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Reminder: This is our last meeting of 2023.

Presentation

Mario Reichel of PPI: Leveraging ISO 20022 to Optimize Supply Chain and Trade Finance Management Platforms: Harmonized ISO 20022 for Cross-Border Payments – A Data Model Also for Blockchain Solutions in Logistics

PRESENTATION

Mario Reichel, along with Ayhan Koseoglu of PPI: Presented their knowledge of leveraging ISO 20020 to optimize supply chain and trade finance management platforms.

PPI is a company providing software end-to-end solutions and consulting for the understanding and migration to ISP 20020 for financial transactions.

Mario described the ISO 20022 international standard for data transport between financial service companies. This message standard is a common platform for the development of messages for the following:
- Is a modelling methodology to capture in a syntax-independent way financial business areas, business transactions and associated message flows
- Is a central dictionary of business items used in financial communications
- A set of XML and ASN.1 design rules to convert the message models into XML or ASN.1 schema
The focus of ISO 20022 is to produce a single standardized approach(methodology) for the development of standards to be utilized during financial standards initiatives. It is a recipe defining specific rules on how to develop messages:
- ISO 20022 does not define the message standard itself. It specifies rules and a methodology for how messages are to be developed.
- Supported by the global SWIFT community
- SWIFT does not mandate migration. The decision to migrate is a decision to be reached by various stakeholder financial communities
The ISO 20022 standard consists of a set of definitions and roles:
- It is a concept for the development of standards
  - A single standardization approach(methodology, strict procedure) to be used for all financial standards initiatives
  - A central financial repository
- Freely and openly available
  - More than 740 messages are available free of charge on ISO20022.org
  - Not just for payments
  - 20+ organizations are involved along side SWIFT
- Supported by SWIFT
  - SWIFT assumes the role of registration authority (RA)
  - Is a service provider for the community
  - SWIFT is not mandating a migration
  - Communities decide if and when they want to migrate – also applies to new releases
- Not just XML tag standardization
  - ISO 20022 is independent of network and syntax
  - ASN.1 is an additional syntax
- Also a basis for API development
  - In order to support non-file based communication consistently to the ISO 20022 data model
  - Representation via JSON next to XML
Customer Credit Transfer Initiation V9 (pain.001.001.09)
- Is an XML based message format under the ISO 20022 standard
- Designed to streamline cross-border and domestic payment processes
- The successor to V9 message format and include a number of enhancements
- pain.001.001.09 = Business Doman + purpose + variant + version
- Covers the following business domains
  - payments initiation
  - payments clearing and settlement
  - account management
  - cash management
  - securities trade
  - collateral
  - Trade Services Initiation
- Enhanced data richness
- Improved flexibility – more flexible payment instructions
- Increased security
- Improved interoperability
- A description of the “4 corners model” for payment systems was provided
- Bank agnostic to initial payments
- Adoption level is across the globe with:
  - 70 countries
  - 80% of the volume in near future
Global Harmonization – CPMI (Committee on Payments and Market Infrastructures)
- Focuses on harmonization of data requirements for the use of ISO 20022 messages for cross border payments.
- The CPMI developed the data requirements for ISO 20022 in collaboration with the private sector.
- Presentation demonstrated(slides) the end to end of richer and better structured information
- Provides for richer data elements:
  - category purpose code
  - purpose code
  - end-to-end reference
  - ultimate debtor and/or ultimate creditor
  - structured remittance info
  - dedicated tags for LEI and UETR
- Under the CPMI data requirements are a core set of messages and 12 basic requirements:
  - appropriate message for a particular business function
  - ISO 20022 externalized codes for payments and payment related processes
  - character set used for ISO 20022
  - common time convention across messages
  - unique end-to-end reference
  - transparency on amounts, FX and charges
  - unique account identifiers to the extent possible
  - identify all Fis involved in a standardized way(BIC or LEI
  - identify all entries and person involved in a structured way
  - common minimum level of postal address – structured
  - transport of customer remittance information across the entire chain by enabling structured or unstructured remittance information
- PDF report to the G20 entitled “Harmonized ISO 20022 data requirements for enhancing cross-border payments available online
- PDF available “Consideration for the use of Stablecoin Arrangements in Cross-Border Payments” through online search.
A working Example of ISO 20022:
- EVONIK and THEMIS, two European chemical companies, have an automated bidirectional invoice settlement and payment process. Components of the solution(architecture) are:
  - CORDA for security integration to their respective ERP systems through a standard information flow
  - Smart contract for payment after automatic validation of the order plus confirmation matching.
  - Nodes and wallets – payment absent any intermediary, cash on ledger
  - E-money by licensed PSP in Fiat money