration

Management Group

ISO 20022 Registration

Authority

ISO 20022 Standards Evaluation

Groups

Securities

Payments

Trade services

Forex

Cards

TBG5 Finance and TBG17 Harmo-nisation

IFX

TBG5

CLS

SWIFT

Euroclear

EPASOrg

ISO 20022 users

ISO 20022 Financial

Repository

Data Dictionary

Business Process

Catalogue

www.iso20022.org

A single ISO-UN/CEFACT approach

UN/CEFACT Registry/Repository

Core Component

Library

Common Business

Processes

UN / CEFACT(all industries)

Business models

Candidate ISO 20022 messages

ISO_20022_LV_v64

Continuing with today’s agenda

Interoperability within

the financial industry

ISO 20022

All institutions have their own sets of data objects

…and groups them into ‘syntax-neutral’ message models, which...

Order

DateDate

ASN.1 FpML

… can be ‘transformed’ in message formats in the desired syntax

FIX

ISO 20022

ISO standardizes common data objects…

Account

Order

Date

ISO_20022_LV_v64

Using ISO 20022 modelling to reach interoperability

ISO_20022_LV_v64

Card payments

ISO 20022 compliance at model level

Repository

Dictionary

Catalogue

Payments clearing & settlement

ISO 20022 message models

ISO 20022 Dictionary

ASN.1 syntax ISO 20022 XML syntax

physical message representation

ISO_20022_LV_v64

Card payments

Repository

Dictionary

Catalogue

Payments clearing & settlement

ISO 20022 message models

ISO 20022 Dictionary

ASN.1 syntax ISO 20022 syntax

ISO 20022 compliant

ISO 20022 compliant ‘using a domain specific syntax’

physical message representation

ISO 20022 compliant

ISO 20022 compliance at model level

“Investment Roadmap” for ISO, FIX, XBRL and FpML syntaxes

ISO_20022_LV_v64

Download the Investment Roadmap and related FAQ

The Investment Roadmap is maintained by the Standards Coordination Group including the following organisations:

Interoperability in the customer-to-bank payment domain

ISO_20022_LV_v64

Let us look at a concrete example from payments area: a customer may need to adapt to the format of the banks…

Customer A

Bank A

Bank B

Bank C

Proprietary format

SWIFTMT 101

IFX format

ISO_20022_LV_v64

…or banks may need to accept many formats…

Bank AProprietary format

IFX formatCustomer A

Customer C

Customer B

SWIFTMT 101


ISO_20022_LV_v64

SWIFT MT

The reverse engineering produces a canonical ISO 20022 message model

Proprietary

TWIST OAGi

IFX


ISO 20022 Core Payment Kernel model

ISO_20022_LV_v64

Adopting ISO 20022 facilitates convergence and co-existence

IFX

MT 101


ISO 20022

Core Payment

Kernel

Core Payment

Kernel

IFX

MT 101

ISO_20022_LV_v64

&&[email protected]

www.iso20022.org

Introduction to ISO 20022 – Universal financial industry message scheme

Documents

Transcript of Introduction to ISO 20022 – Universal financial industry message scheme