WIRE/ACH to ISO Digital Directions SFE 29th Conference and Expo Presenter Nell Campbell-Drake

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Tokenization WIRE/ACH to ISO 20022 Digital Directions SFE 29 th

Campbell-Drake Vice President, Retail Payments Office Federal

ACH Harmonization Collaboration BUZZ Words Driving Change in

1 Tokenization WIRE/ACH to ISO Digital Directions SFE 29 th Conference and Expo Wednesday, April 24, 2018 Presenter Nell Campbell-Drake Vice President, Retail Payments Office Federal Reserve Bank of Atlanta Cross-Border Ubiquity Same Day ACH Harmonization Collaboration BUZZ Words Driving Change in Payments! Interoperability IoT Directories Distributed Ledger ISO

don t even know what the acronym ISO stands for and is all about! 4 4 I SO 20022 International Organization for Standardization What is ISO 20022?

2 don t even know what the acronym ISO stands for and is all about! 4 4 I SO International Organization for Standardization What is ISO 20022? A harmonized set of extensible markup language (XML) financial messaging standards across major financial services domains What is ISO for Payments? Robust standard with room for additional payment-related information that supports the endto-end flow of information about a payment from the originator to the beneficiary 5 5 ISO Connection to - Strategies for Improving the U.S Payment System Strategy #4 Achieve greater end-to-end efficiency for domestic and cross-border payments Develop an implementation strategy for the application of the ISO standard to U.S. payment transactions 6 6 2

ISO 20022 Journey in Time in the U.S. 2012 ISO 20022 Remittance Coalition Study Not at all familiar 61% 2014 ISO 20022 U.S. Stakeholder Group Business Case Assessment KPMG Study - no compelling

3 ISO Journey in Time in the U.S ISO Remittance Coalition Study Not at all familiar 61% 2014 ISO U.S. Stakeholder Group Business Case Assessment KPMG Study - no compelling financial business case, but potential strategic reasons to adopt Four Strategic Phases Not very familiar Somewhat familiar Very familiar 29% 9% 1% 1. Planning and Education 2. Cross-Border Payments 3. Domestic Payments 4. Additional Consideration 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 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 7 7 A U.S. Stakeholder Group was formed to assess whether ISO payment messages should be adopted for highvalue (wire) and low-value (ACH) payment systems in the U.S. ISO Stakeholder Group Federal Reserve Bank of New York Wholesale Product Office Federal Reserve Bank of Atlanta Retail Payments Office The Clearing House Payments Company L.L.C. NACHA The Electronic Payments Association Accredited Standards Committee X9 Financial Industry Standards, Inc. 8 8 still don t know why ISO is such a hot topic

4 10 U.S. ISO Efforts Underway Mature Format ISO Wire Migration ACH Integration ISO Enterprise Perspective Mature Format Wire Migration ISO ACH Integration October 2017 Fed Announcement Fedwire Funds to migrate to ISO message format. Format Specifications for High Value Transactions collaboration between Fedwire Funds participants, The Clearing House, SWIFT 3-Phase Implementation Plan Fedwire Funds 3-phased approach targeted to begin November 2020 and continue through the end of NACHA and ACH Network - industry education on tools to integrate the NACHA and ISO message formats. Potential triggers creating a move to migration - technology improvements, wire migration lessons learned, cost benefits, regulatory mandates ISO use cases for high value and low value payments have synergies with a focus on standards and efficiencies. XML software language Flexibility Facilitation of straightthru-processing Modern programming language Single payment instruction USE Cases No data truncation Additional data elements Interoperability with crossborder payments End-to end payment tracking

5 know you are not about to share another payments improvement implementation plan Phase 1 ISO Preparation Phase 2 ISO Like for Like Fedwire Funds Implementation Approach Stability Period Materials are not to be used without consent. Phase 3 ISO Enhancements Phase 1 ISO Preparation November 23, 2020 Phase 2 ISO Like for Like Target Date 12 to 18 months - begins in March 2022 Stability Period 1 to 3 months Phase 3 ISO Enhancements Target Date November Phase 1 DIT* available February 2020 Phase 2 and Phase 3 DIT* available Target: March 2021 Fedwire Funds Timeline *DIT = depository institution testing environment

Fedwire Funds ISO 20022 Implementation Center Website Bookmark this page to access the following information: https://www.frbservices.

html Implementation Approach Overview Software Vendor List Educational Opportunities Frequently Asked Questions Background on ISO 20022 16 16 know I heard about another

6 Fedwire Funds ISO Implementation Center Website Bookmark this page to access the following information: implementation-center.html Implementation Approach Overview Software Vendor List Educational Opportunities Frequently Asked Questions Background on ISO know I heard about another ISO initiative related to wire transactions Materials are not to be used without consent Global Payments Innovation (GPI) Improving straight-thru-processing of cross border payments Over 450 global banks and local market infrastructures Speed Transparency Payments Tracking

know if you have ISO 20022 information for wires, you also have something for ACH!

