ISO 20022

History

In the second half of the 20th century, during active development of electronic calculations, in Europe and the USA there was no single state settlement system, in large quantities available to banks, but existed and actively infrastructure of electronic communications developed. As a result, a large number of private electronic payment systems with the special message formats and business rules of work appeared. Banks and corporate clients of these payment systems were forced to spend considerable funds for support of different formats. Repeatedly made attempts of standardization on an initiative "from below" led to parallel existence of a significant amount different, often crossed and not always approved regional or industry ^[1] There was obvious a need for more global standard. Representatives of private companies, financial institutions and experts of financial markets actively participated in work on it, since 2002 this work was carried out in Technical Committee 68th Financial transactions (TC 68) of the International organization on ^[2] (ISO, International Organisation for Standardisation). As a result in 2004 ISO 20022 was officially accepted. Now there is its practical application, for example, the uniform European payment space (SEPA, Single Europe Payment Area) is constructed on ISO 20022 methodology. The initiative of the Federal Reserve System (USA) of the global standard for cross-border payments of IPF (International Payment Framework) is also based on ISO 20022. The geography of application of ISO 20022 is very wide and includes, for example, Japan, Brazil, South Africa. The international systems, such as CLS and Euroclear, support message exchange, designed according to ISO 20022, and stimulate the participants to transition to them.

The system of interbank SWIFT messages plans gradation from the messages of the SWIFT MT format applied now to messages of the SWIFT MX format which are designed on ISO 20022 methodology.

Large banks, such as JP Morgan, HSBC, Deutche Bank and others, give to the clients worldwide an opportunity to transfer payments in the format designed and placed in the central storage ISO 20022.

Methodology

Basis in ISO 20022 are not so much messages, how many methodology of the formalized description of the business processes (for example, work in the Forex market) making them elements (for example, opening of a short position on a certain currency) and schemes of interaction of elements during the course of performance of business process.

The most important part of methodology of ISO 20022 is formation of descriptions by directly interested participants of financial markets under the leadership of experts of committee of TC 68 who are engaged in support of this standard. This work is carried out jointly by experts in the analyzed data domain and specialists in use of methods of computer simulation.

The main features of methodology of ISO 20022 are:

• application of the formalized languages;
• carrying out domain analysis and design of messages on the basis of the system of the interconnected models;
• creation and database maintenance of standard solutions for their repeated and reuse;
• ensuring openness of developments of the standard and involvement in these processes of all interested persons;
• providing recommendations about implementation of migration of the existing systems of exchange of the financial messages to message exchange systems corresponding to ISO 20022.

Tools

Important feature of ISO 20022 is use of the tools having high extent of formalization. These tools consist of subsets of the specialized UML and XML languages applied in ISO 20022.

The models constructed using means of the UML language, being very compact, have high degree of visualization and are focused on simplification of information exchange between people.

As finally models of financial messages are intended for ensuring information exchange, provided in electronic form, models from the UML language will be transformed to XML - the schemes suitable for machining. Except XML schemes now ISO 20022 allows creation of descriptions of the financial messages suitable for machining, using ASN.1 (Abstract Syntax Notation One) which give ampler opportunities for coding of financial messages in electronic form, but so far all results of development of models of financial messages are provided and available in the XML language.

Approach to modeling

ISO 20022 methodology applied to standardization of exchange of information messages when rendering financial services is based on consecutive application of a method of modeling.

Transactions of exchange of information messages are auxiliary, they only provide accomplishment of the main financial transactions and cannot be considered out of a context of the main transactions.

ISO 20022 methodology considers it. The universal scheme of messages of the financial industry in ISO 20022 is under construction on the basis of domain models, i.e. models describing parts of actually financial industry, for example, payments and calculations, securities, etc.

On ISO 20022 methodology modeling is carried out by structurization of objects of standardization and data on them by the principle "from top to down" or "from the general – to private". When modeling four stages corresponding to four different levels of community (abstractness) at which the studied objects are considered are selected.

These levels of abstractness have names:

• survey level;
• conceptual level;
• logic level;
• physical layer.

