23 September 2017
Paul Miserez

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Paul Miserez - SWIFT

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Standards Forum

The Standards Forum is the place where business and standardisation meet. This group would like to facilitate and encourage dialogue around standardisation in the financial industry, and share views, insights and updates on how financial standards can contribute to reducing cost and increasing efficiency when tackling today's challenges such as automation, compliance, and regulation.

ISO 20022 as innovation enabler

22 August 2017  |  4110 views  |  0

At the occasion of the 2017 Standards Forum to be held at Sibos in Toronto, Canada from 16 to 19 October, I interviewed a number of SWIFT standards experts about the content of this year's programme. During the coming weeks, my posts will offer readers a sneak-preview of what people can expect to hear about in Toronto.

In this post, I interviewed Patrik Neutjens, Head of Community Engagement, and Alexandre Petre, ISO 20022 Business Manager, about the role of ISO 20022 as innovation enabler. Additionally, as many people are already aware, Jean-Marie Eloy, Head of ISO 20022 Registration Authority (outgoing), will retire from his ISO 20022 Registration Management Group (RMG) and Registration Authority (RA) responsibilities on 1 December 2017 to go on a well-deserved retirement. I thought you would like to hear from Jean-Marie and from his successor Karin De Ridder, Head of ISO 20022 Registration Authority (incoming).

Paul Miserez: Patrik, in what ways can ISO 20022 act as an innovation enabler?

Patrik Neutjens: ISO 20022 is not only a financial messaging standard, but also a business model. Through the growing adoption of ISO 20022 for financial messaging, this model is becoming increasingly used by Market Infrastructures (MIs), Financial Institutions (FIs) and commercial solution providers in this space. As such, ISO 20022 will facilitate and enable the uptake of new technologies in the financial industry, as its business model will be applied to block-chain as well as API-based solutions.

Miserez: Which ISO 20022 implementation strategy turned out to be the most popular one so far and why? What lessons can we draw from this?

Neutjens: Our recently published Information Paper on "ISO20022 Implementation Strategies" (July 2017) covers the different combinations of implementation approaches and options extensively. It shows that every single implementation option can be the best choice, depending on the context and the parameters of each specific MI ecosystem. Some prefer an intermediate 'like-for-like' adoption step; others want to enable all new benefits and possibilities from the start. The different MI use cases that are part of the Information Paper also show how and why different approaches make sense, based on circumstances and end-goal. Really interesting stuff! [makes the thumbs up sign]

Miserez: How will implementation strategies in the many-to-many space be different from the many-to-one space, and why?

Neutjens: If and when ISO 20022 adoption becomes a requirement in the many-to-many space, similar considerations will need to provide for different adoption approaches as well; the additional 'complication' in this space is that messages flow between a large number of parties, and therefore it is important to know who is capable of processing ISO 20022 messages. That is, as long as they coexist in the same space with FIN or other proprietary standards.

Miserez: Does the increasing focus on compliance and regulation have an impact on ISO 20022 adoption and harmonisation efforts?

Neutjens: It is clear that compliance requirements as well as regulatory obligations are mandatory and have to be complied with by all financial players involved. Many of these requirements are related to providing additional information and data in transactions, as well as making sure that all parties in a transaction can be fully identified. ISO 20022 messaging is very flexible and caters for these evolving requirements quite efficiently, and therefore is more and more used in the regulatory space. This will ultimately also have an influence on the harmonisation efforts, as the interoperability between all links in the financial value chain is of critical importance, and this is part of the harmonisation goal.

Miserez: Alex, are the trends that became visible last year being confirmed? Are MIs still driving ISO 20022 adoption? What about FIs?

Alexandre Petre: Indeed, the number of MIs committing to adopt ISO 20022 is constantly growing across all business areas. Some of the world's largest High-Value Payments (HVP) MIs and Securities MIs (SMIs) have shown great commitment. Then there are the benefits ISO 20022 brings in the compliance space. All this combined makes that large FIs are supportive. After all, they are most impacted! As more and more MI "nodes" will be ISO 20022-enabled, we expect FIs to have increasing requirements about extending ISO 20022 capabilities to other business segments to obtain further interoperability benefits.

