First, Second, and Third Generation Islamic Economicss
Payments and ISO 20022 in the U.S. Market
1. ISO® 20022 Update
U.S. High-Value & Low-Value Systems
SWIFT Standards Forum Breakout Session
Payments and ISO 20022 in the U.S. Market
May 12, 2016
Nell Campbell-Drake, Federal Reserve Bank of Atlanta
Gina Russo, Federal Reserve Bank of New York
Jim McDade, The Clearing House
2. ISO 20022 Happenings in the U.S.
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Not at all familiar
Very familiar
Somewhat familiar
Not very familiar
61%
1%
9%
29%
2012 ISO 20022 Remittance Coalition
Study
2014 ISO 20022 U.S. Stakeholder Group –
Business Case Assessment
No compelling financial business case, but potential strategic reasons
to adopt
Four Strategic Phases
1. Planning and Education
Promote educational efforts and develop a national strategy for
adoption
2. Cross-Border Payments
Enable cross-border wire payments, following by cross-border
ACH payments
3. Domestic Payments
Assess value proposition and timing for adoption for domestic
wire and ACH payments
4. Additional Consideration
Consider as the standard messaging format for new products
and services
2015 Federal Reserve: Strategies for
Improving the U.S. Payments System
Strategy 4 – achieve greater end-to-end efficiency for
domestic and cross-border payments
2014 Press Release – undertake a multi-year effort to design
and develop a secure, real-time payment system incorporating
ISO 20022 standard
2015 NACHA White Paper –
introduction to ISO 20022 for U.S.
Financial Institutions
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4. ISO 20022 for U.S. Wire Transfer Systems
Proposed High-Level Implementation Strategy
Scope
Include both domestic & cross-border wire payments
Include both inputs and outputs for the U.S. wire
systems (all message types, inquiries, reports, etc.)
Include enhancements based on industry feedback
Approach
Two-phased approach that includes mandated sunset date for
legacy formats:
1. Require all banks to receive ISO 20022
− Fedwire® Funds Service & CHIPS® will translate legacy
formats to ISO 20022 during conversion period
2. Require all banks to send ISO 20022
− Legacy formats will sunset at end of this phase
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5. ISO 20022 for U.S. Wire Transfer Systems
Preliminary High-Level Timeline
Detailed Planning
(2016/2017)
Finalize planning &
announce format
specifications (2017)
Application
development &
internal testing
(2018)
Fedwire/CHIPS
customer testing
(2019)
Fedwire/CHIPS begin
production rollout
(2020)
Rollout
complete &
sunset legacy
format (TBD)
Detailed Planning Activities
Develop customer communications plans
Define project teams, detailed project plans, and timelines
Ensure ISO 20022 can accommodate everything needed for Fedwire Funds Service & CHIPS
Identify the specific ISO 20022 messages and fields that will be needed for Fedwire Funds Service & CHIPS
− Could provide opportunity to streamline processes or eliminate messages with little or no usage
− May identify changes needed to ISO message formats
Collaborate with the industry to identify, prioritize & design enhancements that will be included in implementations
Define format specifications/message implementation guides & validate with industry 5
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6. Recent ISO 20022 Activities
In March, the Fed sent customer communication to announce intention to adopt ISO 20022 messages
for the Fedwire Funds Service, including high-level implementation approach and timeline.
− Additional ISO 20022 updates will posted at: https://fedpaymentsimprovement.org/
Updated the ISO 20022 use cases for U.S. wire transfer systems by adding an executive summary and
additional use cases related to the “negative” business case and a corporate use case.
