The Beauty of ISO 20022
“All you need to know*” – from the history of this standard to the future challenges in crypto currencies towards a digital assets payments leg using ISO 20022
Anja Kamping and Dr. Mario Reichel, March 24th, 2021 * all that fits into a 30 minutes overview l © PPI AG l 1. Introduction PPI AG 2. Basic overview - ISO20022 3. Basic overview - Digital Currencies
2 l © PPI AG l The Beauty of ISO 20022 – a global trend l © PPI AG l 1. Introduction PPI AG 2. Basic overview - ISO20022 3. Basic overview - Digital Currencies
3 l © PPI AG l The Beauty of ISO 20022 – a global trend l © PPI AG l PPI AG – a consulting and software company for over 30 years
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PPI AG has been working successfully as a consulting and software company for financial institutions, insurance companies and financial service providers for over 30 years. As a family-owned stock company with stable growth, we combine business expertise and technological know-how to implement projects in a competent and uncomplicated manner. With our standard product portfolio, we occupy a leading market position in the European payments sector. More than 700 employees are entirely focussed on our customers' success.
The Beauty of ISO 20022 – a global trend l © PPI AG l 4 We combine business expertise and technological know-how
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The Beauty of ISO 20022 – a global trend l © PPI AG l 5 PPI AG – PAYMENTS service portfolio
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https://www.iso20022.org/ https://www.ebics.de The Beauty of ISO 20022 – a global trend l © PPI AG l 6 1. Introduction PPI AG 2. Basic overview - ISO20022 3. Basic overview - Digital Currencies
7 l © PPI AG l The Beauty of ISO 20022 – a global trend l © PPI AG l History of data formats
Many national TWIST initiative: 2004 2006 2008 formats for the Treasury Workstation Core Payment Kernel was released SWIFT became Launch of SEPA payment order Integration Standards using the ISO 20022 method the registration and thus first "payment initiation" Team authority for global use of (today: Transaction ISO 20022 XML according Workflow Innovations to ISO 20022 Standards Team)
International formats 2003 – MoU 2005 – organisation 2006 such as MT101 or TWIST, IFX, OAGi, RMG – Registration EPC decided to use a EDIFACT PAYMUL SWIFT develop the Management Group data model according Core Payment Kernel and SEG – Standard to ISO 20022 Evaluation Group www.iso20022.org
https://www.iso20022.org/ https://www.finextra.com/newsarticle/11993/standards-bodies-converge-on-core-payments-kernel The Beauty of ISO 20022 – a global trend l © PPI AG l 8 What is ISO 20022?
• ISO 20022 implements the idea of a globally uniform standard for all types of financial transactions between financial institutions, market infrastructures and end customers as well as regulatory authorities that enable seamless communication and interoperability (STP) − Business areas: payments, securities, trade services, cards and FX
• ISO 20022 does not define the message standard itself but specifies rules and a methodology for how messages are to be developed – a standard for standards − Provision of a central repository (at iso20022.org) with all defined messages (Business Process Catalogue and Data Dictionary) − Common language for applications and people − The approval and/or release is performed by appropriate ISO committees – RMG, SEG, TSG − One display type is based on XML (Extensible Markup Language), others are possible
https://www.iso20022.org/ The Beauty of ISO 20022 – a global trend l © PPI AG l 9 The role of SWIFT
ISO 20022 is
Supported by SWIFT Not mandatory • SWIFT assumes the role of the registration • SWIFT is not mandating a migration authority (RA) – as a service provider for the • Communities decide if and when they want community to migrate − This also applies esp. to new releases A concept for the development of standards • A single standardisation approach Not just XML (methodology, strict procedure) to be used • ISO 20022 is independent of network and syntax by all financial standards initiatives • ASN.1 is another available syntax • A central financial repository Freely and openly available – task of the RA Also a basis for API • More than 650 messages are available free of • in order to support non file-based charge on www.ISO20022.org communication consistently to the ISO 20022 − Not just payments data model • 20+ organisations are involved alongside SWIFT • representation via JSON next to XML
SWIFT The Beauty of ISO 20022 – a global trend l © PPI AG l 10 Standards are created globaly and used locally ISO 20022 –many harmonizing initiatives HVPS+, CBPR+ - new: IP+ - first: CGI-MP
MX XML messages usually designed by those rules of ISO 20022
Generic ISO Generic ISO 20022 message set – 20022 current release (2020) similar level CGI-MP
HVPS+ Harmonized usage for all MI - T2, general CGI-MP EURO1, CHAPS, CHIPS, Fed, MEPS+, usage guidelines LYNX etc. CBPR+
T2 local bank / MI is Dedicated usage rules for local adopting community
* based on SWIFT The Beauty of ISO 20022 – a global trend l © PPI AG l 11 ISO 20022 and the 4-Corner-Model