Miserez: Can you please give an update of the current status of ISO 20022 adoption and harmonisation?

Petre: The fact that adoption is currently being driven by MIs means that the foundation for an end-to-end adoption of ISO 20022 is being laid as we speak. As I mentioned before, some of the world's largest HVP MIs (Fed, TCH, T2 and CHAPS) have committed to adopt ISO 20022 between 2020 and 2022. Twelve real-time gross settlement (RTGS) systems are already live, thirteen are in the planning stage and fourteen others are investigating to adopt ISO 20022. A large share of the low-value payments traffic is ISO 20022-enabled thanks to the EU's Single Euro Payments Area (SEPA) regulation. ISO 20022 has also become the de-facto standard for real-time retail payment systems worldwide. On the securities side, T2S is live at near full speed. Another twenty-nine Central Securities Depositories (CSDs) and Central Counterparties (CCPs) are using ISO 20022 in live mode for one of their business streams, with more to add in the future.

Regarding harmonisation then, Financial MIs (FMIs) increasingly endorse SWIFT's ISO 20022 Harmonisation Charter. Twenty-five FMIs already endorsed the charter. Another eleven support the principles of the ISO 20022 harmonisation framework. Together, these thirty-six FMIs are geographically spread between the Americas, EMEA and Asia-Pacific regions; they cover Securities, Payments and FX business areas.

Miserez: Moving over to you now Jean-Marie! When did your involvement in ISO start? Looking back at your extensive participation in ISO, what were the main milestones and achievements you witnessed?

Jean-Marie Eloy: I got involved in ISO in 1984 as Euroclear representative. That was also when I joined ISO TC68/SC4/WG2, the second working group created by SC4 - Securities. This WG2 was finalising ISO 7775, the first standard for securities messages. The group functioned as the ISO working group and, at the same time, it was the first SWIFT Securities Working Group (SWG). The SWIFT representatives in the group were Sandy Bleich and Charles Welham. Unfortunately, I joined WG2 too late to be able to introduce proper settlement messages for the International Central Securities Depositories (ICSDs) within the ISO 7775 series. Hence, it is after the publication of ISO 7775 that I defined the MT 580 (Instruction to an International Clearing System) with the help of Julian Presber, then at SWIFT. The MT 580 was part of SWIIFT's Category 5 messages, but not part of ISO 7775.

To avoid such issues from re-occurring, I proposed ISO/SC4 to develop a new ISO standard that would define the method to build securities messages based on a Data Field Dictionary, maintained by a Registration Authority (RA), but to keep the messages themselves outside of the standard. This was to allow any organisation to use a common "toolkit" to develop standard messages. SC4 agreed with the proposal and I introduced a New Work Item Proposal (NWIP) with a draft describing the basic principles of what became the ISO 15022 standard. In 1994, upon the request of the former SC4 chairman, I accepted to become the chairman of SC4 and did this for three years. ISO 15022 was defined by SC4/WG7 with the strong support of SWIFT (Peter Guldentops and... Karin De Ridder). ISO 15022 was published in 1999: SWIFT was appointed the RA and I was appointed convenor of the ISO 15022 RMG.

SWIFT then contacted me suggesting to enhance the ISO 15022 standard by introducing business modelling and the XML syntax. I initiated the proposal for a second edition of ISO 15022 to SC4, which created a new WG10 for this purpose in 2000. In September that year I joined SWIFT. WG10 had over fifty members and spent about four years – strongly supported by SWIFT – to develop what became the first edition of ISO 20022, issued in 2004. SWIFT was appointed ISO 20022 RA and hosted the kick-off meeting of the RMG and the first Standards Evaluation Groups (SEGs) in 2005.

Miserez: How did the work of the ISO 20022 RA change over time?

Eloy: At the beginning, the RA management took about 25% of my time. That grew to 50% in 2010. Today, we have an RA team of three full-time people and the support of a development team.