̶ Fed webinars on April 26 & May 17
Joined Swift’s high-value market practices task force to review the PACS messages to come up with
best practices for an ISO 20022 implementation that goes beyond a like-for-like approach
̶ June workshop at Swift offices in London
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7. ISO 20022 Use Case for Wire Transfer SystemsCompliance
with domestic &
global
regulatory
requirements Domestic &
cross-border
interoperabilit
y
Negative
business
case
Single end-
to-end
payment file
format
Consistent
format for
extended
remittance
information
(ERI)
End-to-end
payment
tracking
Next
generation
workforce
Enhanced
corporate
capabilities
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8. ISO 20022 Next Steps
Create ISO 20022 detailed project plan
Begin detailed planning work to determine how ISO 20022 messages will be used
on Fedwire Funds Service & CHIPS
Engage industry to discuss potential enhancements that could be included in an
ISO 20022 implementation
Provide update at Sibos conference in September 8
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10. 10
ISO 20022 Strategies for the ACH Network
Industry tools and solutions that allow
for the translation and integration of
the ISO 20022 payment message
standard for both payments initiation
and payments remittance,
incorporating the current ACH formats
supported by the NACHA operating
rules
ACH
Integration ACH
Conversion
Current file formats converted to ISO
20022 payment messages for all ACH
payment types to all endpoints,
supported by the NACHA operating
rules, as revised to support different
ISO formats and messages
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11. 11
ISO 20022 ACH Integration Solutions in the Marketplace
ACH
Integration
NACHA XML-ACH Remittance Opt-In
Program (2013)
Defines rules for the exchange of ISO
20022 formatted remittance messages
for B2B transactions in a standardized
XML format that supports extensive
remittance information
https://www.nacha.org/programs/xml-ach-
remittance-xml-ach
NACHA ISO 2002 Mapping Guide
(2015)
Provides standardized guidance to
facilitate translation of ISO 20022
payment initiation credit transfer payment
messages into ACH transactions
https://www.nacha.org/iso-20022-mapping
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12. Corporate originator requests for a single
payment instruction for multiple payment
types
Elimination of data truncation and field
length restrictions
Improvements in financial institutions’ abilities to
comply with growing regulatory requirements
The need for the use of a modern
programming language
Interoperability with cross-border payments
USE
Cases
Flexible options to carry payments information
Use cases identified for converting the
current ACH formats to ISO 20022
payment messages have similarities to
the Wire use cases
ISO 20022 ACH Conversion Exploration
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ACH
Conversion
13. 13
Potential triggers and/or events that may influence conversion
Will the U.S. ACH Network Convert to an ISO Format?
Significant gaps or
opportunities
Technology
modernization
System STP
opportunities
Cost justification
Regulation
Significant gaps or opportunities not met by ISO 20022
ACH integration impacting users
ACH Operators complete significant system and
operation modernization efforts that create a catalyst for
ACH format conversion
Benefits of ISO 20022 ACH format conversion justify the
potential industry
Regulatory/mandatory requirements
Adjacent systems that facilitate STP are updated to
support ISO formats for all parties and processes in the
ACH flow
14. Enhancements to NACHA ISO 20022 ACH integration
solutions in the marketplace
Continued industry outreach and collaboration to obtain
feedback on potential triggers and document use case
studies
Identify additional areas where work today can be
leveraged to help move to tomorrow
Continued work with the U.S. ISO 20022 Stakeholder
Group on events and tools to educate industry on ISO and
opportunities for low-value payments.
ISO 20022 Next Steps for ACH
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15. More Information on ISO 20022
• NACHA Resource Center Web site
− https://www.nacha.org/ISOresources
• Federal Reserve Resource Center Web site
− https://fedpaymentsimprovement.org/payments-efficiency/iso-20022/
• Remittance Coalition - Federal Reserve Resource Center Web site
− https://fedpaymentsimprovement.org/wp-content/uploads/understanding-
iso-20022.pdf
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16. Notices
• “ISO” is a registered service mark of the International Organization for Standardization.
• “Fedwire” is a registered service mark of the Federal Reserve Banks.
• “CHIPS” is a registered service mark of The Clearing House Payments Company L.L.C.
• “SWIFT” is a registered trademark of S.W.I.F.T. SCRL.
The Federal Reserve Banks do not sponsor, endorse, or recommend (or provide any warranties, express or implied,
regarding) any third party or any third-party products or services referenced in this presentation.
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