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Bob BlairExecutive Director, J.P.MorganVice-Convener, ISO 20022 RMG

June 2009

ISO 20022 Standards: Status, Adoption, Relevance to Asia Market Participants

Japan TC68

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Music Technology – The evolution

1880 1900 1920 1940 1960 1980 2000 2020

Phonograph 1887

Portable wind-up phonograph

1930

Cassette player 1962 Walkman

1979

iPod2001

iPhone2007

CD Player1982

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Financial Standards – The evolution

1880 1900 1920 1940 1960 1980 2000 2020

The Physical Age

The Digital Age

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What is driving the move to ISO 20022?

Globalization of economies and markets

New technologiesXML, SOA, web services

New initiativesGlobal harmonisation

Giovannini and SEPA in Europe

Market infrastructures

Automation in the ‘funds’ market

New playersCorporates, fund managers

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Standards

Require partnership and co-operation

Enable competition and differentiation

Require change, enhancement, replacement

Once invested in, it is often costly and difficult to incorporate new standards/changes to existing standards

Who cares about standards?No one…

Everyone!!!

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Agenda

ISO 20022Organization and Structure

Status as a Standard

Adoption

Resources

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ISO 20022 - Organization and Status

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Financial industry standards The current situation

Proprietary

FIX

SWIFT

FpML

Edifact

Domestic

?

?

?

?

?

?

?

US-Fedwire

US - NACHA

SG - IBG

KR - Hofinet

KR – IFT

JP - Zengin

UK-BACS

HK-CHATS

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ISO 20022The ISO recipe for all financial messages

ISO 20022, the recipe:

syntax neutral business modelling methodology

syntax specific design rules

industry led development/registration process

financial repository on www.iso20022.org

reverse engineering approach to ease coexistence

ISO 20022, a “universal” framework for financial services messaging standards

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Why ISO 20022?Better, cheaper, faster message standards…

Improve qualityFocus on end-to-end business requirements

Industry validation of requirements & solutions

Formal business modelling

Reduce development and implementation costs Decouple business and physical message standard

Reusable components

Use well-supported open standards (UML, XML)

Increase automation capabilities (“e-products”)

Facilitate interoperability (coexistence)

Improve time-to-marketAutomated generation of physical message standards

Faster implementation (“injection”)

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Why ISO 20022?The ISO 20022 value proposition

Objective

Enable communication interoperability between:Financial institutions

Market infrastructures and

End-user communities

Major obstacle

Numerous overlapping standardisation initiatives looking at XML financial messages:MDDL, FIX, FinXML, VRXML,

RIXML, XBRL, FpML, IFX, TWIST,

SWIFT, RosettaNet, OAGi,

ACORD, CIDX, etc.

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The ISO 20022 recipe - For whom?Potential users and developers

Communities of users seeking interoperability and more cost-effective communications

Message development organisations:

CBI Consortium, FIX, FinXML, VRXML, RIXML, FpML, IFX Forum, TWIST, SWIFT, RosettaNet, OAGi, ACORD, ISTH, XBRL, EPAS Consortium, etc.

Market Infrastructures (MIs):

DTCC, FED, EBA, Target, CLS, Euroclear, Omgeo, ECB/4CB, etc.

International or national standards setters:

ISITC, ISO TC68 WGs, UN/CEFACT TBG5, OMG, EPC, etc.

Catalysts for interoperability and convergence include SEPA, Giovannini, MiFID, e-Invoicing, Asia Market Harmonization

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The Community of ISO usersISO TC68 – Financial Services: 62 member countries

27 P-members TC68 SC2 SC4 SC7Australia X X X XAustria X X XBrazil X X Bulgaria X X X X Canada X X X China X X X XCzech Rep. X XDenmark X XFrance X X X XFinland X XGermany X X X X Hungary XItaly X X X XJapan X X X X Kenya X X X XKorea X X X X Luxembourg X X Netherlands X X X X Norway X X Portugal XSpain X South Africa X X X Sweden X X X X Switzerland X X X XTurkey X XUK X X X XUSA X X X X

35 O-members:Argentina Azerbaijan BarbadosBelarusChileColombiaCôte-d’IvoireCroatiaCubaEgyptGreeceHong KongIcelandIndiaIranIrelandJamaica

Countries - Active Countries - Observers

LithuaniaMalaysiaMaltaMauritiusMoldovaMongoliaMontenegroPakistanPhilippinesPolandRomaniaRussian FederationSerbiaSingaporeSlovakiaThailandTunisiaUkraine

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ISO 20022 Organization

ISO Technical Committee TC68Financial Services

ISO 20022RMG

SEGPayments

SEGSecurities

RA

SEGFX

RMG Members Nominated by P-member countries and A-liaison organisations

TSG & SEG Members Nominated by all member countries and liaison organisations

SC7Banking

SC4Securities

SC2Security WG4

ISO 20022 Review

SEGTrade Services

TSG

SEGCards

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The Community of ISO users

Bank Central Bank

Central Depository

Stock Exchange

Financial Institution

Fund Manager

Custodian

Corporate

Registrar

Broker

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Defining a CommunityCreating Value from Standards

The Local Community

BOJ, TBA, Zengin, etc.