Over the years, the RA had to go through a series of obstacles. The most important one was probably the resources spent by SWIFT to support the RA, which SWIFT had proposed to cap to three FTEs per year. This has been a matter of discussion within the RMG, SWIFT management and SWIFT Board for many years. It culminated in 2011, when ISO required the revision of the RA contract with ISO, including the RA cost recovery mechanism. A specific RMG subgroup met for two years to discuss the best possible ways of getting revenues to subsidise the RA costs in case they would have exceeded three FTEs!

The "Chinese wall" between the RA and SWIFT has also been a challenge, forcing us to send two representatives to RMG meetings – an RA representative and a SWIFT representative. In 2010, an important conflict arose in the ISO 20022 RMG because the RA had consulted the SWIFT PMWG (instead of the Payments SEG) to assess how to best eliminate the BEI codes in messages, to be replaced by BIC codes.

The decision process in the RMG has often required long negotiations such as for the adoption of alternative syntaxes, of the Business Application Header (BAH), of message extensions, variants, minor versions and more recently, APIs and JSON syntax.

During the last years, many of these problems have disappeared. The cap of three FTEs per year has been withdrawn by SWIFT, the governance structure of the ISO 20022 registration bodies has been completely reviewed, which simplified the life of the RA.

Miserez: Do you want to share any anecdotes from your collaboration with ISO?

Eloy: Certainly! And there are two that immediately spring to mind. When ISO 20022 was approved by SC4 in 2004, I proposed to move the standard under TC68, because the scope of ISO 20022 was no longer securities only. This was approved during the 2004 yearly meeting of SC4 and TC68 hosted by SWIFT. It is during the discussion about the promotion of ISO 20022 to TC68, that I emphasised that TC68 had only, at the time, a subcommittee for Security and Operations (SC2), one for Securities (SC4) and one for Cards and retail banking (SC6), but not for wholesale banking, FX and Trade finance. This led to the creation of SC7 – Core Banking, which held its inaugural meeting at SWIFT in 2005.

And here is another one. Initially, ISO 20022 was called the 'second edition of ISO 15022'. When I proposed to use this new edition for payments messages as well, it is Yves Gailly (BNP Paribas and then chair of UN/CEFACT/TBG5 – Finance) who advised to change the name of the standard because the banking community would never adopt a standard that had been developed by and for the securities industry. I contacted Sophie Clivio (then Technical Program Manager for TC68) at the ISO Central Secretariat and asked if we could have another standard number, but not too different from "15022" to keep the momentum of the securities industry. We were given "20022"... The moniker "UNIversal Financial Industry message scheme" (UNIFI) (proposed by Alex Kech of SWIFT) was created for the same purpose, but everybody just continued using the name "ISO 20022"...

Miserez: Do you have any message for Karin, who is taking over the bat from you?

Eloy: I'm confident that Karin's takeover will be very smooth. She has been involved in ISO and RA matters since the nineties. She is well known in the ISO community. Karin is also well-versed in the ISO processes as well as in the governance and, sometimes, political intricacies of ISO committees and 20022 groups. We also had the opportunity to manage the RA together during the last year.

Miserez: Karin, in what way will Jean-Marie's accomplishments be an inspiration for you?

Karin De Ridder: As Jean-Marie indicated, we met back in 1997 when I started to get involved in ISO TC 68/SC 4 WG 7, the group that was responsible to draft the ISO 15022 standard. 1997 was also the year in which I joined SWIFT Standards from Euroclear. Indeed, Jean-Marie and myself both have a Euroclear past! [smiles]

Miserez: Did you continue to work with ISO after joining SWIFT?

De Ridder: At SWIFT, my responsibilities always had something to do with ISO, although sometimes from a distance. Last year, I worked in closer cooperation with the ISO 20022 RA, together with Jean-Marie and the team. Of course I will do my utmost to keep up the high standard of work that Jean-Marie displayed during all the years he was in charge. It will not be easy follow in the footsteps of someone who has such a wealth of knowledge. I would like to take this opportunity to thank Jean-Marie for all his efforts and dedication, and to wish him well in his retirement and future projects.

Please also read the other 2017 Sibos Standards Forum interviews:

1. Highlights and approach of the 2017 Sibos Standards Forum 

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