Better data for better payments The case for

Better data for better payments The case for investment in ISO 20022 Third party toolkit, 2 nd Edition November 2020

Contents How to use this toolkit Summary narrative Why ISO 20022? How is ISO 20022 different? Real-time treasury – Benefits in action Reference graphics Better data, better payments - The case for investment in ISO 20022 2

How to use this toolkit ISO 20022 brings significant benefits to your clients’ payments experience, and creates new opportunities for you. To help you communicate the benefits and adoption requirements of ISO 20022, we have put together this toolkit. You can use it with your product teams, sponsors, other internal stakeholders and clients. They all need to understand why a change is required and required now. This toolkit provides reference material to make the case for better data in payments. While ISO 20022 brings common and shared benefits, how it supports your business and clients will be unique. Adapt this content to tell the ISO 20022 story in your own terms. Better data, better payments - The case for investment in ISO 20022 3

Summary narrative The summary provides a compact but complete overview of the ISO 20022 story. It can be used in its entirety or as a boilerplate, overview or introduction to ISO 20022. The payments ecosystem continues to rapidly change and evolve. This is being driven by increasing pressure from regulators, intense competition from new entrants and by customers who now expect payments to be instant, frictionless and account-to-account. All reserve currencies and over 14 high value payment systems will adopt ISO 20022 in the next five years. SWIFT also will introduce a coexistence period for ISO 20022 and current SWIFT MT standards for cross-border payments from November 2022 to November 2025. To address these challenges and meet the needs of our clients, a modern, structured, open and pervasive payments language is now required. Adopting this new payments language will require investment. That standard language is ISO 20022 is more than a technology investment. It will provide more remittance information to improve reconciliation for clients; make payment processing faster with consistent and structured data across the end-toend payment chain; and improve efficacy of compliance controls with all payment actors identified with granular details. Better data, better payments - The case for investment in ISO 20022 Those that make a strategic plan for better payments data, and leverage their investment for better client payments experience will benefit from this change. The next generation of instant, efficient and reconciled payments is at hand. 4

Why ISO 20022? Better data, better payments - The case for investment in ISO 20022 5

Limited and unstructured data results in a poor payment experience for clients For example: Unstructured data MT 103, Field 50 Ordering Customer 85% 100% 14% Limited data 1% 50 A Structured Option 50 F Structured Option MT 103, Field 59 Beneficiary Customer • Requires multiple institutions to repeatedly interpret ambiguous and incomplete data, with 10% of payments requiring manual interventions, delaying crediting of funds to clients 50 K Unstructured Option • Limited space for remittance information requires customers to exchange data separate from payments and implement costly and time consuming reconciliation • Limited space to identify all parties and their details in the payment chain 94% 100% • prevents consistent identification of ultimate parties, further complicating reconciliation • reduces efficacy of compliance controls 1% 59 A Structured Option 5% 59 F Structured Option 59 Unstructured Option Better data, better payments - The case for investment in ISO 20022 • Limited space for regulatory reporting data requires clients to manually or separately provide necessary information, reducing speed and efficiency of payments 6

ISO 20022 will provide consistent, rich and structured data across the payments chain Client ISO Ultimate Debtor Domestic payments Correspondent banking ISO Debtor Agent & MI participant MI ISO Intermediary & MI participant • High value payment systems for all reserve currencies either use or are in process of migrating to ISO 20022 • ISO 20022 is the standard of choice for all next generation Instant Payment systems • By 2025 80% of all currency settlement is estimated to use ISO 20022 Better data, better payments - The case for investment in ISO 20022 Domestic payments Client ISO Intermediary & MI participant MI ISO Creditor Agent & MI participant Creditor Ultimate Creditor • ISO 20022 provides several features, to improve payment automation and compliance, and enable new client services • A consistent data model across the entire payments chain, reducing ambiguous data • 10 x more space than SWIFT MT, with ability to carry rich and structured remittance information, party details and regulatory reporting 7

ISO 20022 brings new capabilities ISO 20022 Consistent, end to end Rich data Rich rails Right the first time Better data, better payments - The case for investment in ISO 20022 Structured & meaningful 8

