2015 NACHA Presentation - ACH Network Roadmap for ISO 20022

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ACH Network Roadmap for ISO 20022
Robert Unger, Senior Director, NACHA
Nasreen Quibria, Managing Director, Q insights
Tom Durkin, Managing Director, Bank of America

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Today’s Discussion

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ISO 20022 Overview
What is ISO?
• The International Standards Organization
• The U.S. is a member and contributor through the Accredited Standards
Committee (ASC) X9
What is ISO 20022?
• A harmonized set of XML messaging standards across major financial services
domains – Payments, Securities, Trade, Card and FX
• Based on a shared data dictionary and business process model
• Freely available to all members of the financial services community
• Foundation of SWIFT’s future standards development (SWIFT MX)

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What is ISO 20022 for Payments?
SWIFT’s ISO 20022 adoption mApp for iPad - download from the App Store
on https://itunes.apple.com/app/iso-20022-adoption-88197590?ls=1&mt=8
Live ISO 20022 standards or on the future roadmap…
› Robust standard with room
for additional payment-
related information –
addresses end-to-end
communications – from the
remitter through beneficiary
› Standard being adopted by
an increasing number of the
world’s payments, clearing &
settlement systems
› Growing interest from
financial institutions,
corporations and financial
applications providers
› SWIFT Standards and the
Payments Market Practice
Group have developed
global implementation
guidelines for high-value
payments with a cross-border
leg

5
Who are the players?

6
“One Foot in the Present and the Other in the Future”
› Meeting the current needs
of early adopter and
innovative end-users
› Leading the U.S. payments
industry in the future
adoption of ISO 20022
NACHA’s implementation and support strategy for the ISO 20022 Payment
Messaging Standard and the ACH Network includes two focal points:

7
NACHA’s Leadership Activities on ISO 20022
2011- 2012 2013 - 2014
• “Recommendation
to Support XML
Formats on the
ACH Network for
Payment
Remittances”
• International
corporate
remittance process
benchmark
State of the
Industry –
Opportunity
Assessment
ISO 20022
for
ACH Payment
Remittance
• NACHA
participation in the
development of
remt.001/002
• NACHA launch of
XML-ACH Opt-in
Program for use of
remt.001/002
› In 2013, NACHA launched an XML-ACH Opt-in
Program that allows participants to exchanged
XML formatted payments information for CTX
transactions
‾ Participating FI’s must sign up to send and
receive
‾ NACHA developed XML schema, data
dictionary, and rules
‾ Formatting was harmonized with FED’s ERI
specification
› In 2014, NACHA completed its work with industry
partner IFX-Interactive Financial Exchange for
the ISO submission and approval of two ISO
20022 messages for payments information
(remt.001) (remt.002)
‾ ISO 20022 remt messages maybe sent with
payment instructions or stand-alone
‾ https://www.nacha.org/programs/xml-
ach-remittance-xml-ach
› In 2014, NACHA completed work to adopt ISO
20022 remit messaging for its XML Remittance
Opt-in Program

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2011- 2012 2013 - 2014 2014 - 2015
to Support XML
Formats on the
ACH Network for
Payment
Remittances”
• International
corporate
remittance process
benchmark
State of the
Industry –
Opportunity
Assessment
ISO 20022
for
ACH Payment
Remittance
ISO 20022
for
ACH Payment
Origination
• NACHA
development of
remt.001/002
• NACHA launch of
XML-ACH Opt-in
Program for use of
remt.001/002
• NACHA ISO 20022-to-
ACH Mapping Tool
for Payment
Origination (pain.001)
• Training and
Education on ISO
20022 for ACH
• CGI-MP collaboration
• US “Stakeholder
Group” [The Fed, The
Clearing House,
NACHA, X9]
collaboration

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ISO 20022 Business Case Assessment
Strategic Reasons to Consider ISO 20022 Adoption in the U.S. Market
Strategic Reason Description
Global Momentum Large U.S. corporates and banks are actively adopting ISO 20022 and that is
expected to continue.
Global Competition Compatibility with the ISO 20022 format enables the United States to maintain
parity with other global markets and U.S. dollar clearing systems in other
jurisdictions that are adopting ISO 20022 messaging, which may help preserve the
attractiveness of the U.S. dollar as a global currency.
Cost Savings &
Processing Efficiency
Standardizing message formats allows for consolidation of payments platforms at
banks and corporations, which could promote straight-through processing and
drive down costs.
Consistent & Rich Data The ISO 20022 format enables all parties to leverage a common set of data
dictionary elements and expands capacity to carry rich data in the payment
message.
Interoperability A common format promotes ease of transacting domestically and globally by
using a single, open standard rather than multiple proprietary standards.
Agility to meet evolving
regulatory needs
The ISO 20022 format provides for full originator and receiver information (third
party or ultimate beneficiary) allowing for improved regulatory reporting and
monitoring.
New, innovative
products
A common format across systems reduces the amount of change required to
bring innovative new products and services to market.

