The on What s ISO 20022

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1 The on What s ISO Nell Campbell-Drake Vice President Retail Payments Office Federal Reserve Bank of Atlanta EPCOR Payments Conference Spring 2017

2 ISO What it is. ISO ISO for Payments What is ISO? International Organization for Standardization a network of national standards bodies that develop international standards U.S. contributes through the American National Standards Institute (ANSI) What is ISO 20022? A harmonized set of extensible markup language (XML) financial messaging standards across major financial services domains Open standards made available to all members of the financial services community Robust standard with room for additional payment-related information that supports the end-to-end flow of information about a payment from the originator to the beneficiary Standard being adopted by an increasing number of world payments, clearing and settlement systems Growing interest from financial institutions, corporations and financial application providers. 2

3 ISO Happenings in the U.S ISO Remittance Coalition Study 2014 ISO U.S. Stakeholder Group Business Case Assessment McKinsey Study - no compelling financial business case, but potential strategic reasons to adopt Not at all familiar Not very familiar Somewhat familiar 61% 29% 9% 1. Planning and Education 2. Cross-Border Payments 3. Domestic Payments 4. Additional Consideration Four Strategic Phases Promote educational efforts and develop a national strategy for adoption Enable cross-border wire payments, following by cross-border ACH payments Assess value proposition and timing for adoption for domestic wire and ACH payments Consider as the standard messaging format for new products and services Very familiar 1% 2014 Press Release undertake a multi-year effort to design and develop a secure, real-time payment system incorporating ISO standard 2015 Federal Reserve: Strategies for Improving the U.S. Payments System Strategy 4 achieve greater end-to-end efficiency for domestic and cross-border payments 2015 NACHA White Paper introduction to ISO for U.S. Financial Institutions 3

4 A U.S. Stakeholder Group was formed to address the adoption of ISO payment messages for high-value (wire) and low-value (ACH) payment systems in the U.S. ISO U.S. Stakeholder Group Federal Reserve Bank of New York Federal Reserve Bank of Atlanta The Clearing House Payments Company L.L.C. NACHA The Electronic Payments Association Accredited Standards Committee X9 Financial Industry Standards, Inc. 4

5 ISO use cases for high value and low value payments have synergies with a focus on standards and efficiencies Use of modern software language, XML, which is human readable and easier to learn Opportunity for the facilitation of STP The need for the use of a modern programming language USE Cases Flexibility in data formats and field definition No field length restrictions and no data truncation Additional identification data elements helps with regulatory compliance Benefit for corporates to be able to send a single payment instruction for multiple payment types End-to end payment tracking Interoperability with cross-border payments 5

6 A number of strategic reasons have been identified for adopting ISO in the U.S. for high value payments Investment to modernize the message formats for wire transfer payments in order to meet increasing demands for: Richer data Easier compliance with evolving regulatory requirements Efficiencies gained from a common format instead of multiple proprietary formats Improvements in interoperability given a global economy Opportunities to provide enhanced services to clients Prevent U.S. payment systems from falling behind the rest of the world and be perceived as outdated, which could: Degrade the U.S. dollar s leadership as a global settlement currency Encourage migration of U.S. dollar clearing offshore, to other currencies, or to emerging payment systems built with new technologies 6

7 ISO initiatives for high value payments are in full gear with some significant accomplishments to date. Began detailed work with SWIFT in October 2016 to create project plan and set of documentation that will replace the specification document for the Fedwire Funds Service. Facilitated industry engagement through a number of meetings. Mapping documents for all Fedwire Funds messages Usage guidelines Message flow diagrams Implementation rulebook Format Advisory Group meetings Implementation Sub-group meeting Enhancement Sub-group meetings SWIFT High-Value Payment Systems Plus work group meetings 7

8 ISO U.S. High Value Systems 2017 Key Milestone Deliverables SWIFT training for Fed project team on key ISOenabling software tool (Q1) Creation of usage guidelines, message flow diagrams, and implementation rule book (Q2 Q3) Published project plan and announcement of draft ISO documentation (Q4) Finalization of mapping documents with validation from Format Advisory Group (Q1) Industry education webinars and inperson workshops (Q3 Q4) 8

