ISO 20022 Introduction to ISO 20022 Universal financial

ISO 20022 Introduction to ISO 20022 – Universal financial industry message scheme ISO_20022_LV_v 66 Slide 1

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_v 66 Slide 2

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, Fin. XML, VRXML, RIXML, XBRL, Fp. ML, IFX, TWIST, SWIFT, Rosetta. Net, EPC, OAGi, ACORD, CIDX, etc. ISO_20022_LV_v 66 Slide 3

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_v 66 Slide 4

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_v 66 Slide 5

The ISO 20022 value proposition (4/5) Growth adds exponential complexity and expense… EDIFACT IFX OAGi TWIST ISO_20022_LV_v 66 Rosetta. Net Without common building blocks: • Point-to-point connection SWIFT • Data is mapped directly from one application to another Proprietary • Costly, unscalable and difficult to implement and format maintain • Process, routing, rules logic needs to be coded to specific message types 42 interfaces = n * (n-1) Source: John Mersberg, IBM Corporation Slide 6

The ISO 20022 value proposition (5/5) Standardized implementation reduces cost, time to effect change and improves overall performance… EDIFACT IFX OAGi TWIST Canonical Message Model (i. e. ISO 20022) Rosetta. Net Canonical message model = • True process integration SWIFT • Reduced brittleness, faster to respond to change Proprietary • Shared message services – format single/shared parser, message independent rules engine, etc. • Unified monitoring / audit trail 14 interfaces = n * 2 ISO aims at long term convergence, while facilitating short term coexistence… ISO_20022_LV_v 66 Slide 7

ISO 20022 Illustrating business modelling Date nt u Acco All institutions have their own sets of data objects r Orde te Da Date ISO standardizes common data objects… …and groups them into ‘syntaxneutral’ message models, which. . . … can be ‘transformed’ in message formats in the desired syntax ASN. 1 XML ISO 15022 FIX ISO_20022_LV_v 66 Slide 8

The ISO 20022 recipe Main 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_v 66 Slide 9

The ISO 20022 recipe Main 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. iso 20022. org ISO_20022_LV_v 66 Slide 10

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 Copies can be obtained from www. iso. org ISO_20022_LV_v 66 Slide 11

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 ANBIMA Berlin Group CBI Consortium Clearstream CLS EPASOrg ISO_20022_LV_v 66 EPC Euroclear FPL ISDA/Fp. ML IFX ISITC FISD NBB OAGi Omgeo SC 7/WG 9 SWIFT TBG 5 TWIST Payments Council 4 CB etc. Slide 12

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_v 66 Slide 13

ISO 20022 The registration process (1/3) R M G m o n i t o r s Submitting organisation Financial industry group or standards body Business justification RMG Submitting organisation & RA SEG RA Submitting organisation & users Project approval & allocation to a SEG Development & provisional registration Business validation Official registration and publication Optional pilot testing or first implementers Repository Dictionary Catalogue www. iso 20022. org ISO_20022_LV_v 66 Slide 14

ISO 20022 The registration process (1/3) R M G m o n i t o r s Submitting organisation Financial industry group or standards body Business justification RMG Submitting organisation & RA SEG RA Submitting organisation & users Project approval & allocation to a SEG Candidate ISO 20022 messages Development & provisional registration Business validation Official registration and publication Optional pilot testing or first implementers ISO 20022 messages Repository Dictionary Catalogue www. iso 20022. org ISO_20022_LV_v 66 Slide 15

ISO 20022 registration process (3/3) Yearly maintenance process Timing By June 1 By July 7 By August 21 By October 1 By December 1 By February 1 April-May ISO_20022_LV_v 66 Users CRs SEG Submitting organisation & RA SEG RA Submitting organisation & users Users introduce Change Requests to the RA SEG screens Change Requests (CRs) Submitting organisation prepares ‘Maintenance Change Request’ with each CR implementation SEG approval/rejection Development of new versions Validation of new versions Registration and publication First implementers Repository Dictionary Catalogue Slide 16

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 message schemas www. iso 20022. org ISO_20022_LV_v 66 Slide 17

Continuing with today’s agenda… ISO 20022 Registration Platform ISO_20022_LV_v 66 Slide 18

ISO 20022 - The Deployment < Approval of the international standard < Selection of the Registration Authority < Set-up of the www. iso 20022. 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_v 66 Slide 19

ISO 20022 How does it fit into the ISO structure? ISO Technical Committee TC 68 Financial Services SC 2 SC 4 SC 7 Security Securities Banking RMG members nominated by P-member countries and Aliaison organisations TSG & SEG members nominated by all member countries and liaison organisations TSG RA SEG Securities SEG Trade Services SEG Payments SEG Cards ISO_20022_LV_v 66 WG 4 ISO 20022 Review ISO 20022 RMG SEG FX Slide 20

