The use of ISO standards and the SWIFT

messaging platform in payment systems.

Steven Palstermans
Head of Russia, CIS & Mongolia
Central Bank of the Russian Federation, 27 June 2011

Agenda

SWIFT in Payment Systems

Areas covered by ISO 20022
Consultancy examples

SWIFT for HVPS

Scope
Central bank
CSD
Govt
Entities

Payment
processing

High-value payment MI

Participants
Direct Participants

Risk
management

ACH
(CSM)
Indirect Participants

Low-value payment MI

Participants

Payment
reporting

Direct Participants

Corporates

Service
administration

Transaction input & validation

Payment routing
Clearing & Settlement
Payment investigation
Cash optimisation
Liquidity management
Treasury reconciliation
Reserve management

Operational
Statistical
Regulatory

Payment scheme management

Member profile management
Participant identification
(Reference data)

Consumers
3
3

SWIFT for High value payment market infrastructures

Live system market Status

North America
Canada
US (TCH)

Central & Latin America

Bahamas
Barbados
Chile
Dominican Rep.
ECCB
El Salvador
Guatemala
Trinidad & Tobago
Venezuela
CMCA

Western Europe
Denmark
Eurozone (EBAEURO1/STEP1
&TARGET2)
Norway
Sweden
Switzerland
UK

Central & Eastern Europe

Albania
Azerbaijan
Bosnia & Herzegovina
Bulgaria
Croatia
Hungary
Romania
Latvia
Middle East
Bahrain
Israel
Jordan
Kuwait
Oman
Palestine
UAE (DIFC)

Africa
Angola
Algeria
Central African States (BEAC)
Ghana
Kenya
Mauritius
Morocco
Sierra Leone
South Africa
Tanzania
Tunisia
Zambia
Zimbabwe
West African States (BCEAO)

Botswana
Egypt
Lesotho
Namibia
Swaziland
Uganda
Comesa

Asia Pacific
Australia
Fiji
Hong Kong
New Zealand
Philippines
Singapore
Sri Lanka
Thailand

Systems on Y Copy topology

SWIFT for High value payment market infrastructures

Systems under implementation
HVPMI
CENTRAL BANK OF THE GAMBIA
BANK INDONESIA
BANQUE DU LIBAN
BANK OF SIERRA LEONE
BANCO CENTRAL DE
HONDURAS
BANQUE CENTRALE DE LA
REPUBLIQUE DE GUINEE
CENTRAL BANK OF LIBERIA
BANCO CENTRAL DEL
URUGUAY
EAST AFRICAN COMMUNITY
(EAC)
CENTRAL BANK OF RUSSIAN
FEDERATION
NARODOWY BANK POLSKI
(NATIONAL BANK OF POLAND)
BANCO CENTRAL DEL
PARAGUAY - RTGS
WEST AFRICAN MONETARY
ZONE

Type of system
RTGS
RTGS
RTGS
RTGS

Status
Implementation (Y-Copy)
Implementation (Y-Copy)
Implementation (Y-Copy)
Implementation (Y-Copy)

RTGS

Implementation (Y-Copy)

RTGS
RTGS

Implementation (Y-Copy)
Implementation (Y-Copy)

RTGS

Implementation (Y-Copy)

Regional RTGS

Implementation

RTGS

Implementation

RTGS

Implementation (Y-Copy)

RTGS

Implementation (Y-Copy)

Regional RTGS

Discussion
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Central banks using SWIFT for Regulatory

Live systems market Status

Central & Eastern Europe

Croatia

Central & Latin America

Ecuador

Africa
Ghana
South Africa
Tanzania
Zimbabwe

Systems using FINInform Copy topology

SWIFT for HVPS

Typical topology

Payment Instruction

Authorisation request

SWIFTNet

1
3

- Copy

Authorisation response

Bank B

Bank A
4

Final Payment Instruction

received

Sender notification and

reporting (Optional)

Position and collateral

management

Transaction input from

ancillary systems

2
5

5
3
6

6
SWIFT Interface

Central
Bank

Central
RTGS
application

Ancillary
systems

Standards
MX , ISO 20022 compliant messages
SWIFT supports the co-existence of the two main industry
standards MT and MX.
As stated, MT messages are the commonly used standard
message today for HVPS.
MX Messages have been created by SWIFT as a set of
standards
Covering payment initiation, inter-bank settlement and cash
management
ISO20022 compliant catering for high and low-value, single and
multiple, and urgent and non-urgent payments.

Standards
MX/XML in the context of an RTGS
The two key categories of SWIFT MX messages to be used within
the context of an RTGS willing to use ISO 20022 are :
Payments Clearing & Settlement PACS messages, which are
ISO20022 approved
Cash Management CAMT messages which are ISO 20022 approved
An industry group CGI(Common Global Implementation) is in the process of finalizing
usage rules.

