ISO 20022
Data, Data and More Data
OK, I am guilty of using a picture of the beloved (?) Data from Star Trek as clickbait in a story about ISO 20022. Can you blame me, talking about payment standards is not the way to entice readers. Assuming you arrived here as a Payments Professional, you will be glad you clicked here I assure you.
If you are like me you likely became aware of ISO from ISO 8583 the well known-ish standard for debit and credit card transactions and their related interchange messages. I worked on a project at Citibank years back where I needed to get my new mobile P2P payments transactions on a network and we ended up using Citishare, which is Citibank’s ISO 8583 network. ISO 8583 enabled me to meet my deadline and avoid the IT backlog at Citibank. A Win-Win and I was convinced of the value of ISO standards.
What or Who is ISO?
“ISO is an independent, non-governmental international organization with a membership of 165 national standards bodies.” — ISO Website
It should be noted that ISO is not a Payments oriented organization and they develop and publish standards around all things Technology and Manufacturing. To date they have published 25,354 standards coming from 792 committees and subcommittees. ISO 20022 is their latest payment standard
Is it pronounced “Two Hundred and Twenty Two” or “Twenty, Zero and Twenty Two” or “Twenty, OH, Two, Two”. Well my source of all things ISO 20022, the brilliant Mike Sigal did not have an answer to this burning question, so pronounce it however you like.
Let’s dive in with two main sources “ISO 20022 for Dummies” and the ISO 20022 Labs website which is an industry consortium run by the aforementioned Mike Sigal.
What is ISO 20022 solving for?
It is the first time that Payments AND Business data will be transmitted together.
I have written here on B2B Buzz numerous times about the issues with matching payments and the associated documents together. A Purchase Order is issued, then a Bill of Lading and an Invoice plus certifications and other documents to ensure the eventual payment is valid.
Here is a diagram of what is wrong with B2B Payments that is well accepted and shows the numerous touchpoints that introduce cost and potential for errors.
ISO 20022 is looking to connect the payment documents to the messages and avoid the numerous errors in a B2B payments flow.
ISO 20022 uses three layers to deliver a consistent and contextual data solution:
- Business Model
- Logic
- Syntax
The syntax layer is based on two standards first is XML and the second is ASN.1
The eXtensible Markup Language (XML) is a simple text-based format for representing structured information.
XML uses a combination of opening and closing tags. The data they contain is called an element. Elements can contain other elements, to group related information together, for example:
<address> (This is the opening tag)
<number>1</number> (element)
<street>Short Lane</street> (element)
<city>London</city> (element)
</address> (This is the closing tag)
Source: for above is ISO 20022 for Dummies, available for free from the ISO Website on 20022.
ASN.1
“A unique characteristic of ASN.1 is the clean separation between the schema and the rules that specify how an instance of a message is encoded on the wire (encoding rules). This separation allows a user to focus on the message definitions without being distracted by the details of the encodings.” — ISO 20022 for Dummies
As a payments professional you don’t need to get too bogged down in ASN.1 or XML. But the overview above helps you see under the covers of ISO 20022 and the data structures that make 20022 so valuable for payments.
You would not be wrong to think:
“SWIFT’s MT series of messages works, why do I need ISO 20022.”
The key as this diagram from 20022 Labs shows is the messages and related data and business context all travel together in an ISO 20022 payment ensuring no loss of data or context. SWIFT messages travel separately.
So yes, SWIFT’s long standing MX series of messages does the message part but not connecting the other data points.
The additional data is what makes ISO 20022 worth the effort for a bank to add this to their payments efforts. Believe me your corporate customers are going to begin demanding more data-ful payments sooner rather than later.
The key here is Extended Remittance Data. As a former controller I can assure you the more data and the more context the better when it comes to closing the books at the end of the month.
One last point on ISO 20022 and why you need to understand and implement it. RTP (Real Time Payments) from The Clearing House is the first new payments network introduced in the US in over 40 years and RTP uses ISO 20022 for messaging consistency. RTP is already impacting Payroll and other use cases for corporates. As CFOs and Treasurers move to manage their working capital in Real Time, they will go from wanting to demanding real time payments and the richer data associated with ISO 20022.
Real Time Payments are coming
Data rich payments are coming
CFOs and Treasurers across the globe are going to demand their banks provide Data Rich and Real Time Payments.
