Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada - Information Paper - SWIFT
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Information Paper
Adoption of ISO 20022 for Payments
and Extended Remittance Information
in Canada
January 20162
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Table of content
Background ...............................................................................................................3
Canada’s Existing National Payments Systems..........................................................4
Payments Remittance Process in Canada..................................................................5
ISO 20022 Global Payment Standard.........................................................................7
Expected Benefits of ISO 20022 and ERI Adoption for Canada..................................8
ISO 20022 Implementation Approach for Canada ......................................................9
SWIFT’s Role ...........................................................................................................11
Conclusion...............................................................................................................12
Appendix .................................................................................................................133
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Background
Global payments context respond to ever-changing market and
regulatory forces, the Canadian federal
Within the global payments market, there
government has provided clear direction
is a continued focus on regulatory and
for governance and oversight changes
supervisory demands for enhanced risk
and has highlighted the need to enhance
management, payments digitisation,
its payments systems.
globalisation, new industry participants,
operational efficiency and user Within the Canadian payments system,
expectations for fast, ubiquitous, value- key areas for change are the introduction
added services. of more robust data elements for
processes like automated reconciliation
Countries around the globe, including
between receipt / invoice remittance,
Canada, are bringing about reforms
modernising older infrastructure
to their payment systems in response
technologies and ensuring payment
to these market and regulatory forces,
messages use open, flexible standards.
which are shaping the global payments
landscape.
The purpose of this paper is to outline
Canada the adoption approach for the
Canada continues to play a prominent ISO 20022 standard within the
role in the world economy. It is currently Canadian payments landscape and, in
ranked 11th in terms of Gross Domestic particular, the importance of renewed
Product (GDP). Its nearest country messaging standards and Extended
‘peers’, with similar GDP, are Australia, Remittance Information (ERI) to CPA
Italy, India, South Korea and Russia. See members, stakeholders and users of
Figure 1.1 the payments system.
Canada’s payments ecosystem has
experienced forces similar to those
observed globally, but at a macro-
economic level, Canada’s performance
has been characterised by steady, stable
growth, over a sustained period.
The strength and maturity of the
Canadian economy and the position of
prominence is further underscored by a
high penetration of payment cards and
digitised transactions. Outpacing its
peers, Canada has one of the highest
take-up rates of electronic cards and
consumer payments, globally, behind only
to the U.S., Korea, Australia and Sweden.
See Figure 2.
To maintain this strong position and to
(1) All figures are available in the Appendix of this document on page 13.4
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Canada’s Existing National Payments Systems
The Canadian Payments Lower Value Retail Payments - Wire Payments - Large Value
Association (CPA) is one of Automated Clearing Settlement Transfer System (LVTS)
Canada’s main financial market System (ACSS) Launched in 1999, the Large Value
infrastructures for payments. It Launched in 1984, the Automated Clearing Transfer System (LVTS) is an electronic
underpins the whole Canadian Settlement System (ACSS) is a retail wire system that facilitates the transfer
payments system through which the vast of irrevocable higher value payments in
financial system and economy majority of lower value payment items are Canadian dollars, across the country.
by providing safe, efficient and cleared, in Canada.
effective clearing and settlement
of payments with its 115 ‘Direct LVTS Existing Message
ACSS Existing Electronic Standards
Clearing’ members.
Message Standards
Headquartered in Ottawa, the CPA was — LVTS uses SWIFT MT payments,
— Automated Funds Transfer (AFT) reporting and status messages
created as a ‘public purpose corporation’
uses CPA’s proprietary “standard
by the Canadian Payments Act2 in 1980. —T
he bulk of LVTS messages are MT
005” format for payments, reporting
It operates two national systems for the 103 for wire payments and MT 205
and status messages
clearing and settlement of payments: for FI to FI settlement
— Electronic Data Interchange (EDI)
—T
he Automated Clearing Settlement —A
ll LVTS messages are carried over
uses the ANSI x.12 standard for
System (ACSS), which clears low value, the SWIFT network
payments, reporting and status
high volume retail payments
messages
—T
he Large Value Transfer System (LVTS)
— All AFT and EDI messages are In terms of volume, LVTS settles nearly 8
wire transfer system, which settles high
exchanged over the CPA Services million payments per year, with steady
value (or urgent) low volume payments
Network growth. See Figure 4. In terms of value,
LVTS settles nearly CAD 40 trillion per
Defining Clearing vs year. In context, this is about 20 times the
In terms of volume, ACSS settles nearly 7
Settlement billion payments per year with modest, but countries’ annual GDP. In this regard,
— ‘Clearing’ means the process steady, growth. In terms of value, ACSS Canada’s settlement-to-GDP
of exchanging and reconciling clears about CAD 6 trillion per year. See performance is similar to its country peers.