The description of appointment and characteristic of construction tools of models of all levels are consolidated in a uniform Metamodel of ISO 20022. The basic purpose of models of the different levels constructed on the basis of the Metamodel is given below in the table.

Modeling process

At the Survey level borders of the selected segment of the sphere of financial services (Businessoblast), for example, payments or securities are defined, the enlarged model Businessoblasti reflecting only the purposes and tasks solved in it, a total characteristic of types of activity within this Area of (Businessprotsessov), the list of the subjects participating in Businessprotsessakh (Businessroli) and the general structure of information which use Businessroli when implementing Businessprotsessov is created.

The main objective of Conceptual level is conversion of model of Survey level to the model defining each Businessroli's needs for information exchange (communications) when implementing each Businessprotsess. In this model sets of transactions through which this or that Businessprotsess is implemented, structure of messages and the sequence of their transfer at accomplishment of each transaction are reflected (MessageChoreography is Choreography of Messages).

At the Logic level the model containing exact descriptions of each message is defined: structure of the message and detailed characteristics of each its element (the name of an element, data type, contained in this element, is possible – the tolerance range of values of data, etc.).

Models of Survey, Conceptual and Logical levels are created by means of the UML language. Process of creation of models of the first three levels includes elements of creativity and is performed only by the person.

Models of the Physical layer form from models of the Logic level using a specialized software according to strictly certain procedures excluding intervention of the person as in processes of input of initial data for conversion, and in adjustment and check of the created models.

Models of the Physical layer represent or schemes for each message, or the description of messages in a notation of ASN.1 are XML. Both Xmlckhemy, and the description of messages in a notation of ASN.1 are independent of machine-oriented encoding techniques and at the same time give the exact, formal description eliminating ambiguities.

The illustration of process of modeling and examples of the objects created in the course of application of methodology of ISO 20022 are given below in Figures 1-3.

Results of modeling

Implementation of methodology of ISO 20022 concerning individual Businessoblasti leads to creation of her complex model consisting of set of models for each of four levels of the Metamodel of ISO 20022.

Models of the first two levels (Survey and Conceptual) reflect objects and Businessoblasti's processes, their interaction in different extent of detailing among themselves, the needs for information exchange.

Models of the third and fourth levels (Logical and Physical) give a complete and exact description of processes of information exchange and the processes which are these – messages and the sequences of transmission of messages of a different type (Horeografiisoobshcheny).

Models of the Logic level are used for the executed person of the analysis and studying of processes of information exchange in the corresponding Businessoblasti. Models of the Physical layer are used for creation of the systems of exchange of the financial messages corresponding to ISO 20022 in specific payment systems, within financial institutions or separate structures of financial markets.

Models of the third and fourth levels consider variety of possible options of implementation of this or that Businessprotsess and contain appropriate means for information support of these options.

For example, for Businessprotsess "Credit transfer" the corresponding sets of messages and the sequence of their transfer for all possible options of implementation of credit transfer are provided: between two clients of one bank, between clients of different banks, the specified options with participation of the payment agent(s), etc. The universality of the scheme of financial messages received as a result of application of methodology of ISO 20022 is provided to these.

Other aspect of universality of methodology of ISO 20022 consists that all ISO 20022 models are stored in the Repository to which free access is provided for all potential users. Models can be used by any subject of economic activity if its financial transactions concern that Businessoblasti for whom models are developed.

Repository

The repository of ISO 20022 represents storage (database) where by certain rules all results of development of schemes of exchange of information messages and schemes of messages accumulate. It consists of two areas:

• DataDictionary;
• BusinessProcessCatalogue.

Slovardannykh contains elements of models of the financial industry for their further or reuse when developing specific message exchange systems.

Katalogbusinessprotsessov contains the models describing determinations of messages and a business process model and also implementations of messages at the physical layer in a certain syntax (for example, XML).

Formation, change of contents and granting open data access of the Repository is provided with the system of the special bodies created within Technical committee 68th Financial transactions of International Organization for Standardization.

Treat such bodies:

• Management team Registration;
• Registration Body;
• Groups of Assessment of Standards;
• Technical support team.