Banks

Payment System Operators

CSDs

End Users

The Global Community

BOJ, EBA, FRB, Hofinet, CHATS, CHAPS, Zengin, Autopay, NACHA, etc.++

SWIFT, Domestic Clearings Globally

Banks

Payment System Operator

End Users

Our horizons bound our actions

Geography: Local, national, global

Domain: Payment, Securities, FX, Trade, Card…

Participants: Banks and Financial Institutions, Payment systems operators, CSDs…

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The ISO 20022 recipe is used!The message portfolio is growing199 (+ 1) messages approved (18 projects)77 (+ 73) candidate messages under evaluation (5 projects)14 (+ 2) development projects approved1 new Business justification (BJ) and 1 updated BJ

GlobalOverview

30 (+1) messages approved:Customer payment initiation (4 - ISTH)Interbank payment clearing and settlement (6 - SWIFT)Payments exceptions & investigations (17 - SWIFT)Bank-to-customer cash management (3 - ISTH)

4 candidate messages under review:E-mandates (4-SWIFT)

Approved BJs:Creditor payment activation request (CBI Consortium) Bank account management (SWIFT)Change/verify account identification (GUF)Cash management (SWIFT)

Pipeline:Cash in transit (NBN on behalf of BE, NL, LU, FI central banks)

Payments

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The ISO 20022 recipe is used!The message portfolio is growing

101 messages approvedInvestment funds distribution (67 - SWIFT)Securities transaction regulatory reporting (4 - SWIFT) Proxy voting (8 - SWIFT) Issuers’ agents communication (22 - Euroclear)

73 candidate messages under reviewFund Processing Passport report (2 - SWIFT)Securities settlement and reconciliation (29 - SWIFT)Securities corporate actions (13 - SWIFT)Securities pre-trade/trade (29 - SWIFT/FPL)

Approved BJs:Total portfolio valuation statement (ISITC)Securities post-trade (Omgeo/SWIFT)Securities registration and holder identification (Euroclear)Securities market claims and automatic transformation (Euroclear)Triparty collateral management (SWIFT)Securities issuance (Euroclear)Alternative funds (SWIFT)Settlement replace/modification & allegement response (SWIFT)Target2-Securities (SWIFT & Bundesbank on behalf of 4CB)

New BJs:CCP clearing (SWIFT)

Securities

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FX• 15 messages approved:– Forex notifications (15 – CLS)

• Pipeline:– Maintenance of Forex notifications & FX reverse engineering (CLS/SWIFT)

• 53 messages approved:– Invoice financing request (3 – CBI Consortium) – Trade services management (50 - SWIFT)

• Approved business justification: - E-invoice (UN/CEFACT/TBG5)• Pipeline:

– Commercial draft (PBOC)– Remittance advice (ISTH, UN/CEFACT/TBG5)

Trade Services

The ISO 20022 recipe is used!The message portfolio is growing

• Approved business justifications:– Card payments exchanges (EPAS Consortium)– ATM interface for transaction processing and

ATM management (IFX Forum)

• Pipeline: - ISO 8583 reverse engineering (TC68/SC7/WG9)

Cards & related retail financial services

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ISO 20022 - Preparing for Adoption

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ISO 20022 Adoption

Large infrastructure projects

T2 (live 2007)

SEPA (live Jan 2008)

IPF (Int’l Payments Framework)

Fed/TCH

HVPS (G10)

T2S (3CB+) and

CCBM2 (NBB and DNB)

Euroclear (single platform)

JASDEC / Zengin

DTCC

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ISO 20022 Adoption

Regulation and self-regulation

Giovannini barrier 1

Code of conduct (CCPs and post-trade)

LCH Clearnet

Regional drivers

Asia (China, Japan)

BRIC+ (Brazil, Russia)

Switzerland

Germany

South Africa

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Bank Central Bank

Central Depository

Stock Exchange

Financial Institution Fund

Manager

Custodian

Corporate

Registrar

Broker

ISO 20022 Adoption

Customer-driven initiativesCustodian and Investment Manager CUG in US

Corporates Microsoft, etc.

