ISO 20022

Definition

ISO 20022 is the international standard for financial messaging. Contrary to the common belief that “ISO 20022 is an XML format,” ISO 20022 is syntax-independent.

The standard is not a single format, but rather a process from which formats are derived. By its own definition, it describes “a unified standardization approach (methodology, process, repository) that can be used by all standardization initiatives in the financial sector.”

The three components

The standard consists of three parts:

• Modeling methodology – a method for describing business transactions independently of syntax
• Data dictionary – a central repository of business terms and their definitions
• Business process catalogue – the business processes and messages derived from this

The Data Dictionary and the Business Process Catalogue together form the Financial Repository, which is publicly available on iso20022.org.

The technical schemas are then created from the model according to fixed rules (in practice XML, according to the standard also ASN.1). A field is defined not because it is in the XML schema, but because it has a definition in the data dictionary.

The message name

Each message bears a four-part name. The example pacs.008.001.08:

Two systems can both “speak pacs.008” and yet fail to interoperate because they expect different versions. “pacs.008” is not a sufficient specification.

The Business Units

The first four letters assign each message to a business unit. The following are particularly relevant for payment transactions:

Alongside these are the families for securities (sese, setr, seev), collateral (colr), foreign exchange (fxtr), and card operations ((caaa, catm, cainand others).

Rule for payment transactions: pain flows between customer and bank, pacs between banks, and camt reports on accounts.

The messages typically follow a sequence within the context of the business transaction for the scheme being used. Here is an example of a SEPA credit transfer:

Those who uphold the standard

ISO committee TC 68/SC 9 is responsible. Three bodies operate under it:

• The Registration Authority (RA) acts as the “custodian of the ISO 20022 Financial Repository.” SWIFT performs this role—a point often overlooked: SWIFT operates the repository on behalf of ISO but does not own the standard.
• The Registration Management Group (RMG) oversees the registration process and reports to TC 68/SC 9.
• The Standards Evaluation Groups (SEGs) review new messages from a business perspective and approve changes. They are organized into six domains: Payments, Securities, Cards and Retail Financial Services, Foreign Exchange, Trade Finance, and API Resources.

This is complemented by the Technical Support Group (TSG) for technical support.

From Standard to Specification: Usage Guidelines

The repository is too broadly defined for practical use. Almost every field is optional, and almost every structure allows for multiple entries. Consequently, each user community establishes its own usage guidelines, restricting which fields are used, which are mandatory, and how they should be populated.

Sources

• ISO 20022 – About ISO 20022
• ISO 20022 – Governance
• ISO 20022 – The Registration Authority
• ISO 20022 – Message Definitions (Financial Repository)
• ISO – TC 68/SC 9 Information exchange for financial services
• EPC – SEPA Scheme Rulebooks
• EZB – TARGET Services