payment information that results in Figure 3. See Figure 5.
a transfer of funds from one
financial institution to another
— ‘Settlement’ means the process
of adjusting financial positions of
individual financial institutions to
reflect the net amounts due to,
and from, them as a result of the
inter-member exchange of payment
items
(2) At the time of creation it was called Canadian Payments Association Act. It was renamed to Canadian Payments Act pursuant to legal changes in 2001.5
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Payments Remittance Process in Canada
Existing remittance process In commercial transactions, the payer length records to represent the movement
(debtor) sends the funds and the limited of funds between accounts, and transmit
Existing payment standards are limited
remittance information identifying the only the most essential of remittance
in the amount of remittance information
reason for payment, and subsequently information. See breakout box.
they can support. The inability to
receives an acknowledgement of
exchange remittance information is
viewed as an impediment to greater
payment. The payee (creditor) receives Canada’s Existing Remittance
the funds and the remittance information, Model
adoption of electronic payments. As a
and then acknowledges that the payment
result, businesses continue to rely on — ACSS allows a maximum of 34
has been made.
paper based payment methods, such characters of unformatted text to
as cheques3. The exchange of more Today, the process of reconciling represent remittance information, in
remittance information with payments incoming payments against an invoice Standard 005 format
offers the potential for the automated remains manual, time consuming and
prone to error. Bank cash management — LVTS allows a maximum of 140
reconciliation of incoming payments with
IT packages — the platform of choice characters of unformatted text to
outstanding invoices.
for processing wire payments — do not represent remittance information, in
operate with a single, industry standard SWIFT MT format
“The main drivers behind for sending and receiving this remittance — CPA clears 10,000 Business-
information, and each bank relies on non- to-Business and 15,000
CPA’s ISO 20022 initiative uniform and unstructured free-format text. Consumer-to-Business EDI
are to provide the Canadian payments per day
financial community with
“One of our company’s Faced with the lack of dedicated fields to
enhanced, more robust
biggest challenges is in place the data and limited tag options,
remittance data, to enhance users of these messages – especially the
supporting the high number
domestic and cross-border corporate banking segment – have either
of its customers who are adapted the payment to fit the message
interoperability, and
sending electronic payments format, or used free-format descriptive
increase efficiency. This text.
with separate remittance
will provide downstream The use of free-format, limited length text
data. Due to the variety
benefits for CPA’s members, to store an agreed reference identifier for
of formats and the lack of a payment can be effective for processing
stakeholders, and their
integration, it is currently a single invoice, but becomes increasingly
customers by reducing the complex when paying several invoices.
more efficient and requires
heavy reliance on integration,
less effort to process cheques
manual processes, and Approaches for an efficient
than Electronic Funds remittance process
multiple, disparate payment
Transfer (EFT) payments.”
standards.” Going forward, there are a number of
Jack Fucale, Senior Manager, Credit & Payment different approaches for ERI that can be
Mark Brule, Director, Payments Innovations at the Management, Canadian National Rail
CPA taken. See breakout box.
The remittance details should cover all
Across all markets, including Canada, the information required to automatically
because of the sheer scale of commercial reconcile the invoice, the transaction and
payments, there is a significant demand the receipt confirmation, but complexity
for automated reconciliation between the arises when a single payment covers
invoice order, the payment transaction several invoices, or contains credit notes
and the receipt confirmation, utilising or discounts, or does not cover the full
Extended Remittance Information (ERI). amount.
CPA’s existing low value payment
standards are over 30 years old and
are limited in the amount of remittance
information they can support. The existing
CPA legacy systems use concise, fixed-
(3) See research paper: https://www.cdnpay.ca/imis15/pdf/pdfs_publications/2016_11_17_Understanding_benefits_of_ISO.pdf6
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Extended Remittance
“Cross-border markets,
Information (ERI)
Approaches
needing to address the
There are three broad approaches for
lowest common denominator
implementing ERI: across the markets involved,
here the full remittance
1. W may benefit most from
information is carried with the a remittance model that
payment through the entire chain,
from payment initiation to final
separates the payment
reconciliation at the end-user. The and remittance messages,
remittance information can cover directing the parties to the
single or multiple invoices, on a
‘one-to-one’, ‘one-to-many’ or
specific locations for the
‘many-to-one’ basis. Provision can information.”
also include credits, discounts and Michael Knorr, Head of Payments & Liquidity Risk,
incomplete payments. Global Payment Services at Wells Fargo
here the structured remittance
2. W
information is separated from
the payment details, and
is delivered as a separate
message. In this model, the debtor
would include the required extended
remittance information in a separate
ERI message, and the payment
message would contain a unique
reference to the ERI message. The
creditor’s bank would reconcile
the payment with the separate ERI
message.
here the structured remittance
3. W
information is separated from
the payment details, and is
provided as a reference to a
separate data repository with a
unique ID. In this model, a unique
‘remittance creditor reference’ would
accompany the payment details
in the message from end-to-end.