ISO 20022 enables a better client experience Interoperable across payment schemes ISO 20022 Rich customer experience Rich remittance data end-to-end for clients to speed reconciliation and working capital management A single, consistent payment language across domestic, cross-border and client channels, extensible and future proof Rich rails Better compliance Complete record of payment parties, agents and their identification, enabling Payments on Behalf Of (POBO), and better compliance Better data, better payments - The case for investment in ISO 20022 Efficiency Rich, structured, mandatory data from source will reduce manual interventions, improve efficiency and speed of payment processing 9

How is ISO 20022 different? Better data, better payments - The case for investment in ISO 20022 10

ISO 20022: A recipe for making financial messaging standards Business model Message model Syntax A methodology to develop common financial messaging standards, based on a business dictionary Better data, better payments - The case for investment in ISO 20022 An open, neutral and global standard, freely implementable by anyone and supported by an open governance process Syntax independent business model, commonly implemented in XML and may be represented in any other future format including JSON for APIs 11

How is ISO 20022 different from current SWIFT MT? MT 103, Single Customer Credit Transfer pacs. 008, FI To FI Customer Credit Transfer <? xml version="1. 0"? > <Document xmlns: xsi="http: //www. w 3. org/2001/XMLSchema-instance" xmlns="urn: iso: std: iso: 20022: tech: xsd: pacs. 008. 001. 08"> <FITo. FICstmr. Cdt. Trf> <Grp. Hdr> <Msg. Id>494931/DEV</Msg. Id> <Cre. Dt. Tm>9999 -12 -31 T 00: 00</Cre. Dt. Tm> <Nb. Of. Txs>1</Nb. Of. Txs> <Sttlm. Inf> <Sttlm. Mtd>INDA</Sttlm. Mtd> </Sttlm. Inf> </Grp. Hdr> <Cdt. Trf. Tx. Inf> <Pmt. Id> <Instr. Id>494931/DEV</Instr. Id> <Tx. Id>NOTPROVIDED</Tx. Id> <End. To. End. Id>NOTPROVIDED</End. To. End. Id> <UETR>360 f 1 e 65 -90 e 0 -44 d 5 -a 49 -a 92 b 55 eb 3025 f</UETR> </Pmt. Id> … </Cdt. Trf. Tx. Inf> {1: F 01 ABNANL 2 AAXXX 1234012345} {2: O 1031511010606 UBSWCHZHGXXX 00000130850105141149 S} {3: {108: UHBMT 103001}{121: 360 f 1 e 65 -90 e 0 -44 d 5 -a 49 a 92 b 55 eb 3025 f}} {4: : 20: 494931/DEV : 23 B: CRED : 32 A: 090828 EUR 1958, 47 : 33 B: EUR 1958, 47 : 50 K: /122267890 BIODATA GMBH HOCHSTRASSE, 27 8022 -ZURICH SWITZERLAND : 59: /502664959 H. F. JANSSEN LEDEBOERSTRAAT 27 AMSTERDAM : 71 A: SHA Field 20 Sender’s Reference is limited to 16 characters Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards Rich, structured data More space for meaningful client information Rich, structured, logically grouped data Customer can send • 35 characters in Message Identification element • 16 characters in Instruction Identification element (for backward compatibility) • 35 characters in End To End Identification element • 35 characters in Transaction Identification element 12

Rich, structured data More space for interbank data for faster settlement How is ISO 20022 different from MT? pacs. 008 v 8, FI to FI Customer Credit Transfer Embedded code list MT 103, Single Customer Credit Transfer Transaction Information [1, 1] Charge Bearer [1, 1] Borne By Creditor [CRED] Borne By Debtor [DEBT] Shared [SHAR] 71 A Details of Charges Code Beneficiary [BEN] Our customer charged [OUR] Shared charges [SHA] Embedded codes are strictly defined in the message and limited to global definitions, making them limited, rigid and difficult to maintain Externalised and flexible code definitions • Codes can be embedded or externalised from the definition of the message, making code maintenance and updates easier • Proprietary codes are also supported, allowing customers to bilaterally agree on codes between them pacs. 004 v 9, Payment Return Externalised code list Transaction Information [1, 1] Return Reason Information [1, 1] Reason [1, 1] Code [1, 1] External. Return. Reason. Code Component Incorrect. Account. Number [AC 01] Invalid. Creditor. Account. Number [AC 03] Closed. Account. Number [AC 04] Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards Blocked. Account [AC 06] … 13