7 know if you have ISO information for wires, you also have something for ACH! ISO ACH Payments ACH Integration Industry tools and solutions that allow ACH users to leverage the ISO payment message standard for electronic payments initiation and remittance without making changes to the current U.S. ACH formats and with support of the NACHA Operating Rules ISO ACH Integration Tools The U.S. ACH ISO strategy is focused on continued integration in the ACH network. XML ACH Remittance Program Deployment 2013 Allows businesses to securely transmit ISO payment remittance information for B2B transactions in a standard XML format. ISO to-ACH Mapping Guide Deployed 2015 A downloadable tool that enables financial institutions to support businesses that leverage ISO Integration entails the translation and integration of the payment data elements. ISO Validator Tool Deployed 2017 A complement to the mapping guide, tests conformity of ISO payment instructions for U.S. ACH file formats

Will the ACH Network Migrate to ISO 20022... There are potential triggers that will influence decisions around when, if or how to migrate the current ACH format to an ISO format.

8 Will the ACH Network Migrate to ISO There are potential triggers that will influence decisions around when, if or how to migrate the current ACH format to an ISO format. 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 know you are going to wrap up with a few tips! Strategic reasons to adopt ISO messages for the Fedwire Funds Service Provides opportunities to improve existing processes (e.g., exchange of extended remittance information), reduce the need for market practices, and/ add new services (e.g., administrative and reporting functions Modernizes the U.S. highvalue payment systems to prevent them from falling behind the rest of the world and being perceived as outdated. Fedwire Funds ISO Provides richer data (e.g., longer names, structured address components, common format for structured remittance information) Promotes domestic and crossborder interoperability, which could reduce the degree of mapping required throughout the payment change to support different proprietary message formats. 24 8

9 Corporate Awareness of ISO Corporates use corporate-to-bank and bank-to-corporate messages for payment initiation and cash reporting 25 Corporates will look to banks and service providers to enable them As more payments migrate to the ISO standard, educate corporates about what's happening and new options FIs can offer Corporate benefits of adopting ISO Common format for multiple banks and payment types Enables least cost payment routing Reduces IT investment and maintenance costs Standard, simpler business processes across multiple business units and geographies More data available for reconciliation Improve compliance, particularly for internal controls and evolving international requirements and regulations (e.g. SEPA) Future-proof payment operations 25 A few planning/educational tips for organizations. Confirm set-up of access to SWIFT MyStandard tool Collaboration with management/staff and external partners on migration plan to support phased implementation Internal assessment to identify needed changes to other tools that may be linked to wire process Development of educational plan for staff to ensure adequate awareness and knowledge to support organization s migration activities Periodic access of Fedwire ISO implementation center web site and participation in educational events to stay abreast of latest developments and support organization s migration strategy ACH Integration Development of educational plan for staff to ensure awareness and knowledge of ACH integration tools available in the marketplace to support customer base Download and review of the ISO to- ACH Mapping Guide to help address potential staff and customer inquiries Periodic access of NACHA and Federal Reserve ISO Resource Centers to enhance knowledge and stay abreast of ISO ACH activities and latest developments Participate in industry educational events (i.e. conferences, webinars, work shops) to help support organization s ISO strategy Fedwire Funds Service ISO Phase 1 Educational Opportunities In-Person Workshops Federal Reserve Description Bank Location* Date Time Detailed review of Chicago Wednesday, May 22, :00 a.m. to 3:00 p.m. ET Phase 1 changes & testing strategy New York Thursday, May 30, :00 a.m. to 3:00 p.m. ET *Same content at each location Register for educational sessions at: Webinar Recording: Overview of Phase 1 changes available at above website

Day Two: October 4, 2018

Day Two: October 4, 2018 1 ISO 20022 is Here: Are you Ready? 2 Speaker Bios Gina Russo Assistant Vice President Federal Reserve Bank of New York Gina Russo is an Assistant Vice President in the Wholesale