The reference itself could be a URL
hyperlink to a repository, provided
by the debtor.7
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
ISO 20022 Global Payment Standard
Multiple Message Formats “The benefit of ISO 20022 is This makes it an ideal choice for local
markets as they upgrade their payments
In Canada, as is commonly seen across that you start with modelling infrastructure.
mature markets, multiple message the business, identifying
formats have been introduced and
implemented to meet particular payment all processes and data
needs at specific points in time. requirements. Once you “We took a business approach
Currently, ACSS payments use one have the business defined, to developing the remittance
message format for automated funds you then start to discuss the messages for ISO 20022.
transfers. High-value LVTS wire
communication flows, the We examined the payment
payments use another message format
and Electronic Data Interchange (EDI) messages and fields needed flows, and looked at business
information, used for business-to-
for information exchange. practices for the industry. For
business transactions and bill payments, example, the manufacturing
uses yet another message format. It is only at this lowest level
that any physical message industry has to address such
Given the changing needs of the
payments landscape in the digital age, formats are defined. With matters as damaged goods
these legacy formats lack the flexibility
ISO 20022, if the syntax and partially-filled orders. A
to adapt, lack the ability to support end- major challenge is how we
to-end Straight-Through Processing changes, the business model
(STP) and lack the ability to integrate and message layer do not electronically convey and then
with Enterprise Resource Planning (ERP)
change, and new messages track these items in financial
systems, such as SAP and Microsoft,
which reduce the need for manual can simply be generated messages. It’s important, as
intervention in the payment reconciliation using the new syntax.” industries such as ours, with
process.
Stephen Lindsay, Head of Standards at SWIFT
strict on-demand inventories,
have very aggressive credit
Emergence of ISO 20022 terms and these needed to
The uptake of ISO 20022 across major
However, over the last few years a single
infrastructure initiatives is growing rapidly.
be carefully tracked and
standard - ISO 20022 - has emerged as managed.”
Currently, there are over 200 major
the financial industry’s preferred standard
infrastructure initiatives around the world Rich Urban, President of the IFX Forum
for new initiatives. ISO 20022 includes
that have either implemented, or are
rich information that supports end-to-
planning to implement, ISO 20022. Of
end payments processing, as outlined in
these, many are payments initiatives, being
Figure 7.
driven by similar demands for automated
remittance reconciliation - see Figure 8.
“CGI was conscious of cross-
border trade while developing
“ISO 20022 provides rich
the payment messages. While
and granular remittance “More than 90% of all
some markets are more
information, and can also payments data elements
active than others, especially
cater for different models are already captured in
for direct debits and credit
of exchanging remittance the ISO 20022 Data
transfers, we harmonised the
information, either with Dictionary. For additional
templates with a global view.”
the payment or outside the local requirements, a formal Harri Rantanen, Co-Covenor of the Common
payment and referenced.” maintenance process has Global Implementation (CGI) and Manager,
Standards and Formats at SEB
Stephen Lindsay, Head of Standards at SWIFT been put in place.”
Stephen Lindsay, Head of Standards at SWIFT
As a result of the CPA research and
the emergence of this singular, global
ISO 20022 is rich, structured, extensible, standard, the adoption of ISO 20022 has
and can accommodate different become a foundational element of CPA’s
remittance approaches. payments modernisation plan.8
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Expected Benefits of ISO 20022 and
ERI Adoption for Canada
CPA Adoption of ISO 20022 to consolidate these formats into one ISO 20022 data, the risk associated with
and ERI global standard. This rationalisation, and manual processing and exception handling
the subsequent consolidation or retirement will be reduced, increasing operational
The CPA will adopt ISO 20022 and also of legacy applications required to support efficiency.
adopt ERI through a mix of mandatory multiple formats, will streamline back-office
and optional data elements that will be operations. The result will be simplified Better regulatory transparency – By
included in the payment messages. This integration, higher STP rates, lower automating the reconciliation of invoice /
optional remittance information can be operational and maintenance costs and payment remittance information through
populated as either structured information, reduced cost-per-transaction. ‘tagging’ of payments data, a bank will be
unstructured information, or as a unique more able to comply with domestic and
reference, indicating where the detailed Support for cross-border cross-border regulatory compliance and
remittance information can be retrieved. interoperability – Standards play an sanctions demands.