Rich, structured data Full party details for better compliance controls How is ISO 20022 different from MT? MT 103, Single Customer Credit Transfer pacs. 008, FI To FI Customer Credit Transfer <? xml version="1. 0"? > <Document xmlns: xsi="http: //www. w 3. org/2001/XMLSchema-instance" xmlns="urn: iso: std: iso: 20022: tech: xsd: pacs. 008. 001. 08"> <FITo. FICstmr. Cdt. Trf> … <Cdt. Trf. Tx. Inf> … <Cdtr> <Nm>Cuba Sports Bar & Grille</Nm><Pstl. Adr> <Strt. Nm>Ocean Drive</Strt. Nm> <Bldg. Nb>1234</Bldg. Nb> <Strt. Nm>Ocean Drive</Strt. Nm> <Pst. Cd>90099</Pst. Cd> <Bldg. Nb>1234</Bldg. Nb> <Twn. Nm>Los Angeles</Twn. Nm> <Pst. Cd>90099</Pst. Cd> {1: F 01 ABNANL 2 AAXXX 1234012345} {2: O 1031511010606 UBSWCHZHGXXX 00000130850105141149 S} {3: {108: UHBMT 103001}{121: 360 f 1 e 65 -90 e 0 -44 d 5 -a 49 a-92 b 55 eb 3025 f}} {4: : 20: 987654321/DEV : 23 B: CRED : 32 A: 011521 USD 10551, 50 : 33 B: USD 10551, 50 : 50 K: /122267890 BIODATA GMBH HOCHSTRASSE, 27 8022 -ZURICH SWITZERLAND : 59: /1234567890 MR. CUBA GOODING JR. CUBA SPORTS BAR GRILLE 1234 OCEAN DRIVE 90099 LA : 71 A: SHA Unstructured and ambiguous Beneficiary Customer details, e. g. “Cuba” in beneficiary name can be confused with a sanctioned country Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards Structured, unambiguous data <Ctry. Sub. Dvsn>CA</Ctry. Su. Dvsn> <Ctry>US</Ctry> </Pstl. Adr> <Ctry. Sub. Dvsn>CA</Ctry. Sub. Dvsn> <Ctry>US</Ctry> </Pstl. Adr> … <Id>1234567890</Id> </Cdtr> <Cdtr. Acct> <Id> <Othr> </Othr> Structured and labelled data brings </Id> </Cdtr. Acct> clarity to the message and enables accurate and efficient screening 14

Real-time treasury – Benefits of better data in action The Coffee. Co Example Better data, better payments - The case for investment in ISO 20022 15

The Coffee. Co example Coffee. Co Based in London, Coffee. Co is a boutique coffee bean importer, roaster and distributor. Average cost for a pallet of 12 x 10 kg bags of Robusta coffee costs 12, 000 USD to import. Coffee. Co imports premium Robusta beans from South East Asia. In order to avoid transaction costs, Coffee. Co would like to aggregate multiple invoice payments to its suppliers. Suppliers insist on USD denominated payments to UK branches of their local banks. Better data, better payments - The case for investment in ISO 20022 16

Open invoices and credit notes from Coffee. Co’s prime supplier in Sumatra, Indonesia Invoice Number: 20200130 -1072 -01 $12, 000 Invoice Number: 20200210 -2084 -01 $24, 000 Invoice Number: 20200417 -4214 -01 $12, 000 Invoice Number: 20200530 -5044 -01 $12, 000 One of the bags of coffee was not shipped, so only $10, 800 to be paid Credit note: 20200315 -4365 -CN $7, 500 Better data, better payments - The case for investment in ISO 20022 17

Coffee. Co’s open invoices get paid by means of a serial payment flow The MT way MT 101 MT 900 Coffee. Co, Ordering Customer A MT 103 Ordering Institution B MT 103 Intermediary Institution C MT 910 Account with Institution Indonesian Supplier, Beneficiary customer The ISO 20022 way pain. 001 camt. 054 Coffee. Co, Debtor Agent Better data, better payments - The case for investment in ISO 20022 pacs. 008 B Intermediary Agent pacs. 008 C Creditor Agent camt. 054 Indonesian Supplier, Creditor 18