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, Fp. ML, IFX, ISITC, SWIFT, TWIST, UN/CEFACT/TBG 5, VISA Convener: Gerard Hartsink, ABN Amro (NL); Viceconvener: Bob Blair, JPMorgan Chase (US); Secretary: Cynthia Fuller, X 9 (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_v 66 Slide 21

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/TBG 5 < Convener: Thomas Egner, Commerzbank (DE); Vice-convener: Bob < Approved: C 2 B payment initiation (SWIFT/ISTH), Interbank credit Blair, JP Morgan Chase (US); Secretary: Deb Hjortland, FRB (US) transfers and direct debits (SWIFT), Exceptions and investigations (SWIFT), B 2 C 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) Under evaluation: none < Next: Cash management (SWIFT), Cash lodgement and withdrawal < (NBB), Card clearing payments (Berlin Group), Real time payments (Payments Council Ltd – UK) Slide 22 ISO_20022_LV_v 66

ISO 20022 – The Payments SEG (2/3) Covering instruments such as: Payments Covering actors such as: Credit transfers Cheques Direct debits Financial institutions Private & corporate customers Clearing houses & RTG systems Central banks ISO_20022_LV_v 66 Slide 23

ISO 20022 – The Payments SEG (3/3) Including business areas such as: Clearing & settlement Payment initiation Communications between the ordering customer and its bank, etc. Payments Cash Management between various actors: Account opening, standing orders, transaction and account information, advices & statements from … ISO_20022_LV_v 66 Interbank transfers via correspondent banking or ACHs, high value payments, low value bulk payments, RTGS, etc. . the account servicing institutions to account owners, including reporting from the financial institution… …to the ordering & beneficiary customers, reconciliation, exceptions & investigations handling. Slide 24

ISO 20022 – The Securities SEG (1/3) < < < Members – 77 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/Fp. ML, 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), Target 2 Securities (SWIFT/Bundesbank on behalf of 4 CB), CCP Clearing (FPL/SWIFT), Collateral Management (FPL, Fp. ML, ISITC, SWIFT), Investment Fund Prospectus (ANBIMA) ISO_20022_LV_v 66 Slide 25

ISO 20022 – The Securities SEG (2/3) Covering instruments such as: Securities Covering actors such as: Equities Fixed income Funds Derivatives ISO_20022_LV_v 66 Investment managers, distributors, transfer agents, fund administrators Market Data Providers Stock exchanges, ETC providers Service bureaux Broker / dealers Custodians Regulators CSDs, ICSDs Clearing houses, CCPs Slide 26

ISO 20022 – The Securities SEG (3/3) Including business areas such as: Securities Issuance Trade Initiation, pre-trade Trade, posttrade Securities Account opening, standing orders, transaction and account information, advices & statements, queries & investigations ISO_20022_LV_v 66 Collateral management Collateral, repos, securities lending & borrowing Clearing & settlement Custody Income, corporate actions, market data, proxy voting Slide 27

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 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) Syntax independent business modelling is key to the ISO 20022 standard ! ISO_20022_LV_v 66 Slide 28

ISO 20022 – The FX SEG (1/3) < 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); Viceconvener: Tony Smith, JP Morgan Chase (UK); Secretary: vacant < Kick-off meeting: in September 2006 < Approved: Forex notifications (CLS) ISO_20022_LV_v 66 Slide 29

ISO 20022 – The FX SEG (2/3) Covering instruments such as: Foreign e. Xchange Trading portals, matching services providers Covering actors such as: Spot Swaps Forward Investment managers Currency Options ISO_20022_LV_v 66 Hedge funds Custodians Dealers Money brokers CLS and CLS settlement members Application providers Industry associations (ISDA) Slide 30

ISO 20022 – The FX SEG (3/3) Including business areas such as: Pre-trade: IOI, quotes, etc. Trade: order, execution, allocation, affirmation, etc. Foreign e. Xchange Notification of trades to third parties ISO_20022_LV_v 66 Trigger events, option exercises Post-trade: confirmation, matching, assignment, novation, etc. Clearing and Settlement, including netting and related reporting Slide 31

ISO 20022 The Trade Services SEG (1/3) < Members – 29 experts – 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), Financial Invoice (UN/CEFACT TBG 5) ISO_20022_LV_v 66 Slide 32

ISO 20022 The Trade Services SEG (2/3) Covering products… Trade Services …and services such as: Collection Letter of credit Documentary credit Open Account Trading e-Invoicing Guarantee Purchase order, transport documents ISO_20022_LV_v 66 Reconciliation (A/R, A/P), remittance data EBPP Invoice financing Slide 33

ISO 20022 The Trade Services SEG (3/3) Including actors such as: Private and corporate customers (treasurers) Financial Institutions Trade Services Risk management entities ISO_20022_LV_v 66 Application providers Associations providing rules and master agreements (eg IFSA, ICC) Trade facilitators: chambers of commerce, insurance co, freight forwarders, carriers, customs, factoring co Slide 34