The proposed ERI data elements expected important role in the development and
to be supported by CPA are outlined in facilitation of business through the Better market efficiency – The increased
Figure 9. promotion of safety, quality and technical efficiency within domestic markets will
compatibility. The payment standards bring benefits to Small and Medium
relied upon for domestic traffic in Canada Businesses (SMBs) as they can more easily
Expected Benefits are not consistently applied by all financial integrate with their larger trading partners
The adoption of ISO 20022 and ERI institutions and businesses. The different and could take advantage of value-added
are both expected to promote the use application of the standard results in services, and deeper reach, offered by their
of digitised commercial payments, inefficiencies in the marketplace and agent banks.
with numerous specific benefits for the inconsistent user experience. Replacing
Canadian market. existing legacy systems and adopting Potential new value-added services –
a single, global standard that supports By adopting ISO 20022, Canadian financial
Canadian Dollar and multi-currency institutions are in a position to streamline
Automated reconciliation for payment transactions will increase domestic and the current suite of payment products
remittances – CPA’s adoption of cross-border settlement efficiency. With and potentially offer new value-added
ISO 20022 will introduce additional, as well the ever-increasing adoption of ISO 20022 services. For example, a bank with robust
as enriched, information to the payment worldwide, the adoption of the standard in cross-border trade finance activity may see
process. By using ISO 20022, the essential Canada will allow cross-border payments opportunities for real-time updates of credit
remittance data can be added to payment to be aligned with international standards, lines as a result of automated payment
message layouts as standardised fields. which increases Canada’s competitiveness flows.
The capability to establish automated as foreign players will no longer have
remittance reconciliation of payments ‘domestic proprietary formats’ as a barrier Faster time to market – The usage of
between debtors and creditors, across to entry. In addition, a single standard a common set of terminology, the cross-
accounts payable systems and accounts allows participants across different domain data consistency, the transparent
receivable systems, without manual financial market domains (payments, tagging and tracking of payments, the
intervention, leads to optimised cash flows, securities, foreign exchange and trade) to ‘openness’ of XML and the accessibility
improved financial forecasting, higher communicate consistently, which supports of integration tools all make interfacing
Straight-Through Processing (STP) rates interoperability and creates a healthy, payment messages with the corporate
as well as reduced exception handling and competitive environment. ERP systems, much simpler. This results in
reduced investigation time and operational reduced development and implementation
risk associated with manual errors. Better data integrity – Financial effort and reduced time to market.
Increased STP rates and lower operational institutions, which have an obligation
costs would ultimately reduce the cost- to deliver end-to-end finality of their
per-transaction. customers’ transactions, depend entirely “The design is intended to
Rationalisation of multiple formats –
on data integrity. However, the rigidity not only replace the current
of legacy Canadian formats causes
Currently, financial institutions are required data problems such as truncation and
payment schemas, but to also
to manage multiple payment formats misinterpretation of values in free- allow for new payment and
- ACSS AFT (Standard 005 format),
LVTS (MTxxx format) and EDI (ANSI x.12
format fields, with associated delays in remittance message types in
processing. With its comprehensive data
format). Implementing and supporting dictionary, extensibility and capacity for
the future.”
disparate formats is costly. Using a single message syntax validation, ISO 20022 Mark Brule, Director, Payments Innovations at the
standard decreases the complexity and addresses these data integrity issues. CPA
cost associated with supporting multiple Once applications have been redesigned
standards. ISO 20022 allows the industry to accept, reference, and pass on validated9
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
ISO 20022 Implementation Approach for Canada
Implementation approach Implementation considerations “As we make progress in
Implementation of CPA’s broader ISO In advance of full design and our drive to modernize the
20022 payments standard initiative is implementation timelines being payment system, we will
a complex, multi-year process, and established for changes to Canada’s
CPA will take a central role. During the core payments infrastructure, the CPA revisit our market driven
implementation, the CPA will: will launch a voluntary, market-driven adoption strategy for
adoption strategy for the new ISO 20022 ISO 20022 to determine the
— Be responsible for the design of the
enabled AFT message standard. This will
new ISO 20022 compliant payment most appropriate time to
enable early adopters to take advantage
messages that will be used between
its member financial institutions and,
of the benefits of the new standard. decommission Standard 005
optionally, by corporates Beginning in 2016, the CPA will publish and to set adoption timelines
the ISO 20022 message standards
— Act as the ongoing custodian of the
for AFT and provide supporting rule
for the remaining two
Canadian ISO 20022 standards and payments schemes—EDI
amendments and an operational support
usage guidelines, while managing
changes based on the needs of
structure to assist CPA member financial and LVTS.”