Openness and development

In ISO 20022 procedures according to which any user group can make offers on change and improvement of this standard are set.

Obligation of the bodies of registration of changes and service of the Repository of ISO 20022 stated above is check of expediency of acceptance of the offered changes (additions) and ensuring correctness of the made changes in a context of already existing Repository elements.

To the purposes of development and expansion of scope of ISO 20022 also serve the recommendations about the return design defining structure and the sequence of actions upon transition from the different existing schemes of message exchange to schemes of message exchange of ISO 20022.

Except the specified organizational and methodical means of ensuring of openness, universality and development of ISO 20022, the standard contains also the technology means focused on the solution of these tasks. External Schemes and External Codes belong to such means.

Application of External Schemes and External Codes allows to use in the messages of ISO 20022 data members defined out of this standard, for example, of codes of bank identifiers, codes of personal identification, codes of bank transactions, etc.

Application of methodology of ISO 20022

Ultimate goal of application of methodology of ISO 20022 in this or that data domain (for example, non-cash payments) is ensuring information exchange with the help of the messages conforming to this standard.

The solution of the specified task depends on a current status of data domain with which transition to application of messages of ISO 20022, and existence in the Repository of the messages covering the needs of information exchange for this data domain begins. Within ISO 20022 three options are considered:

• there are no messages of ISO 20022, the corresponding data domain, the settled list of messages within data domain;
• in data domain there is a list of the messages providing information exchange, but in ISO Repository 20022 similar messages are absent;
• in data domain there is a list of the messages providing information exchange, in ISO 20022 Repository there are also similar messages.

Recommendations about implementation of transition to use of messages of ISO 20022 for the specified cases are considered within the uniform approach called "the return design". The structure of actions of the return design can be in less detail presented in the form of the following sequence of stages.

• Verification of presence as a part of ISO 20022 of Businessoblasti, coincident or similar to data domain for which application of ISO 20022 is planned (For example: non-cash payments and Businessoblast of ISO 20022 "Payments").
• Comparison of structure and properties of transactions in the considered data domain with structure and Businessprotsessov properties in the corresponding Businessoblasti of ISO 20022.
• Documentation of coincidence and differences (the analysis of gaps in Businessoblasti).
• Comparison of structure and properties of messages in the considered data domain with structure and Mnozhestvasoobshcheny properties for the corresponding Businessoblasti of ISO 20022 with the subsequent documentation (the analysis of gaps in Opredeleniisoobshcheny).
• On analysis results of gaps: creation new and/or modified Businessprotsessov and/or Opredeleniysoobshcheny, corresponding to ISO 20022
• Registration in the Repository of ISO of 20022 changes and additions in Businessprotsessakh and/or Opredeleniyakhsoobshcheniy11
• Planning and implementation of migration to Mnozhestvusoobshcheny ISO 20022.

In Figure 4 block representation of this process is given below.

Storage

The uniform centralized storage (repository) is the center of knowledge of ISO 20022 and is open for viewing for the purpose of an exception of differences in use of the same elements and approval of an operating procedure.

The storage logically is divided into the dictionary of data and the directory of business processes. The dictionary of data includes the description of basic spheres of business (for example, Forex, operations with stocks), determination of messages, their basic elements (for example, the electronic digital signature (EDS) and data types (for example, a currency code, the bank identification code (BIC – ISO 9362). The directory of business processes contains models of financial business processes, descriptions of specific business operations with links to the used messages.

Also the storage contains all change history of its data. Initiatives of replenishment of storage proceed from the interested market participants, undergo multistage process of approval by the experts selected by representatives of financial institutions and ISO then are registered and entered to storage. Thus, process control of development of standards in methodology of ISO 20022 is close to self-regulation.

The problems revealed at application of ISO 20022 in the international practice

• High labor input at the initial stage ^[3].
• The standard first of all is profitable to the large financial institutions providing a broad spectrum of financial services and capable to pass independently to the new standard.
• Small and medium business is, as a rule, not able to be passed independently to ISO 20022 and waits for ready-made solutions from financial institutions and suppliers of automated information systems.