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 < Approved: Card payments exchanges – Acceptor to Acquirer (EPASOrg) < Next: CAPE - Sale-to-POI management (EPASOrg), CAPE Terminal management (EPASOrg), Acquirer to Issuer Card Messages (TC 68/SC 7/WG 9), ATM interface for transaction processing and ATM management (IFX Forum) ISO_20022_LV_v 66 Slide 35

ISO 20022 – The Cards & Related Retail Financial Services SEG (2/3) Covering instruments… Cards and Retail Debit card …and actors such as: Charge and credit card Card holder Prepaid card Hard- and Software providers Acceptor (merchant, retailer) Card issuer Card scheme Acquirer Intermediary agent ISO_20022_LV_v 66 Slide 36

ISO 20022 – The Cards & Related Retail Financial Services SEG (3/3) Including business areas such as: Transactions between acquirers and card issuers ATM processes such as authorization, processing, ATM management and inventory ISO_20022_LV_v 66 Transactions between merchants and acquirers, and cardholders and issuers that support authorization, clearing, reversal, chargeback, dispute processing, etc. Similar messages transacted on internet or from mobiles or other personal devices POI messages for payments, administrative and device related services Slide 37

ISO 20022 – Technical Support Group < Members – 29 experts – 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); Viceconvener: 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_v 66 Slide 38

Continuing with today’s agenda… ISO 20022 Cross-industry harmonisation ISO_20022_LV_v 66 Slide 39

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. , eb. XML 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_v 66 Slide 40

Harmonisation between ISO and UN/CEFACT < < < < 2004: TC 68, TBG 5 and SWIFT sign a Mo. U to investigate harmonisation 2005: Trial submission from ISO 20022 to UN/CEFACT 2006: ISO TC 68/WG 4 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 ‘Mo. U on e. Business’ 2010: Official submission of a financial e-invoice message from UN/CEFACT to ISO 20022 ISO_20022_LV_v 66 Slide 41

A single ISO-UN/CEFACT approach ISO 20022 Registration Management Group ISO 20022 Registration Authority UN / CEFACT (all industries) UN/CEFACT Registry/Repository Core Component Library Common Business Processes ISO 20022 Standards Evaluation Groups Securities ISO 20022 Financial Repository TBG 5 Finance and TBG 17 Harmonisation Data Dictionary ISO 20022 users Business models Payments Trade services Business Process Catalogue Candidate ISO 20022 messages Forex Cards IFX TBG 5 CLS SWIFT Euroclear EPASOrg www. iso 20022. org ISO_20022_LV_v 66 Slide 42

Continuing with today’s agenda ISO 20022 Interoperability within the financial industry ISO_20022_LV_v 66 Slide 43

Using ISO 20022 modelling to reach interoperability Date nt u Acco All institutions have their own sets of data objects r Orde te Da Date ISO standardizes common data objects… …and groups them into ‘syntaxneutral’ message models, which. . . … can be ‘transformed’ in message formats in the desired syntax ISO 20022 ASN. 1 ISO_20022_LV_v 66 Fp. ML FIX Slide 44

ISO 20022 compliance at model level Repository ISO 20022 Dictionary Catalogue ISO 20022 message models Card payments Payments clearing & settlement physical message representation ASN. 1 syntax ISO_20022_LV_v 66 ISO 20022 XML syntax Slide 45

ISO 20022 compliance at model level Repository ISO 20022 Dictionary ISO 20022 compliant Catalogue ISO 20022 message models Card payments Payments clearing & settlement physical message representation ASN. 1 syntax ISO 20022 compliant ‘using a domain specific syntax’ ISO_20022_LV_v 66 ISO 20022 syntax ISO 20022 compliant Slide 46

“Investment Roadmap” for ISO, FIX, XBRL and Fp. ML 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_v 66 Slide 47

Interoperability in the customer-to-bank payment domain IFX format Proprietary format Bank A 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_v 66 Slide 48

Interoperability in the customer-to-bank payment domain Customer A IFX format Proprietary format Bank A Customer B SWIFT MT 101 Customer C …or banks may need to accept many formats… ISO_20022_LV_v 66 Slide 49

Interoperability in the customer-to-bank payment domain Proprietary TWIST ISO 20022 Core Payment Kernel model SWIFT MT OAGi IFX The reverse engineering produces a canonical ISO 20022 message model ISO_20022_LV_v 66 Slide 50

Interoperability in the customer-to-bank payment domain IFX Core Payment Kernel MT MT 1 01 IS 101 IFX O 20 02 2 Core Payment Kernel Adopting ISO 20022 facilitates convergence and co-existence ISO_20022_LV_v 66 Slide 51

www. iso 20022. org uestions &A nswers iso 20022 ra@iso 20022. org ISO_20022_LV_v 66 Slide 52