9 The ISO implementation for Fedwire Funds includes a two-phased approach leading to a mandated sunset date for legacy formats. Approach selected and endorsed by the Federal Reserve Format Advisory Group Two-phased approach that includes a mandated sunset date for legacy formats: 1. Require all banks to receive ISO (with enhancements) and send ISO like-forlike. Will migrate banks in waves. Fedwire Funds Service will translate legacy formats to ISO and vice versa during conversion period. Legacy formats will sunset at end of this phase. 2. All banks can send ISO with enhancements on the same day. Benefits of Approach Reduces the transition period and establishes a clear end date to the transition Provides an option for financial institutions ready to both send and receive ISO Allows financial institutions not ready to send ISO with optional enhancements Opportunity for legacy formats to sunset earlier 9

10 ISO initiatives for low value payments are also in full gear with a focus on integration in the U.S. ACH network. ACH Integration Industry tools and solutions that allow ACH users to leverage the ISO Payment Message standard for both electronic payments initiation and remittance without making changes to the current U.S. ACH formats and with the support of the NACHA Operating Rules 10

11 ACH integration tools are currently available in the marketplace to support business users and early adopters of ISO NACHA XML-ACH Remittance Opt-In Program Allows businesses to transmit ISO approved payment remittance information for B2B transactions in a standard XML format NACHA ISO Mapping Guide Enables financial institutions to support business users and early adopters to leverage the ISO standard with details to map ISO to ACH for select payment types 11

12 ROADMAP: ISO Integration for the ACH Network Mapping Guide Phase I (B2B and International ACH credits payment) Mar Apr ISO Mapping guide expansion survey May SWIFT My Standards meeting to educate and May-Jul promote ISO Industry stakeholder interviews conducted Q2-Q3 FI and corporate interviews Sep SIBOS session on US ISO High-value / Lowvalue efforts Oct Payments Innovation Alliance stakeholder session to update, educate, and have dialogue on ISO efforts Nov Mapping Guide Phase II (Debits, credits, rejects and returns, and Same Day ACH transactions) Dec Industry webinar on ISO Low-value hosted by NACHA Q1 Finalization of low-value FAQs Stakeholder educational webinar Q2 Q4 Comparison of ACH and Wire mapping formats No additional plans for a Phase III mapping guide release. Additional updates are to be determined later. Continue participation in industry engagements to educate and promote ISO Low-value efforts and tools. 12

13 Will the U.S. convert its ACH network to an ISO format? There are potential triggers that will influence decisions around when, if or how to convert the current ACH format to an ISO format. Conversion current U.S. ACH file formats are converted to ISO payment messages for all ACH payment types to all endpoints and supported by the NACHA Operating Rules Significant gaps or opportunities are not met by ISO ACH integration impacting users ACH Operators complete significant system and operation modernization efforts that create a catalyst for ACH format conversion Adjacent systems that facilitate STP are updated to support ISO formats for all parties and processes in the ACH flow The benefits of ISO ACH format conversion justify the potential industry cost Regulatory/mandatory requirements 13

14 ISO integration mapping to all ACH B2B, C2B/B2C and related messaging SECs INTERBANK CLEARING AND SETTLEMENT NACHA File Formats: B2B, C2B/B2C, Remittance, Messaging (e.g. prenotes, returns) Debtor Agent / ODFI * used to translate Creditor Agent / RDFI * ISO Messages: pain.001 credit transfer remt.00x formatted remittance pain.007 customer payment reversal pain.008 direct debit NACHA Mapping Guide ISO format to NACHA file formats ISO Messages: pain.002 status report camt.05x cash management ACH OPERATOR NACHA Operating Rules PURCHASE INVOICE NACHA File Formats: EDI, BAI/BAI2, SWIFT MT, remt.00x formatted remittance, camt.05x cash management, Custom Reports, Integrated Receivable *Note: Originator / Receiver & RDFI / ODFI reversed for debit Debtor / Originator * Creditor / Receiver * 14

15 ISO ACH Format if conversion occurs INTERBANK CLEARING AND SETTLEMENT pacs messages payments clearing and settlement pacs messages payments clearing and settlement Debtor Agent / ODFI * Creditor Agent / RDFI * ISO Messages: pain.00x remt.00x, ISO Messages: pain.002 camt.05x ACH OPERATOR NACHA Operating Rules ISO Messages: pain.00x remt.00x camt.00x PURCHASE INVOICE *Note: Originator / Receiver & RDFI / ODFI reversed for debit Debtor / Originator * Creditor / Receiver * 15

16 What s next in the U.S. on ISO efforts? High Value (Wires) Finalization of mapping documents Creation of usage guidelines, flow diagrams and rule book Published project plan Low Value (ACH) Addition of materials to ISO resource centers Promotion and awareness of integration tools Comparison of Wire and ACH mapping formats for synergies Continued industry engagements and collaboration 16

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