purchase order - invoice
Debtor Creditor
payment initiation reporting
pain camt.053
pacs pacs Debtor Creditor Interbank Interbank Bank CSM Bank messaging messaging
pacs.008
RTGS
pain pacs.009 pacs.009 camt.05x camt.053
Debtor Intermediary Intermediary Creditor Debtor Agent Bank Bank Agent Creditor
The Beauty of ISO 20022 – a global trend l © PPI AG l 12 Example Messages in XML according ISO 20022
pain.001.002.03 (German community definition 2010)
Version of 2009
Variant Die Deutsche Kreditwirtschaft (DK) 2010
Business purpose
SEPA: pain, pacs, camt pain.001 = Customer Credit Transfer Initiation TARGET2: many camt in A2A pain.008 = Customer Direct Debit Initiation T2S: acmt, admi, camt, colr, pain.002 = Payment Status Report (PSR) reda, seca, sese SCL: rocs Business Domain
acmt = account management head = headers seca = securities management admi = administration pacs = payments clearing & settlement sesa = securities settlement camt = cash management pain = payments initiation setr = securities trade colr = collateral reda = reference data tsin = Trade Services Initiation trck = gpi tracker – neu für ISO 20022 Release 2021
The Beauty of ISO 20022 – a global trend l © PPI AG l 13 The Beauty of ISO 20022 – pain
Identification \ OrganisationIdentification \ BIC Other \ Identification \ SchemeName
The Beauty of ISO 20022 – a global trend l © PPI AG l 14 The Beauty of ISO 20022 – pain – a practical use case
A single credit transfer shall settle invoices, credit note and a discount
SWIFT Third Party Toolkit The Beauty of ISO 20022 – a global trend l © PPI AG l 15 The Beauty of ISO 20022 – pacs
https://www.youtube.com/watch?v=CtSBS2nLEgM Anlage 3 zum DFÜ-Abkommen The Beauty of ISO 20022 – a global trend l © PPI AG l 16 The Beauty of ISO 20022 – camt
too many translations
Container ship - Thomas B., Pixabay Horse vehicle - M. Reichel, Hanse Museum in Lübeck The Beauty of ISO 20022 – a global trend l © PPI AG l 17 The Beauty of ISO 20022 – pain - pacs – camt
Vision of EDI-Loop becomes reality with „rich data“ and seamless STP
Abbildung nach SEB Vortrag für CGI-MP aus 2012 (Harri Rantanen) SSC: Shared Service Center The Beauty of ISO 20022 – a global trend l © PPI AG l 18 How to pay by Crypto Currencies in a b2b environment?
w2w
The Beauty of ISO 20022 – a global trend l © PPI AG l 19 1. Introduction PPI AG 2. Basic overview - ISO20022 3. Basic overview - Digital Currencies
20 l © PPI AG l The Beauty of ISO 20022 – a global trend l © PPI AG l Cryptocurrencies enable peer-to-peer payments without intermediaries.
Conventional payments in the four corner model: an Cryptocurrency payments: an example example
Central bank Central bank
Commercial bank Commercial bank Commercial bank Commercial bank Creditor Debtor Creditor Debtor
• Wallet-to-wallet payment (W2W)
Peer-to-peer Creditor Debtor Creditor payments Debtor
The Beauty of ISO 20022 – a global trend l © PPI AG l 21 It all began with Bitcoin? A historical overview as introduction.
2008 2015 2009 2019 Satoshi Nakamoto Ethereum launch Bitcoin release Diem • Publication of the • Open source • Bitcoin market • Publication of 1989 Bitcoin DLT platform 2020 establishes itself 2016 1. Libra white David Chaum cryptocurrency People's Bank of • Money can be Hyperledger launch paper (Diem) • Digicash is the first white paper China exchanged for Bitcoin • Open source project of cryptocurrency • Field tests with the Linux Foundation • Cryptographic 2012 "digital yuan" protocols Ripple (XRP) release
Origin Cryptocurrencies DLT platforms and applications (Central bank) digital currencies
1998 2013 2015 2020 Nick Szabo Vitalik Buterin 2019 R3 Central Bank of • Idea of a digital decentralised • Ethereum: ECB • Founding of The Bahamas currency "Bit Gold" decentralised • Initialisation blockchain • CBDC blockchain of the 1991-1992 consortium introduction: platform with CBDC Stuart Haber and W. Scott Stornetta Corda platform 2018 Sand Dollar 2010 smart contracts • Task Force • Solution for time stamping of digital Bitcoin Ethereum documents • First Bitcoin transaction: • Chat marks start of 10,000 BTC for two pizzas DeFi *Decentralised Finance (DeFi) **Central Bank Digital Currencies (CBDC)
The Beauty of ISO 20022 – a global trend l © PPI AG l 22 Central bank digital currencies are NOT cryptocurrencies
Difference between CBDCs and cryptocurrencies Digital money flower
1 Public cryptocurrencies • Issued by private sector • Example: Bitcoin
2 Permissioned cryptocurrencies/stablecoins • Issued by private sector • Example: JP Morgan Coin, Diem
3 4 5 Digital central bank money (CBDC) 2 • Issued by central bank Account-based and retail/general purpose (access 3 1 for private households and companies also) Token-based and retail/general purpose (access for 4 private households and companies also)
Token-based and wholesale (access only for 5 financial institutions)
Source: Central bank digital currencies, Bank for International Settlements (BIS), 2018. The Beauty of ISO 20022 – a global trend l © PPI AG l 23 Q&A
The Beauty of ISO 20022 – a global trend l © PPI AG l 24 Contact
25 The Beauty of ISO 20022 – a global trend l © PPI AG l