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

2
 SWIFT for HVPS
Scope
Central bank
CSD
Govt Transaction input & validation
Entities Payment Payment routing
processing Clearing & Settlement
High-value payment MI Payment investigation

Cash optimisation
Risk Liquidity management
Participants Treasury reconciliation
Direct Participants
management
Reserve management
ACH
(CSM)

Indirect Participants Low-value payment MI Operational

Payment Statistical
reporting Regulatory

Payment scheme management

Participants Direct Participants
Service Member profile management
administration Participant identification
(Reference data)

Corporates Consumers

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3
SWIFT for High value payment market infrastructures
Live system market Status…

Central & Eastern Europe

Albania
Azerbaijan
Bosnia & Herzegovina
Bulgaria
Western Europe Croatia
Denmark Hungary
Eurozone (EBA- Romania
EURO1/STEP1 Latvia
North America
Canada &TARGET2)
US (TCH) Norway Middle East
Sweden Bahrain
Switzerland Asia Pacific
Israel
UK Australia
Jordan
Fiji
Kuwait
Hong Kong
Oman
New Zealand
Central & Latin America Palestine
Philippines
Bahamas UAE (DIFC)
Singapore
Barbados
Africa Sri Lanka
Chile
Angola Algeria Botswana Thailand
Dominican Rep.
ECCB Central African States (BEAC) Egypt
El Salvador Ghana Kenya Lesotho
Guatemala Mauritius Morocco Namibia
Trinidad & Tobago Sierra Leone South Africa Swaziland
Venezuela Tanzania Tunisia Uganda
CMCA Zambia Zimbabwe Comesa
West African States (BCEAO)

Systems on Y Copy topology 4

 SWIFT for High value payment market infrastructures
Systems under implementation

HVPMI Type of system Status

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

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Central banks using SWIFT for Regulatory
Live systems market Status

Central & Eastern Europe

Croatia

Central & Latin America

Africa
Ecuador
Ghana
South Africa
Tanzania
Zimbabwe

Systems using FINInform Copy topology

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SWIFT for HVPS
Typical topology

1 Payment Instruction SWIFTNet

3
Authorisation request

Authorisation response
1 Y - Copy
4

Bank A Bank B

4 Final Payment Instruction 2

received 5 5
3
5
Sender notification and
reporting (Optional) 6 6

Position and collateral SWIFT Interface

6
management

7 Transaction input from

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ancillary systems
Central Central Ancillary
RTGS
systems
Bank
application

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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.

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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.

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Inter-bank payment exchange
Payment clearing and settlement transfer
Internal Participant B

Serial model (V-Shape)

Payment system
SWIFTNet
SWIFT interface
InterAct
• InterAct (MX) for single transactions Participant A V-topology
exchange using MX/ISO PACS

SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN/InterAct transaction flow

Copy model Internal

Payment system
Participant B
SWIFTNet
• InterAct Copy (MX) for single transaction SWIFT interface
Copy
exchange using MX/ISO PACS Participant A Payment Payment message
message (settled)

Settlement Authorisation/
request refusal

SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN Copy transaction flow

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Net settlement transfer
Payment clearing and settlement transfer
Participant A,B,C
In one transaction Internal
Payment system
SWIFTNet
SWIFT interface
• FileAct (MT/MX) for multiple transactions FileAct/InterAct
Ancillary system
exchange using MX/Pacs (e.g. Ancilliary
system settlement )
• InterAct (MX) for confirmation delivery SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN/InterAct transaction flow

Internal Participant A,B,C

In series Payment system
SWIFTNet
SWIFT interface
InterAct
• InterAct (MX) to send settlement movement Ancillary system V-topology
as a series of single transaction exchange
using MX/ISO PACS
SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN/InterAct transaction flow

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Retail payment with immediate settlement in RTGS
Payment clearing and settlement transfer
Internal Participant B

Serial model (V-Shape)

Payment system
SWIFTNet
SWIFT interface
FileAct
• FileAct (MT/MX) for multiple transactions Participant A
exchange using MX/Pacs

SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN/InterAct transaction flow

Copy model Internal

Payment system
Participant B
SWIFTNet
• FileAct Copy (MT/MX) for multiple SWIFT interface
Copy
transactions exchange using MX/ISO PACS Participant A Payment Payment message
message (settled)

Settlement Authorisation/
request refusal

SWIFT interface
Payment Infrastructure
Payment processing Central web server
Bank A Bank B

FIN Copy transaction flow

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Liquidity & Cash management

Browse information Participant B

Internal
• Browse, provides secure user-to-application Payment system
SWIFTNet
browsing to access the market SWIFT interface

Participant A
infrastructures to monitor & control functions

InterAct real-time
information exchange
and control
Browse online
Info query

Secure instructions SWIFT interface

• InterAct, to support interactive monitoring & Payment Payment processing Central web server
Bank A Bank B
control functions with MX/CAMT message Infrastructure
(HVP & LVP)