Inter-bank payment exchange

Payment clearing and settlement transfer
Serial model (V-Shape)
InterAct (MX) for single transactions
exchange using MX/ISO PACS

Participant B

Internal
Payment system

SWIFTNet
InterAct
V-topology

SWIFT interface

Participant A

SWIFT interface

Payment Infrastructure

Payment processing
Bank A

Central web server

Bank B

FIN/InterAct transaction flow

Copy model
InterAct Copy (MX) for single transaction
exchange using MX/ISO PACS

Participant B

Internal
Payment system

SWIFTNet
Copy

SWIFT interface

Participant A

Payment
message
Settlement
request

Payment Infrastructure

Authorisation/
refusal

SWIFT interface

Payment processing
Bank A

Payment message
(settled)

Central web server

Bank B

FIN Copy transaction flow

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Net settlement transfer

Payment clearing and settlement transfer
In one transaction
FileAct (MT/MX) for multiple transactions
exchange using MX/Pacs (e.g. Ancilliary
system settlement )
InterAct (MX) for confirmation delivery

Participant A,B,C

Internal
Payment system

SWIFTNet
FileAct/InterAct

SWIFT interface

Ancillary system

SWIFT interface

Payment Infrastructure

Payment processing
Bank A

Central web server

Bank B

FIN/InterAct transaction flow

In series

Participant A,B,C

Internal
Payment system

SWIFTNet
InterAct
V-topology

SWIFT interface

InterAct (MX) to send settlement movement

as a series of single transaction exchange
using MX/ISO PACS

Ancillary system

SWIFT interface

Payment Infrastructure

Payment processing
Bank A

Central web server

Bank B

FIN/InterAct transaction flow

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Retail payment with immediate settlement in RTGS

Payment clearing and settlement transfer
Serial model (V-Shape)
FileAct (MT/MX) for multiple transactions
exchange using MX/Pacs

Participant B

Internal
Payment system

SWIFTNet
FileAct

SWIFT interface

Participant A

SWIFT interface

Payment Infrastructure

Payment processing
Bank A

Central web server

Bank B

FIN/InterAct transaction flow

Copy model
FileAct Copy (MT/MX) for multiple
transactions exchange using MX/ISO PACS

Participant B

Internal
Payment system

SWIFTNet
Copy

SWIFT interface

Participant A

Payment
message
Settlement
request

Payment Infrastructure

Authorisation/
refusal

SWIFT interface

Payment processing
Bank A

Payment message
(settled)

Central web server

Bank B

FIN Copy transaction flow

12

Liquidity & Cash management

Browse information
Browse, provides secure user-to-application
browsing to access the market
infrastructures to monitor & control functions

Internal
Payment system
SWIFT interface

Participant B
SWIFTNet

Participant A

InterAct real-time
information exchange
and control

Secure instructions
InterAct, to support interactive monitoring &
control functions with MX/CAMT message

Browse online
Info query

SWIFT interface
Payment processing
Payment
Bank B
Bank A
Infrastructure
(HVP & LVP)

Central web server

13

Report & directory management

Report management
SWIFTNet Interact (MX) to support the sending
of balance report and statement messages on
an individual basis

Participant B

Internal
Payment system

SWIFTNet

SWIFT interface

Participant A

FileAct for
reporting

Large reports exchange

FileAct is ideal for exchanges of
Operational, statistical or regulatory reports
Raw data
Directories
Contract information

Payment
Infrastructure
(HVP & LVP)

InterAct for
statements

SWIFT interface
Payment processing
Bank A

Central web server

Bank B

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Report & directory management

SWIFTNet Interact in a real-time mode will use

MX/ISO CAMT messages.

Participant B

Internal
Payment system

SWIFTNet

SWIFT interface

Participant A

SWIFTNet Browse makes it possible to access

the web-services of the HVPMI, allowing the
participant to monitor and control service
administration data (e.g. static data related to
its profile)
SWIFTNet FileAct will allow the HVPMI to
exchange large volumes of static data, such as
the reference data needed by participants to
secure a efficient STP.

InterAct for
Profile Mgt

Browse online
Info query

FileAct for
reporting

Payment
Infrastructure
(HVP & LVP)

SWIFT interface
Payment processing
Bank A

Central web server

Bank B

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Integration
Connectivity options
Direct connection

SWIFT
software

VPN
Network partners

Indirect connection
Secure Internet
or VPN

SWIFT
software
Service Bureau
or Bank

Alliance Lite
Secure Internet

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SWIFT for Payment Systems on ISO

SWIFT Services for Payment Systems
Services

Consulting
Implementation
Project
Management
Training
Customer support

Messaging

FIN,
InterAct
FileAct,
Browse
Copy

Security
CUG
PKI
HSM
RMA
Delivery
notification
Multi-site

Standards

Integration

MT messages
MX (ISO20022)
Market practices

Alliance Interfaces
Integration tools
Alliance Connect
Bronze/Silver/Gold

SWIFT provide an E2E solution

Including
Coexistence MT/MX

17

Standards consulting services

Advisory services

Analysis/mapping

Formal subsets

Market practice &

implementation rules

End-user testing
Training

Examples of implementation services and tools

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Standards Consulting Services