Implementation and usage guidelines

Funds (EU, UK communities, Singapore)

Other standardisersInvestment roadmap (FIX, FpML, ISITC)

XBRL

Parties adopting ISO 20022:SWIFT!

Banks, payment systems, CSDs,

central banks, corporates and

other end users …

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Planning for ISO 20022 Adoption

Community planningImpacted parties

Implications for adoption, defining the business case

Schedule

Cross reference documentsUS – Legacy Fedwire, NACHA to ISO 20022

SWIFT - MT to MX

Message Implementation GuidesDocumenting conventions for community

implementations

Common maps & other toolsCommon Maps - Establishing a common

framework

Translation services

When exactly?

Each with their own answer

Factors include:New standards requirements

E.g. cover payments

New functional requirementsE.g. Fedwire extended remittance

information

Core systems renewalReplacing existing system

addressing liquidity, other functions

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Payment messages set developed by CSTP/ISTH

Credit initiation

Debit initiation

Bank to corporate reporting.

Adopted by several vendors

Declared ISO 20022 the format set for SEPA by EPC

Piloted by corporates using SWIFT SCORE, by individual corporates and vendors beginning Fall 2007.

Corporates currently engaged include GE, Microsoft, Danone, Pfizer, Merck, Alcatel, SAP, IKEA, Shell, Eskom, Arcelor, Gaz de France, etc.

Banks currently engaged include ABN AMRO, BOA, HSBC, JPMC, BNP, Societe Generale, Barclays, RBC, ANZ, DB, Citi, Nordea

Payments Domain Case Study

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Payments Domain - Bank Status

WIPGlobalWIPEuropeBNP Paribas

WIPWIPWIPEuropeSociete Generale

WIPGlobalWIPEuropeNordea

GlobalGlobalWIPGlobalJPMorgan Chase

WIPGlobalWIPGlobal WIPHSBC

WIPGlobalGlobalGlobalDeutsche Bank

GlobalGlobalWIPGlobal WIPCitigroup

GlobalGlobalWIPGlobalBank of America

GlobalGlobalGlobalGlobalABN Amro

Cash

Mgmnt

Payment

Status

Direct

Debit

Credit

TransferBanks

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Payments Domain - Vendor Status

TBDTBDQ3 2009 SEPA Q4 2009 SEPAPeopleSoft Enterprise 8.8

TBDTBD2009 SEPA Q2 2008 SEPA JD Edwards Enterprise One all releases except Xe and ERP8

TBDTBD2009 SEPA Q2 2008 SEPA JD Edwards World

A9.1

TBDTBDQ3 2009 SEPA Q3 2009 SEPA PeopleSoft Enterprise 8.9

TBDQ4 2008Q3 2009 SEPA Q4 2008 SEPA PeopleSoft Enterprise 9.0

TBDTBD2009 SEPA Later 2008 SEPA Oracle EBS 12

TBDTBD2009 SEPA Q1 2008 SEPA Oracle Applications

Cash

Mgmnt

Payment

Status

Direct

Debit

Credit

TransferVendor Releases

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Payments Domain - Vendor Status

TBDGlobalGlobalGlobalWall Street

TBDGlobalSEPAGlobalSunGard Trax

TBDGlobalTBDSEPASAP ERP 6.0 (enhancement package 2)

TBDTBDTBDV1 Q4 2007 Microsoft Dynamics GP 10.0

Cash

Mgmnt

Payment

Status

Direct

Debit

Credit

TransferVendor Releases

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Financial Services Industry Messaging Standards

A basis for partnership

A framework for community

Providing a foundation for:

Realizing industry efficiencies

Enabling competition

Automating manual processes

Facilitating market harmonization and market access

Establishing a consistent language

Local participants access to global markets

Global market participants to local markets

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Standards – What’s next?

Technical developments

Interoperability and alternative syntax

Language and character set

Variants and Documentation - Message Usage Guides, Message Implementation Guides

Headers and transport standards (protocol, security)

Payment schema and external codes

Domain developments

Payments

Securities

Trade

FX

Cards

Standards strategy

Investment roadmap

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Resources

ISO20022.orgSchema, External Code Lists

Message Usage Guides, Models

Status Reports

Implementers/Participants WebsitesFederal Reserve Bank of New York

NACHA

Target

European Payments Council

SEPA Scheme RulebooksCredit Transfer:

http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=136

Direct Debit http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=180

SAP, JPMorgan, etc.

SWIFTSWIFT.com

swiftcommunity.net

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Questions?