ISO 20022 is a universal messaging scheme for the financial services industry. It is an international standard designed to simplify financial communication by allowing information to be processed in a clear and consistent manner. ISO 20022 is comprised of metadata and uses a universal dictionary to identify different terms used when processing financial transactions.
With the grown of Internet Protocol (IP) interactions and the general increase in electronic communications, there became a need to standardize financial messaging across the board. Without such standardization, the transmission of uncoordinated eXtensible Mark-up Language (XML) messaging made it challenging for firms to identify and effectively utilize financial models.
Within the ISO 20022 dictionary, terms are organized by their “business area codes.” Some examples include: “camt” for cash management, “Sese” for securities settlement and “pacs” for payments clearing and settlement.
Other functions supported by ISO 20022 include payments, such as bank account management and direct debt mandate management. These messages can be transmitted between banks or between banks and customers. ISO 20002 also supports the processing of investment funds, corporate actions, reconciliation and settlement, among others.
ISO 20022 uses unified modeling language (UML) to describe business transactions. The business transactions can be converted into physical message in the desired syntax, which is typically XML. These outputs are then stored in a repository managed by a registration authority. The repository currently contains hundreds of message definitions.
The ISO 20022 standard was established by the international organization for standardization (ISO), within the Technical Committee TC68. ISO 2002 is a free and open standard, and can be used publicly all over the globe.
If a firm wants to use the ISO 20022 standard, a business justification proposal must be submitted to the ISO 20022 Registration Management group (RMG).
Other widely used standards include the FIX protocol for electronic trading and XBRL, a widely used variant of XML.
To hear from three of the leading banks deployed on the ISO 20022 Pilot Project, attend the FTF 6th Annual Corporate Actions Processing conference in New York City on Oct. 3, 2012.