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Report & directory management

Participant B
Report management Internal
Payment system
SWIFTNet
• SWIFTNet Interact (MX) to support the sending SWIFT interface

of balance report and statement messages on Participant A

an individual basis
FileAct for InterAct for
reporting statements

Large reports exchange Payment SWIFT interface

FileAct is ideal for exchanges of Infrastructure
(HVP & LVP) Payment processing Central web server
– Operational, statistical or regulatory reports Bank A Bank B

– Raw data
– Directories
– Contract information

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Report & directory management

• SWIFTNet Interact in a real-time mode will use Internal Participant B

MX/ISO CAMT messages. Payment system
SWIFTNet
SWIFT interface

Participant A
• SWIFTNet Browse makes it possible to access InterAct for
Profile Mgt

the web-services of the HVPMI, allowing the

Browse online
participant to monitor and control service FileAct for
reporting
Info query

administration data (e.g. static data related to

its profile)
Payment SWIFT interface
• SWIFTNet FileAct will allow the HVPMI to Infrastructure
(HVP & LVP) Payment processing Central web server
exchange large volumes of static data, such as Bank A Bank B

the reference data needed by participants to

secure a efficient STP.

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Integration
Connectivity options

Direct connection
SWIFT
software VPN

Network partners

Indirect connection
Secure Internet SWIFT
or VPN 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 Messaging Security Standards Integration

CUG
Consulting
PKI Alliance Interfaces
Implementation FIN, MT messages
HSM Integration tools
Project InterAct MX (ISO20022)
RMA Market practices
Management FileAct,
Delivery Alliance Connect
Training Browse Bronze/Silver/Gold
notification
Customer support Copy
Multi-site

SWIFT provide an E2E solution

Including
Coexistence MT/MX

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Standards consulting services

Market practice & End-user testing

Advisory services Analysis/mapping Formal subsets
implementation rules 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
2 Message flows, message scope, usage
and a high-level mapping with ISO 20022

JP market landscape, JASDEC project

1 and the main features of the future
platform Use of collateral for DVP transactions
Receive Deliver

PSMS

Securities transactions processing on the Japanese market

Trading Clearing/Pre-settlement Settlement/registration Cash/collateral Mgt
JDCC
transactions (DVP)
Stock exchange

Depository Payment
TSE TSE Clearing Clearing Member bank
participant participant Member Depository
Member
Member
Cash settlement
BETS proprietary messages

Tokyo Stock JSCC BETS BoJ

Exchange
JDCC Receiver Deliverer
BoJ
Non-stock exchange

Broker/
Depository Depository
transactions

Investors dealers
(non-DVP)

Depository Member Member

Depository JDCC Receiver Deliverer
Member
Member
Gross settlement. Securities to be
received are held in JDCC account
Broker/ until cash is settled at BoJ (Receiver
dealer can still trade these securities)
Asset Cash management – Net settlement
Manager PSMS BETS
(deadline 14:00). In case the receiver
The bigger the Risk management (to cover liquidity risk)
Payment cannot pay for the securities, JDCC
margin level is the
Non-stock exchange

Depository
pay on his behalf -> liquidity risk for
transactions (DVP)

bank Securities
Member more transactions
to be JDCC
can settle real-time
Depository received
Same as above
Member before 14:00. The
DM (receiver) can Securities
also make advanced collat.
payments to ensure Net cash
BETS BoJ
additional position Cash collat.
PSMS JDCC settlement.
(HOKURI) Receiver

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 Gap analysis 1/2
Document flows and execute gap analysis
1 between proprietary flows and ISO 20022 2 High level gap analysis
message standards

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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).

4 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
Project boundary 2 Description of business Use cases
1 3
process and sub processes

4 Activity diagrams

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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 WORK REQUIRED, Business Areas SWIFT Standards

ISO 20022 BY involvement
MESSAGES
---S&R; Cash management;
Consultancy
Maintenance (Regular
(limited -
Standards

Pillar I Existing procedure involving

business) &
standard BVGs, industry
Development
consultations, etc.)
SWIFT

Pillar II New ---Queries; Securities Reference

---Development, by Development
Standard Data; S&R Audit Trail; Cash
SWIFT Standards
Management; Cash Account
Management

--- Queries (various business

T2S-specific
4CB

Pillar III ---Development, by areas); Party Reference Data,

Consultancy
4CB, with SWIFT Securities Account Reference
(extensive -
Standards support Data, Billing; Collateral
technical)
Developed Management Price Reports
in the course
of T2S

Consultancy (extensive –
project management and
business) 26
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
Goal:
Reusable Content
Reduce industry TCO by
Customization
200 million EUR / year
Market Practice

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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

F +7 495 228 5924
M +7 903 164 6095 or + 32 478 40 30 23
E Steven.palstermans@swift.com
W www.swift.com

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