Expertise right from the source
We are a pool of 42 Standards experts
more than half are possible consultants
12 distinct resources active since Jan. 2009
We cover all of SWIFT Standards business areas
We collaborate closely with Consulting Services, other SWIFT areas
We have experience in most major economies and numerous
emerging markets, with broad language skills
We possess industry knowledge and project management skills
through previous engagements, working groups and prior experience
We have extensive technical expertise in Standards implementation
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Case Study 1: JASDEC / ISO 20022

Large, strategic engagement
Japan Securities Depository Center Inc.
Objective: extend services to overseas investors
ISO 20022

Current state
ISO 15022 like proprietary messages
Complex flows; many actors

SWIFT role
Enable transition to ISO 20022

Benefit to SWIFT
Influence an entire market

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JASDEC / Project Blueprint

Message flows, message scope, usage
and a high-level mapping with ISO 20022

JP market landscape, JASDEC project

and the main features of the future
platform

Use of collateral for DVP transactions

Deliver

Receive

PSMS

Securities transactions processing on the Japanese market

Non-stock exchange
transactions (DVP)

Non-stock exchange
transactions
(non-DVP)

Stock exchange
transactions (DVP)

Trading

Clearing/Pre-settlement

Settlement/registration

Cash/collateral Mgt

JDCC
TSE
participant

TSE
participant

Clearing
Member

Clearing
Member

Depository
Member

Depository
Member

Payment
bank

Cash settlement
proprietary messages

BETS
Tokyo Stock
Exchange

JSCC

BoJ

JDCC

Broker/
dealers

Investors

BETS

Depository
Member

Depository
Member

Depository
Member

PSMS

BETS
Depository
Member

Payment
bank

Depository
Member

Same as above

BETS
PSMS

Deliverer

Gross settlement. Securities to be

received are held in JDCC account
until cash is settled at BoJ (Receiver
can still trade these securities)

Broker/
dealer
Asset
Manager

Receiver

Depository
Member

JDCC
(HOKURI)

BoJ

The bigger the

Risk management (to cover liquidity risk)
margin level is the
Securities
more transactions
to be
can settle real-time
received
before 14:00. The
DM (receiver) can
Securities
also make advanced
collat.
Net cash
payments to ensure
position
Cash collat.
additional
settlement.
Receiver

BoJ

JDCC

Receiver

Deliverer

Cash management Net settlement

(deadline 14:00). In case the receiver
cannot pay for the securities, JDCC
pay on his behalf -> liquidity risk for
JDCC

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Gap analysis 1/2

Document flows and execute gap analysis
1 between proprietary flows and ISO 20022
message standards

High level gap analysis

22

Gap analysis 2/2

3

Harmonisation analysis

Analysis showing where harmonisation makes sense, by reducing the number of messages to
gain efficiency (business processes) and save costs (less to implement).

High level mapping analysis

Mapping proprietary fields to ISO 20022 elements; flagging

ISO mandatory elements (including cross-rules); providing
advice on way forward to close gaps (harmonisation,
mapping to free text, use of extensions, etc)

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Documenting the business model

1

Project boundary

Description of business
3
process and sub processes

Use cases

Activity diagrams

24

Case Study 2: T2S

1. High level gap analysis - T2S
requirements vs available MXs
2. Detailed gap analysis for flows where
ISO 20022 MXs exist
3. Project Management support to
Bundesbank, which is responsible
amongst the 4CB for the messaging and
registration areas in the T2S project
4. MX development support

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TARGET2-Securities
A multifaceted, long-term, SWIFT Standards consultancy relationship

SCOPE OF
ISO 20022
MESSAGES

WORK REQUIRED,
BY

Business Areas

4CB

SWIFT
Standards

---S&R; Cash management;

Pillar I

Existing
standard

Pillar II

New
Standard

Pillar III

T2S-specific

Maintenance (Regular
procedure involving
BVGs, industry
consultations, etc.)
---Development, by
SWIFT Standards

---Development, by
4CB, with SWIFT
Standards support

Developed
in the course
of T2S

Consultancy (extensive
project management and
business)

---Queries; Securities Reference

Data; S&R Audit Trail; Cash
Management; Cash Account
Management
--- Queries (various business
areas); Party Reference Data,
Securities Account Reference
Data, Billing; Collateral
Management Price Reports

SWIFT Standards
involvement
Consultancy
(limited business) &
Development

Development

Consultancy
(extensive technical)

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The Future: Services and Products

Standards strategy aims to
Formalize the content we already have to be re-used or re-purposed
Create new Standards content cartridges to help with known
implementation pain points
Change Management
Translation

Enable (more) asset-based consulting

Formalized Market Practice rules
ISO 20022 Business Model
Change Management documentation

PoC exercises and prototyping work are ongoing

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SWIFT 2015: TCO reduction strategy

Standards has a significant part to play in TCO reduction

Change Management
Reusable Content
Customization
Market Practice

Goal:
Reduce industry TCO by
200 million EUR / year

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In case of further questions

Steven Palstermans
Head of Russia, CIS & Mongolia

SWIFT
8 Novinsky boulevard
121099 Moscow
Russia
T

+7 495 228 5923

+7 495 228 5924

+7 903 164 6095

[email protected]

www.swift.com

or + 32 478 40 30 23

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