Russia and ISO 20022

Application of methodology of ISO 20022 in Russia is possible for:

• creations of the uniform standard of electronic payments including a monetary component of calculations for transactions in the share and currency markets;
• problem solving of compatibility of payment system of Russia with international payment systems;
• increases in availability of the Russian financial market to foreign participants;
• assistance to development of electronic document management in allied industries (trade, reporting).

Specialists of the Bank of Russia carry out work on the analysis of development of ISO 20022 and practice of its application for what interaction with the Federal agency on the metrology and certification representing Russia to ISO for the purpose of connection of the Bank of Russia to work of committee of the CU 68 is organized. Discussion of the plan of the main actions for creation of the national standard of non-cash payments using schemes of the electronic messages constructed on methodology of the international standard ISO 20022 within which consultations with public institutions, participants of financial markets and their associations are planned is carried out.

Working group on interaction of banks and corporations (CMPG)

In many leading countries of the world there are national groups on the analysis and support of practice of interaction of banks and corporations in financial market (Corporate-to-Bank Market Practice Group) which activity coordinates the international forum Common Global Implementation (CGI). The purpose of such groups is development of uniform requirements and specific recommendations about formation and use of SWIFT messages on the basis of ISO 20022 taking into account national specifics.

The national working group on standardization the practician of interaction of the non-financial organizations with banks and other partners in the Russian Federation (Russian Corporate-to-Bank Market Practice Group), the short name - The working group on interaction of banks and corporations (CMPG) was created in November, 2012. In the course of work of group Recommendations for use of ISO standards 20022 were developed for transfer of financial messages between bank and corporation taking into account requirements of national payment system (ISO-RUB) in which the main features of filling of payment messages and messages of cash management when carrying out calculations of corporations in the Russian financial market found reflection. Further the specified document will be updated according to changes of the ISO 20022 formats, changes of the legislation of the Russian Federation, wishes and notes of users on an annual basis.

Activity of the Working group is regulated by the Provision approved by Committee ROSSVIFT. The chairman of the Working group is Yakunina Tatyana Anatolyevna, the Senior vice president of Gazprombank, Deputies - Chirkov Georgy Valentinovich, the Head of Department of development and administration of products of Management of corporate liquidity of Unicreditbank and Millers Alexey Valeryevich, the CEO EvrazHolding Finance.

The Bank of Russia, Sberbank of Russia, VTB, Gazprombank, Unicreditbank, Citibank, EvrazHolding, Rosneft, Lukoil, Inter RAO UES, SWIFT, etc. are a part of the Working group 91 representatives of 19 banks, 18 corporations and regulatory organizations, in particular.

Within activity of the Working group a lot of work in the field of justification of legitimacy of use of the electronic signature SWIFT was carried out. The inquiry was sent and the official explanation of a number of provisions of regulations of the Bank of Russia is received.

Now development of new types of the messages intended for ensuring functions of currency exchange control is conducted.

Activity of the Working group is conducted in close interaction with the different Russian and international structures which are engaged in standardization in the field of electronic document management in financial market such as Technical committee No. 122 "Standards of financial transactions" of the Bank of Russia, CGI, SWIFT, etc.

2015: "Cinimex" was a part of the Working group of ROSSVIFT on localization of ISO 20022

The Cinimex company, one of developers of integration solutions for the financial sector, entered the Russian National Association SWIFT (ROSSVIFT) integrating about 600 largest banks and the SWIFT organizations users in the territory of the Russian Federation. More than a half of the Russian credit institutions which are the largest financial institutions of the country are provided to SWIFT and perform more than 80% of calculations.

"Cinimex" became the second Russian IT company which received the status of the official member of ROSSVIFT and was a part of the Working group of Association on localization of the international standard ISO 20022 for interaction of banks and corporations. Bank representatives of Russia, National Settlement Depositary, the largest commercial banks and corporations and also SWIFT are a part of the Working groups of ROSSVIFT.

Specialists of "Cinimex", along with other experts of the industry, will take active part in development of uniform methodological approaches to use of international standards in settlement and payment activity of the Russian financial institutions and to conducting electronic legally significant document management between corporations and banks.

Notes