institutions that choose to adopt the new
members and stakeholders Mark Brule, Director, Payments Innovations at the
ISO 20022 messages. This operational CPA
— Act as the expert on ISO 20022 support structure will include a message
in Canada, by sharing knowledge testing service, dedicated CPA personnel
and support with its members and to assist in understanding the test results
stakeholders, through education and and an on-boarding process to facilitate
training successful implementation of ISO 20022 “While ‘big-bang’
The delivery of the project is separated into the clearing and settlement system. implementation can be the
into two distinct phases – the ‘design
phase’ and the ‘implementation phase’ –
right approach for RTGS
see breakout box. “As there is no single projects, a phased approach
remittance format in place with scaled adoption
Phase 1 – Design today, it’s ‘the sooner the has been put forward
By the end of Phase 1, currently
scheduled to be completed in 2016,
better’ for Corporate Canada for retail-based payment
the CPA will deliver: to implement and adopt the initiatives. Based on our
— ISO 20022 message standards new standard.” experience with ISO 20022
for AFT payments, for use by its Jack Fucale, Senior Manager, Credit & Payment implementation projects in
members Management, Canadian National Rail
many markets, SWIFT can
— ISO 20022 message standards
for LVTS wire payments, and EDI
provide a range of conversion
During the early stages of adoption, the options. This allows the
payments, for use at a later date
CPA will monitor industry progress against
— Canadian ISO-AFT Rule target milestones for adoption and will market to evolve at its own
amendments communicate progress regularly. pace – migration tools for the
— An operational framework that early adopters, and shielding
manages and supports the
standard on an ongoing basis
for those institutions that
want to wait.”
— Ongoing outreach and
communications with members and Juliette Kennel, Head of Market Infrastructures at
SWIFT
stakeholders
— An adoption strategy for ISO-AFT
based on a market-driven approach
Phase 2 – Implementation
Phase 2 will focus on the multi-year
task of implementing the new standard
in Canada.10
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Community support
SWIFT Implementation
For Canadian corporates and financial
institutions, there will be associated costs Support Tools for ISO 20022
in adopting and implementing MyStandards – A collaborative web
ISO 20022 for payments. Investments will platform that helps customers manage
span additional resources, new hardware, global standards and ensure that their
and software changes needed to ensure internal specifications and guidelines
that the enterprise architecture adheres are in line with market practice. It is
to the new ISO 20022 data model and used to create, maintain, document,
the implementation rules for the new publish, share, compare and consume
remittance information. ISO 20022 and significantly reduces
Throughout the initiative, the CPA will implementation costs and effort and
continue to actively support the Canadian drives community-wide harmonisation.
community to help minimise design MyStandards Readiness Portal
and implementation efforts and ensure – An extension of MyStandards that
collaborative buy-in. allows publishers of specifications,
such as market infrastructures, to offer
Design support a web-based testing service to their
CPA will facilitate the design process customer community. The service
by readily sharing business, functional validates test messages against
and technical design information with ISO 20022 usage guidelines
impacted corporates and financial streamlining the on-boarding and
institutions through a centralised platform, testing of new customers and reducing
e.g. project charter and goals, project time and cost.
plans and milestones, data models,
new vs legacy data element mapping,
business process flows, usage guidelines
and detailed specifications.
“A major component of
In addition, the CPA will support
the implementation process
impacted firms with the qualitative and should be a clear and
quantitative advantages gained from consistent communication
enriched remittance data, the advantages
of consolidating of the current legacy
from the CPA and its
payments systems and the reduced member banks, including the
expense of manual reconciliation. migration status for other
major corporates.”
Implementation support
Jack Fucale, Senior Manager, Credit & Payment
XML, ISO 20022’s underlying flexible Management, Canadian National Rail
modelling syntax, has become widely
recognised by application providers.
As such, commercial conversion tools,
validation tools and testing portals,
migration utilities and integration tools
are readily available in the marketplace.
SWIFT has two specific tools that support
ISO 20022 implementation projects. See
breakout box.11
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
SWIFT’s Role
SWIFT supports its customer
community by standardising financial ISO 20022 Harmonisation
transactions, thereby lowering costs, Charter
reducing operational risk and eliminating
inefficiencies from operations. It also The Harmonisation Charter is based
acts as the catalyst that brings the on four principles:
financial community together to work 1. Share information between financial
collaboratively on shaping market practice market infrastructures about
and defining standards. ISO 20022 usage
SWIFT has a wealth of ISO 20022 2. Adhere to global market practice
experience, having delivered 100+ where it exists, and contribute to
standards consulting projects, supporting new global market practice initiatives
several hundred clients across multiple
3. Introduce stricter message version
geographies. SWIFT has packaged this
control and release management
deep expertise into a unique combination
process and timing
of specialised tools, products and
services that share best practice, increase 4. Publish up-to-date information
automation and drive efficiencies, about standards on a common
providing a one-stop-shop for all platform (MyStandards), including
ISO 20022-related requirements. market practice compliance,
messages and versions used and
For ISO 20022, SWIFT is driving the
message release timeline
industry towards a more harmonised
and consistent use of the standard, per
market segment. SWIFT is collaborating For Canada, SWIFT is supporting the
with market infrastructures to ensure CPA and Canadian community with
a cost-effective and seamless move standards mapping, market practice
to ISO 20022 through the ISO 20022 definition and deep experience with
Harmonisation Charter (see breakout ISO 20022 adoption projects.
