Introduction to ISO 20022 – Universal financial industry message scheme

Slide 1

Introduction to ISO 20022 – Universal financial industry message scheme

ISO_20022_LV_v111

ISO 20022

Slide 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

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Slide 3

The ISO 20022 value proposition (1/5)

Objective To enable communication interoperability

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

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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.

Slide 4 ISO_20022_LV_v111


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

ISO 20022



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



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…



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…

Slide 8

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

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Slide 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

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Slide 10

The ISO 20022 recipeMain ingredients (2/2):

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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

Slide 11

The eight parts of ISO 20022

Part 1: Metamodel

Part 2: UML profile

Part 3: Modelling

Part 4: XML schema generation

Part 5: Reverse engineering

Part 6: Message transport characteristics

Part 7: Registration

Part 8: ASN.1 generation

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Copies can be obtained from www.iso.org

Slide 12

ISO 20022: The actors (1/2)

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Submitting organisations

Could be

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

ANBIMAASFBerlin GroupBIANCBI ConsortiumCFETSChina UnionPayClearstreamCLSDanish Bankers Association

EPASOrgEPCEuroclearFFIFISDFpMLIFXISITCNBBFPL

OAGiOmgeoSC7/TG1SWIFTUN/CEFACTTWISTUK Payments Council4CB etc.


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 The registration process (1/3)

Submittingorganisation

Financial industry group or standards body

Business justification


RMGProject approval & allocation to a SEG

SEGBusiness validation

RAOfficial registrationand publication

Repository

Dictionary

CatalogueOptional pilot testingor first implementers

www.iso20022.org

RMG

monitors

Submitting organisation

& users


& RA

Development & provisional registration


ISO 20022 The registration process (2/3)

Submittingorganisation

Financial industry group or standards body



RMGProject approval & allocation to a SEG

SEGBusiness validation

RAOfficial registrationand publication

Repository

Dictionary

CatalogueOptional pilot testingor first implementers

www.iso20022.org

RMG

monitors


& users


& RA

Development & provisional registration

Candidate ISO 20022 messages

ISO 20022 messages

Slide 16

Users CRs Users introduce Change Requests to the RA


Submitting organisation prepares ‘Maintenance Change Request’ with each CR implementation

SEGSEG screens Change Requests (CRs)

SEG SEG approval/rejection


& RA

Development of new versions

SEGValidation of new versions

RA Registration and publication Repository

Dictionary

Catalogue

By June 1

By July 7

By August 21

By October 1

By December 1

By February 1

April-May

Timing

ISO 20022 registration process (3/3)Yearly maintenance process

First implementers

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& users

Slide 17

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 or ASN.1 message schemasXML or ASN.1 message schemas

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www.iso20022.org

Slide 18

ISO 20022

ISO 20022 Registration Platform

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Continuing with today’s agenda…

Slide 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’

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

Slide 20

ISO 20022 How does it fit into the ISO structure?

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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

SEGTrade Services

TSG

SEGCards

Slide 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

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Slide 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)

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Slide 23

ISO 20022 – The Payments SEG (2/3)

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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


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:

Slide 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)

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Slide 26

ISO 20022 – The Securities SEG (2/3)

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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

Slide 27

ISO 20022 – The Securities SEG (3/3)

ISO_20022_LV_v111


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

Slide 28

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 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

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

Slide 29

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: Zaiyue Xu, 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)

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ISO 20022 – The FX SEG (1/3)

Slide 30

ISO 20022 – The FX SEG (2/3)

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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 – 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

Slide 32


– 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)

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ISO 20022 The Trade Services SEG (1/3)

Slide 33


ISO_20022_LV_v111

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

Slide 34


ISO_20022_LV_v111

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

Slide 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

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Slide 36

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

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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

Slide 37

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

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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.

Slide 38

ISO 20022 – Technical Support Group


– 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

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Slide 39

Continuing with today’s agenda…

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ISO 20022

Cross-industry harmonisation


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

Slide 41

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

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Harmonisation between ISO and UN/CEFACT


Continuing with today’s agenda

Interoperability within

the financial industry

ISO 20022

Slide 43

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

XML

ISO standardizes common data objects…

Account

Order

Date

ISO_20022_LV_v111

Using ISO 20022 modelling to reach interoperability


Card payments

ISO 20022 compliance at model level

Repository

Dictionary

Catalogue

Payments clearing & settlement

ISO 20022 message models

ISO 20022 Dictionary

ISO 20022 ASN.1 syntax ISO 20022 XML syntax

physical message representation


Card payments

Repository

Dictionary

Catalogue

Payments clearing & settlement

ISO 20022 message models

ISO 20022 Dictionary

other 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

Slide 46

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

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Download the Investment Roadmap and related FAQ

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

Slide 47

Interoperability in the customer-to-bank payment domain

ISO_20022_LV_v111

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


…or banks may need to accept many formats…

Bank AProprietary format

IFX formatCustomer A

Customer C

Customer B

SWIFTMT 101



SWIFT MT

The reverse engineering produces a canonical ISO 20022 message model

Proprietary

TWIST OAGi

IFX


ISO 20022 Core Payment Kernel model


Adopting ISO 20022 facilitates convergence and co-existence

IFX

MT 101


ISO 20022

Core Payment

Kernel

Core Payment

Kernel

IFX

MT 101


&&[email protected]

www.iso20022.org

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Introduction to ISO 20022 – Universal financial industry message scheme

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