10
2011- 2012 2013 - 2014 2014 - 2015
to Support XML
Formats on the
ACH Network for
Payment
Remittances”
• International
corporate
remittance process
benchmark
State of the
Industry –
Opportunity
Assessment
ISO 20022
for
ACH Payment
Remittance
ISO 20022
for
ACH Payment
Origination
• NACHA
development of
remt.001/002
• NACHA launch of
XML-ACH Opt-in
Program for use of
remt.001/002
ACH Mapping Tool
for Payment
• Training and
Education on ISO
20022 for ACH
Clearing House,
NACHA, X9]
collaboration
7
› 1st QTR 2015 NACHA
releases the ISO 20022
Mapping Guide to
standardize ODFI
conversion of ISO 20022
(pain) messaging to ACH
formats:
– CTX, CCD, and IAT
credit transactions will
be initially supported
– Payments Remittance
information mapping is
included
– Guidelines for returns
and exceptions is
included
The NACHA ISO 20022 Mapping Guide will allow financial institutions to better
serve the needs of originators that are planning too or have adopted ISO20022
for accounts payable functions

11
2011- 2012 2013 - 2014 2014 - 2015 Future
to Support XML
Formats on the
ACH Network for
Payment
Remittances”
• International
corporate
remittance process
benchmark
State of the
Industry –
Opportunity
Assessment
ISO 20022
for
ACH Payment
Remittance
ISO 20022
for
ACH Payment
Origination
Full
Compatibility
with
ISO 20022
• NACHA
development of
remt.001/002
• NACHA launch of
XML-ACH Opt-in
Program for use of
remt.001/002
• Assess NACHA Rules
update to require
RDFI receipt of ISO
20022 XML
• Evaluate ACH
Network
infrastructure
migration to ISO
20022 XML
ACH Mapping Tool
for Payment
• Training and
Education on ISO
20022 for ACH
Clearing House,
NACHA, X9]
collaboration

12

NACHA ISO 20022 Tools
13
The NACHA ISO 20022 Tool and Guide were developed
with the helpful information provided by the following
financial institutions and large global corporations:
Bank of America  Bayer  Bank of New York Mellon  Citi
Deutsche Bank  JPMorgan Chase  Microsoft  PNC
Wells Fargo  US Bank

Why pain.001.001.03?
pain.001.001.03
Business Area: Payment Initiation
Message Definition: Credit Transfer
Variant: ISO20022 / European Payments Council
Version: 03
›Conforms to European Payments Council mandate
on SEPA
›Adheres to the recommendations of CGI – MP
›Dominant version in use in the U.S. market and
globally
14

Types of Messages in 2009 ISO Specification
15
From Customer to Bank
 Credit Transfer: pain.001.001.03
 Direct Debit: pain.008.001.02
From Bank to Customer
 Payment Status Report: pain.002.001.03
 Account report (intraday): camt.052.01.02
 Account report (end of day): camt.053.01.02
 Debit / credit notification: camt.054.01.02

ISO 20022 Catalogue of Messages
16

ISO 20022 Flow of Messages
17NACHA Guide supports only credit transactions (pain.001)
Debtor / Originator* Creditor / Receiver*
Debtor Agent / ODFI* Creditor Agent / RDFI*
Interbank Clearing and Settlement
CustomerCreditTransfer
CustomerPayment
StatusReport
AccountReporting
pain.001
pain.002 camt.05x
CustomerDirectDebit
CustomerPayment
StatusReport
AccountReporting
pain.008
pain.002 camt.05x
pacs messages
Purchase
Invoice
*NOTE: RDFI / ODFI and Originator / Receiver are reversed when pain.008 is originated

ISO 20022 Flow of Messages
1818U.S. ACH Operators only transmit NACHA file formats today
Debtor / Originator Creditor / Receiver
Debtor Agent / ODFI Creditor Agent / RDFI
Interbank Clearing and Settlement
CustomerCreditTransfer
pain.001
Purchase
Invoice
CCD
CTX
IAT
NACHA File Formats
Translate
from ISO
20022 to
NACHA file
formats
Flow of information Flow of funds