box). With the plethora of market
infrastructure initiatives and flexibility
of the standard, the Charter sets out
a number of principles aimed to avoid
fragmentation and the risk of multiple
ISO 20022 versions being adopted
across the different markets. The
principles of this Charter are formally
endorsed by the Bank of Canada and by
the CPA.12 Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada Conclusion The adoption of ISO 20022 by major markets around the world demonstrates that it is the strategic direction for payments globally. Financial institutions and their corporate clients in the Canadian market not only have the opportunity to design an efficient payment messaging format for domestic needs, but to actively participate in the evolution of the global standard. The adoption of ISO 20002 and the implementation of Extended Remittance Information across the Canadian payments landscape are expected to support domestic commerce, strengthen Canada’s competitiveness as a trading nation and create new opportunities for financial institutions, payment service providers and business in Canada. The CPA, supported by SWIFT, the Payments Market Practice Group (PMPG) and other industry best practice organisations are in a position to deliver these benefits for Canadian firms.
13
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Appendix
25.000
16.768
25.000
Country Gross Domestic Product (USD billions)
9.185 16.768
Country Gross Domestic Product (USD billions)
9.185
4.918
3.7304.918
3.730
2.806 2.684
2.8062.242
2.684
2.500 2.098 2.071
2.242
2.500 1.930
2.098 2.071
1.9301.863
1.863
1.494
1.494
1.304
1.304 1.2611.261
853 823
853748823
650 748
579
650
525
579
525
351
298
274
250
351
298
274
United States
China
Japan
Germany
France
BrazilKingdom
Brazil
Russia
Italy
India
Canada Canada
Australia
Korea
Korea Mexico
Netherlands
Turkey
Saudi Arabia
Switzerland
Saudi ArabiaSweden
SwitzerlandBelgium
South Africa
Singapore
Hong Kong
250
United States
China
Japan
Germany
France
United Kingdom
Russia
Italy
India
Australia
Mexico
Netherlands
Turkey
Sweden
Belgium
South Africa
Singapore
Hong Kong
United
Figure 1 - Canadian Peer Ranking by Country Gross Domestic Product (GDP) - USD billions for 2013
200.000
US
268.3
200.000
Number of Card Transactions (millions)
20.000
UK
181.1 US China
Korea Japan Brazil
268.3 9.5
228.5
Canada France
136.7 49.9 India
224.8 70.2
5.9
Australia
Russia
228.5
Germany 31.9
Turkey
Netherlands 44.7
Sweden 41.9
169.5
249.8
20.000 2.000 Italy
29.9 UK
Mexico China
Saudi Arabia South Africa 181.1
14.6
56.6
Korea
30.6 Japan Brazil
Belgium 9.5
228.5
119.5 Canada France
136.7 49.9 India
Switzerland 224.8 70.2
5.9
89.2 Australia
Singapore Russia
228.5
94.3
Germany 31.9
200 Turkey
Netherlands 44.7
2
Sweden 20 41.9 200 2.000
169.5
Country Population (millions)
2.000 249.8 Italy
29.9
Figure 2 - Canadian Peer Ranking by Consumer Cards (size of bubble = numberMexico
of transactions per person for 2013)
Saudi Arabia South Africa 14.6
56.6 30.6
Belgium
119.5200
200
2 20 200 2.000
2 20 200 2.000
Country Population (millions)
14 Country Population (millions)
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
7,3 $6,4
7,3 $6,4
$6,2
$6,2
7,1 $6,2
7,1 Volume (billions) $6,2
Volume (billions)
Value (CAD trillions)
Value (CAD trillions) $6,0
$6,0
6,9 $6,0
6,9 $6,0
$5,8 6,8
$5,8 1.5%
6,7 1.5% 6,8 $5,8
trillions)
6,7 $5,8
(billions)
trillions)
6,7
(billions)
6,7
3.1%
(CAD
3.1%
(CAD
Volume
6,5 $5,6
Volume
6,5 $5,5 $5,6
Value
6,5
$5,5
Value
6,5
Payment
3.2%
Payment
Payment
3.2%
Payment
6,3 $5,4
6,3 $5,4
6,3
Annual
6,3
Annual
Annual
$5,2
Annual
$5,2 5.0%
6,1 5.0% $5,2
6,1 $5,2
6,0
5,9 6,0 $5,0
5,9 $5,0
5,7 $4,8
5,7 $4,8
5,5 $4,6
5,5 $4,6
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Figure 3 – Canadian Retail Payments - Automated Clearing Settlement System (ACSS)
9,0 $42,0
9,0 $42,0
Volume (millions)
Volume (millions)
Value (CAD trillions) $39,6
Value (CAD trillions) $39,6 $40,0
8,5 $40,0
8,5 $38,7
$38,2 $38,7
$37,7 $38,2
$37,6
$37,7 $37,6 $38,0
$38,0
8,0
8,0