ISO 20022 provides Coffee. Co a rich dictionary for Structured Remittance Data Pay against invoices MT 101 and 103 ISO 20022 pain. 001 and pacs. 008 : 70: P 1002/Payment of pallet invoices - 20200130 -1072 -01/20200210 -208401/20200417 -4214 -01/20200530 -504401/ Credit note: 20200315 -4365 -CN <Purp> <Prtry>P 1002</Prtry> </Purp> <Rmt. Inf> Dedicated field for Payment Purpose Code, required by Indonesian Regulator <Strd> <Rfrd. Doc. Inf> <Tp> Code to show payment is <Cd. Or. Prtry> against a “Commercial <Cd>CINV</Cd> INVoice” Limited to 4 lines of 35 characters </Cd. Or. Prtry> </Tp> Buyer’s unique reference to <Nb>20200130 -1072 -01</Nb> Free form text that ERP and bank apps have to interpret </Rfrd. Doc. Inf> <Cdtr. Ref. Inf> </Strd> <Strd>… Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards the invoice in their ERP <Tp> <Cd. Or. Prtry> <Cd>SCOR</Cd> Supplier’s unique </Cd. Or. Prtry> Structured </Tp> COmmunication <Ref>PAY 1245 ABC</Ref> Reference of the invoice Structured element of Remittance Information is repetitive and can contain multiple documents 19

ISO 20022 provides Coffee. Co a rich dictionary for Structured Remittance Data Refer to credit notes MT 101 and 103 ISO 20022 pain. 001 and pacs. 008 : 70: P 1002/Payment of pallet invoices - 20200130 -1072 -01/20200210 -208401/20200417 -4214 -01/20200530 -504401/ Credit note: 20200315 -4365 -CN … <Strd> <Rfrd. Doc. Inf> <Tp> <Cd. Or. Prtry> Code to show a “CREdit <Cd>CREN</Cd> Note” is applied </Cd. Or. Prtry> </Tp> Credit note reference <Nb>20200315 -4365 -CN</Nb> Limited to 4 lines of 35 characters number in Debtor’s ERP </Rfrd. Doc. Inf> <Rfrd. Doc. Amt> Credit note amount <Cdt. Note. Amt>USD 7500</Cdt. Note. Amt> </Rfrd. Doc. Amt> <Cdtr. Ref. Inf> <Tp> Supplier’s unique <Cd. Or. Prtry> Structured <Cd>SCOR</Cd> COmmunication </Cd. Or. Prtry> Reference of the credit note </Tp> <Ref>Cred. Note 12345</Ref> </Cdtr. Ref. Inf> Free form text that ERP and bank apps have to interpret </Strd> Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards 20

ISO 20022 provides Coffee. Co a rich dictionary for Structured Remittance Data Adjust an invoice payment with clarification MT 101 and 103 ISO 20022 pain. 001 and pacs. 008 : 70: P 1002/Payment of pallet invoices - 20200130 -1072 -01/20200210 -208401/20200417 -4214 -01/20200530 -504401/ Credit note: 20200315 -4365 -CN Limited to 4 lines of 35 characters Free form text that ERP and bank apps have to interpret … <Strd> <Rfrd. Doc. Inf> <Tp> <Cd. Or. Prtry> <Cd>CINV</Cd> </Cd. Or. Prtry> </Tp> <Nb>20200417 -4214 -01</Nb> <Line. Dtls> <Id> Second Line Item from invoice<Nb>002</Nb> </Id> Line Item Description on <Desc>Robusta Grade 3, invoice January 2020 shipment</Desc> <Amt> Adjusted amount <Adjstmnt. Amt. And. Rsn> <Amt>USD 1200</Amt> <Cdt. Dbt. Ind>DBIT</Cdt. Dbt. Ind> Reason for adjustment <Rsn>SVNR</Rsn> </Adjstmnt. Amt. And. Rsn> </Amt> </Line. Dtls> … Note: These illustrations are based on the 2020 versions of the CBPR+ Usage Guidelines. Please check for current CBPR+ payment specifications on My. Standards 21