Group Header (1..1)
Payment Information (1..n)
Credit Transfer
Transaction
Information (1..n)
Remittance
Information (0..1)
pain.001 XML File Structure
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<?xml version="1.0" encoding="UTF-8"?>
<Document
xmlns="urn:iso:std:iso:20022:tech:xsd:pain.001.001.03"
xmlns:xsi="http://www.w3.org/2001/XMLSchema-
instance">
<CstmrCdtTrfInitn>
<GrpHdr>
<MsgId>20110102-0000001</MsgId>
<CreDtTm>2011-01-12T09:00:01</CreDtTm>
<NbOfTxs>6</NbOfTxs>
<CtrlSum>20000.00</CtrlSum>
<InitgPty>
<Nm>Firm ABC</Nm>
<Id>
<OrgId>
<Othr>
<Id>1123456789</Id>
</Othr>
</OrgId>
</Id>
</InitgPty>
</GrpHdr>

NACHA ISO 20022 Guide
20
Block
ISO
Index
ISO
Field
Name
Tag
Level
Content
Description
Mult Type
M /
O
Maps to
NACHA
Format Field
Mapping
Guide

Example – NACHA File Format
21
Company Name: ABHC CLM PMT CR
Company Identification: 1234567891
Originating DFI Identification: 987654321
Standard Entry Class Code: CCD
Company Entry Description: HCCLAIMPMT
Effective Entry Date: February 19, 2015
1 2 3 4 5 6 7 8 9
1234567890123456789012345678901234567890123456789012345678901234567890123456789012345678901234
Example Data
5200ABHC CLM PMT CR 1234567891CCDHCCLAIMPMT 1502190001987654320000014
Company / Batch Header Record “5”

Example – ISO 20022 XML Format
22
<PmtInf>
<PmtInfId>011011</PmtInfId>
<PmtMtd>TRF</PmtMtd>
<PmtTpInf>
<SvcLvl>
<Cd>NURG</Cd>
</SvcLvl>
<LclInstrm>
<Cd>CCD</Cd>
</LclInstrm>
<CtgyPurp>
<Prtry>HCCLAIMPMT</Prtry>
</CtgyPurp>
</PmtTpInf>
<ReqdExctnDt>2015-02-19</ReqdExctnDt>
Non-Urgent / ACH payment
NACHA SEC Code
Company entry description
Effective entry date

Example – ISO 20022 XML Format
23
<Dbtr>
<Nm>ABHC CLM PMT CR</Nm>
<Id>
<OrgId>
<Othr>
<Id>1234567891</Id>
</Othr>
</OrgId>
</Id>
</Dbtr>
<DbtrAgt>
<FinInstnId>
<ClrSysMmbId>
<ClrSysId>
<Cd>USABA</Cd>
</ClrSysId>
<MmbId>987654321</MmbId>
</ClrSysMmbId>
<Nm>USA BANK</Nm>
</FinInstnId>
</DbtrAgt>
</PmtInf>
Company Name
Company Identification
Originating DFI Identification

7/18/2015
24
24
21

NACHA Payments Conference
Tom Durkin
Managing Director, Digital Channels
Bank of America Merrill Lynch
April 20, 2015

26
ISO-20022 XML
Adoption Landscape
A global, unified standard for messaging has the potential to enable efficient end-to-end processing across domains and geographies,
promote STP and operational efficiencies in cash management, and overcome difficulties in multiple domestic and international standards.
The commitment to ISO 20022 implementation initiatives with major global clearing systems in Europe and other countries
such as Singapore, India and Australia continues to drive the international momentum for adoption.
United States
•Adoption driven by clients
with global reach
Europe
•SEPA Regulation migration
deadline was in 2014
•Target 2 and Euro 1 testing is
scheduled to begin with industry
migrations target of November
2017
India
•NG-RTGS is operational as
the first ISO 20022
compliant RTGS system in
the world
Singapore
•ISO 20022 will serve as the
messaging standard for G3,
the low-value real-time
payments solution
Australia
•Intention to adopt ISO 20022 for
the NPP (ACH) initiativeSource: KPMG LLP

27
An architectural element of new Payment Systems and Market
Infrastructures
For Treasuries:
 Facilitates multi-bank consistency
 Increasing support by major TMS and ERPs
 Simpler translation and faster troubleshooting
 Choice of connectivity: direct H2H or SWIFT
 Facilities Business Intelligence (BI)
For Banks:
 Single Euro Payments Area (SEPA)
 Major payment systems within banks
 Canada Payments Association and Federal
Reserve
exploring XML for E2E Remittance
 Business case for US adoption performed by US
Stakeholder group
Why ISO-20022 XML?
Bank of America Merrill Lynch Leads the Way

Questions?
Robert Unger | Senior Director, Product Management &
Strategic Corporate Alliances
RUnger@NACHA.ORG
(o) 703.561.3913
Nasreen Quibria| Managing Director & Founder
nasreen.quibria@qinsights.net
(m) 617.388.6207
Tom Durkin| Managing Director, Digital Channels
tom.durkin@baml.com
(o) 312.904.7370
31
22

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2015 NACHA Presentation - ACH Network Roadmap for ISO 20022

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