7,9 $36,0
3.9% 7,9 $36,0
trillions)
3.9%
(millions)
trillions)
(millions)
7,5 7,6
7,5 7,6 $34,0
(CAD
$34,0
(CAD
Volume
8.6%
Volume
8.6%
Value
Value
7,0 $32,0
Payment
7,0 $32,0
Payment
Payment
7,0
Payment
7,0
6.1%
6.1%
Annual
$30,0
Annual
Annual
$30,0
Annual
6,5 6,6
6,5 6,6
10.0%
10.0% $28,0
$28,0
6,0
6,0 6,0
6,0 $26,0
$26,0
5,5
5,5 $24,0
$24,0
5,0 $22,0
5,0 $22,0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Figure 4 – Canadian Wire Payments - Large Value Transfer System (LVTS)15
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
$1,000,000
US FedWire
42.5
DE-TARGET2 CN-HVPS
79.8 36.2
US CHIPS
Annual Transaction Value (USD billions)
JP-BOJ NET 22.7
59.4
BR-STR
48.8
FR-TARGET2
41.4
$100,000 NL-TARGET2
107.7
UK-CHAPS
40.8
KR-BOK WIRE+ IT-TARGET2
40.4 24.0
CA-LVT
HK-CHATS RMB 19.6 JP-ZENGIN
53.0
AU-RITS 5.9
25.4
BE-TARGET2 TR-EFT1
40.9 27.1 MX-SPEI
12.9
SA-SARIE RU-BESP
19.5 7.6
SE-RIX IN-RTGS
29.7 6.5
$10,000
$500 $5,000 $50,000
Country GDP (USD Billions)
Figure 5 – Canada’s Payment Settlement vs GDP Performance (bubble size = ratio of payment transaction value vs GDP in 2013)
Payments Oversight and Governance in Canada
—C
PA’s Board of Directors is comprised — CPA administers the daily system
of 7 independent directors, 5 member operations and develops, implements,
directors and the CPA’s President and and updates the rules and standards
CEO, and participating CPA members that govern the clearing and
fund the operating costs settlement of payments between its
members
—L
egal foundation for payments
systems operations is provided in the — Bank of Canada is responsible for
CPA By-laws and in the Payments oversight, monitoring the flow of
Clearing and Settlement Act (PCSA) payments through the systems
and the settlement positions of the
participants at all times. Overall
oversight is undertaken by the
Canadian Minister of Finance
Figure 6 – Payments Oversight and Governance in Canada16
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Explaining ISO 20022
— ISO 20022 is a financial messaging — All ISO 20022 data elements are — For the reconciliation of invoice /
standard developed by the bundled into structured messages receipt, ISO 20022 supports all
International Organisation for with additional rules that provide necessary remittance data fields
Standardisation (ISO), a worldwide guidance on usage and interpretation, and remittance models (one-to-one,
federation of National Standards set by industry market practice one-to-many, many-to-one and
Bodies, and was first introduced in groups. Each message has many-to-many) and implementation
2004. It is open to everyone, not specifically defined functions and models (carry with the payment, refer
controlled by a single interest. definitions, enabling automated to an external repository).
field and syntax validation, and
— Utilising eXtensible Mark-up — The remittance information also
avoiding the non-validation and
Language (XML) syntax, ISO 20022 allows financial institutions to meet
misinterpretation associated with
uses a flexible modelling methodology regulatory payment ‘screening’
free-format fields.
to address financial messaging requirements, such as sanction lists
requirements. — ISO 20022 is not just a repository of and Anti-Money Laundering (AML).
standardised financial messages but
— ISO 20022 uses a central repository — Is supported by modern, mainstream
also a method in which to develop
of globally-agreed business terms technology that facilitates efficient
standards.
that has evolved into a common integration and allows for easy data
global reference for the financial — For payments, ISO 20022 takes consumption as its underlying syntax
industry. It has already been applied into account the end-to-end data is based on structured XML.
to many financial processing areas, requirements of various stakeholders,
including trade finance, securities including corporations, vendors,
settlement, corporate actions, banks and clearing and settlement
payments, remittance, and regulatory systems.
reporting.