The Coffee. Co example Within a single payment instruction, Coffee. Co can: Coffee. Co • Pay all outstanding invoices • Apply a credit note • Contest a specific line item on an invoice all without a single phone call or email. To open this use case in video format, right click here and select ‘Open Hyperlink. ’ Better data, better payments - The case for investment in ISO 20022 22

Banks can use this rich data to provide a next generation of reconciliation and treasury services Pending reconciliation EUR Credit note adjustment USD GBP Vendor 1 76, 231. 91 EUR Vendor 2 56, 981. 45 USD Vendor 3 42, 124. 78 USD Vendor 4 31, 873. 21 GBP Disputed EUR 73, 609. 56 18, 402 … Mar Pending approval by debtor Outstanding invoices Apr Average time to get paid 23 days May Jun Jul Aug Amount paid 103, 781. 96 EUR Vendor 5 25, 782. 02 GBP Vendor 6 5, 782. 02 USD 139, 531. 65 EUR … 22, 082. 87 33124. 30 USD 103, 672. 91 41, 469. 16 36, 285. 52 25, 918. 23 GBP 91, 451. 93 9, 145. 19 Better data, better payments - The case for investment in ISO 20022 45, 725. 97 36, 580. 77 23

Where can I find out more? WWW ISO 20022 Programme hub ISO 20022 in bytes newsletter The ISO 20022 Programme Document Centre now includes: • ISO 20022 for Dummies e-book • Customers insights • Corporate case study • Past webinar recordings Subscribe by adding “ISO 20022” to your interests under the “Standards” category SWIFTSmart The SWIFTSmart e-learning platform includes training modules for • Introduction to ISO 20022 and Standards • CBPR+ message flows and attributes • Exchange messages over FINplus Better data, better payments - The case for investment in ISO 20022 24

What do I do now? 1. Subscribe to the ISO 20022 in bytes newsletter. Go to swift. com > News & Events > Subscribe to SWIFT insights to stay updated by adding “ISO 20022” to your interests under the “Standards” category. 2. 3. Access ISO 20022 training on SWIFTSmart. Share this toolkit will your product teams, sponsors, other internal stakeholders and your clients. They all need to understand why a change is required and required now. Better data, better payments - The case for investment in ISO 20022 25

Reference graphics You can use the following graphics, logos and icons to construct your own client story or adapt as needed. Better data, better payments - The case for investment in ISO 20022 26

Logo Better data, better payments - The case for investment in ISO 20022 27

Icons Labels serve as initial meaning but can be adapted to the context Use Icons can have multiple meanings, as long as they are shown in a different context. Labels act as the definition of the icon. Better data, better payments - The case for investment in ISO 20022 Statement account Listing File Customer Trader Broker 28

Icons Compliance Labels serve as initial meaning but can be adapted to the context Fraud control Scalable Secure Transparent Data End to end Global business Global Community Compliance Processes and data KYC Sanctions compliance Compliance analytics Structured data Printer Fax Standardisation Better data, better payments - The case for investment in ISO 20022 Centralisation Phone 29

Icons Market infrastructure Labels serve as initial meaning but can be adapted to the context Gpi tracker Direction & optional £££ $$$ ₹₹₹ Reducing costs ¥¥¥ Cloud Translation Global Reducing costs Flag Exceptional Cloud 2 Statement/ Listing/ File Statement account owner Better data, better payments - The case for investment in ISO 20022 30

Icons Bank Labels serve as initial meaning but can be adapted to the context Corporate Process agent Central depository Other $ $ Bank Central Financial Institutions Stock Exchange Better data, better payments - The case for investment in ISO 20022 Authority Dollar processing bank 31

Icons Any person Labels serve as initial meaning but can be adapted to the context Debitor Man with phone Authorized Creditor Dealer Authority Meeting Better data, better payments - The case for investment in ISO 20022 32

Icons Labels serve as initial meaning but can be adapted to the context MT Message MT Key Encryption Encrypted Key pair Decryption Decrypted Hardware key Certificate / Authority Signed Better data, better payments - The case for investment in ISO 20022 33

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