Figure 7 – Explaining ISO 2002217
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
ISO 20022-based Payment Remittance Initiatives in Other Markets
— SEPA - Supported by the European as a trading partner’s or third-Party template. This template contains the
Payments Council (EPC), the solution provider’s web site, where lowest common denominators for
goal of the Single Euro Payments the remittance information can be making a valid payment, and allows
Association (SEPA) is to harmonise found. for additional data elements to be
customer credit transfers and passed between those banks and
— United States - In the U.S.,
direct debits across 37 disparate corporations that agree to support
the Federal Reserve and the
EU communities. The EPC has such a service. The initiative extends
National Automated Clearing
developed SEPA payment schemes beyond corporations and banks to
House Association (NACHA) have
described in the SEPA Credit Transfer include application vendors, service
conducted quantitative surveys to
(SCT) and SEPA Direct Debit (SDD) providers, and market infrastructure
consider changes to their respective
Rulebooks, using ISO 20022. The organisations.
payments systems in the U.S.
SCT schema supports the end-to- corporate marketplace. Similar to — SCORE - The SWIFT for Corporates
end carrying of optional remittance Canada, the studies revealed an (SCORE) initiative harmonises the
data in a structured or unstructured increased demand for additional implementation approach for large
format, depending upon the specific structured remittance data to corporates for implementing ISO
requirements as an ‘Additional enable more efficient processing 20022 payments. SCORE aligns with
Optional Service’ (AOS) that can be and automated reconciliation. As CGI for both payments and additional
offered as a value-added service by a result, the Fedwire System and remittance elements. In addition, the
participant banks. It is estimated that CHIPS introduced enhanced International Payments Framework
more than 500 individuals and over messaging layouts based on ISO Association (IPFA) interlinks
20 million corporations, as well as 20022. In addition to containing all Automated Clearing Houses (ACHs)
European public authorities can make necessary data fields for payment across the world for cross-border
and receive euro payments through and settlement, the new messages ACH payments, using ISO 20022
SEPA. include remittance elements to as common standard for mapping
— Finland - Finland has completed explain the purpose of the payment. inbound and outbound traffic.
an ISO 20022 payments initiative, Based on customer requirements,
ACH Finland as a SEPA-compliant a participating institution can
Clearing and Settlements Mechanism choose from three methods of
(CSM). ACH Finland now supports transferring remittance information
the SEPA SCT schemes, including to their customers, ‘unstructured’
the data formats which are based on (which allows originators to send
ISO 20022 messages standard. ACH beneficiaries a block of up to 9,000
Finland also supports the optional characters of remittance data in a
remittance data used to provide specified format supplied by the
structured remittance information originator), ‘related’ (which contains
for such processes as bundling of a reference in the CTP to where the
invoices and credit notes. extended remittance information can
be found, such as a URL address), or
— IFX Forum - The International
‘structured’ (which allows originators
Financial eXchange (IFX) Forum is an
to include the remittance data in pre-
organisation comprised of leading
defined fields in the CTP messages).
financial institutions, service providers,
and software vendors dedicated to — CGI - In response to demands from
developing a messaging standard corporates, the Common Global
for financial services. In April 2014, Implementation (CGI) initiative,
the IFX Forum submitted two new seeks to agree on a common
messages to ISO for inclusion in ISO implementation of ISO 20022 in the
20022. The ‘Remittance Advice’ corporate-to-bank payment cycle,
message contains key elements in order to simplify implementation
pertaining to an associated payment, for corporate users, and to promote
including discounts, disputed wider acceptance of ISO 20022. CGI
amounts and invoice details. The has examined the underlying local
‘Remittance Location Advice’ market requirements and created a
message specifies the location, such CGI-MP (Market Practice) message
Figure 8 – ISO 20022-based Payment Remittance Initiatives in Other Markets18
Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
Mandatory Payment Data Required for all payments
Elements Similar to CPA Standard
005
plus optional
and Unstructured Remittance One repetition of 140 characters
/ or Data Good for Business-to-Consumer (B2C) payments
and Structured Up to 100,000 repetitions
/ or Remittance Data Good for Business-to-Business (B2B) payments
Referred Document Info Type, Number, Date
Referred Document Due Payable, Discount, Credit
Amount Note, Tax, Adjustment, Remitted
Creditor Reference
Type, Reference
Information
Name, Address, ID, Country,
Invoicer
Contact
Name, Address, ID, Country,
Invoicee
Contact
Additional Remittance
420 Characters, Unstructured
Info
and Related One repetition. Good for supplying remittance
/ or Remittance Data data outside payment transaction
Remittance Identification
Remittance Location
EDI, e-mail, Fax, URI/URL
Method
2048 characters (alphanumeric)
Remittance Location
for electronic address (email or
Electronic Address
URL)
Figure 9 – ERI data elements expected to be supported by CPA19 Adoption of ISO 20022 for Payments and Extended Remittance Information in Canada
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