Improving the Bottom Line

Improving the Bottom Line

ISO 20022 meets key corporate expectations

10 November 11

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Integration of systems for electronic data delivery generates cost benefits

The International Organization for Standardization (ISO) is a global organisation of national standards bodies. ISO 20022, the universal financial industry message scheme, aims to give the financial industry a standard platform for the development of messages in one eXtensible Markup Language (XML) rule. According to ISO, this is achieved using:

  • A modelling methodology (based on Unified Modeling Language (UML)) to capture in a syntax-independent way financial business areas, business transactions and associated message flows.
  • A set of XML design rules to convert the messages described in UML into XML schemas.

ISO catalogues all of the ISO 20022 messages on its website (, in an effort to provide what it describes as a "flexible framework", open for developers to categorise types of messages according to a universally accepted approach. This is certainly something that both corporates and banks are becoming involved with, because of the cost benefits achieved by integrating systems for electronic data delivery. The ISO 20022 message standards are globally supported based on the efforts of organisations such as SWIFT and major cash management banks to ensure locally developed EDI-based standards are upgraded to the XML-based ISO 20022 design.

The ISO 20022 corporate experience in

Despite its international nature, ISO 20022 adoption is finding particular support within the Single Euro Payments Area ( ). The Data Formats are a valid subset of the global ISO 20022 message standards.

Dr Markus Warncke, head of corporate finance at Villeroy & Boch, outlined this in a presentation he gave at SIBOS, the annual gathering of professionals active in payments, last year. Warncke used the subset of ISO 20022 because it's best practice in Europe, in his opinion. "We wanted to implement a standard that we can use Europe-wide but that also gives us the possibility to go global in the second step," explains Warncke. He believes that ISO 20022 can be a profitable standard to use, as it makes it possible to avoid the daily use of various domestic formats in the euro countries, thereby reducing complexity and increasing efficiency.

"We had many cash management banks before where we did a lot of payments transactions and we usually used their electronic banking systems. All the multiple systems had various security steps, which added to the complexity. We use a dual verification principle that was enforced by passwords, smartcards, tokens and even diskettes in some systems. Now we have a set of homogenous security standards and don't have to maintain all these types of programmes," Warncke points out. This highlights the advantage that his company has found through standardisation. By using the subset of ISO 20022, Villeroy & Boch could achieve the following:

  • Provision of a wider set of structured and enhanced message information along with the transaction, thereby raising the efficiency in end-to-end automation
  • Reduce application development times
  • Decrease number and complexity of interfaces
  • Reduce support and maintenance costs by avoiding customised or proprietary formats
  • Increase security
  • Optimise processes

Villeroy & Boch tested its first ISO 20022 FileAct payments in August 2008 and, at the time of SIBOS in September 2008, the company had 90 per cent of its supplier payments executed through SWIFT with a format. Looking to the future, Warncke said: "Now we will turn our attention to non-euro payments - starting with the US dollar. And by the end of 2009, we will have the Direct Debit format ready." This example highlights how treasurers around the world, not just in the euro area, can make the case for ISO 20022 and the bottom line value it can add to corporates who adopt it.

Support in the ISO 20022 implementation process

As already mentioned, standardised messaging affords corporates the chance to replace numerous domestic formats with a single ISO 20022-based standard. This makes the communication process with payments counterparties easier and allows integration with internal systems. Elie Lasker, senior market manager at SWIFT*, points out that the number of corporates using ISO 20022 is increasing (on, and outside of, the SWIFT network) for sending payments to their different banks. "Going forward, SWIFT is focussed on assisting its corporate customers and banks in further adopting ISO 20022," explains Lasker. SWIFT is one of a number of companies and associations that are actively involved in developing and advocating payments standards.

ISO 20022 responds to key corporate requirements

As a universal payments standard, ISO 20022 helps automate payment data flows by using a wider collection of enhanced and structured message information, avoiding proprietary formats. This makes processes more efficient, helps reduce application development times, optimises the number of interfaces required and enhances security. All of these benefits can have a positive effect on the bottom line of corporates and financial institutions, which should give ISO 20022 the impetus to continue expanding its take-up and evolving as the global payments standard.

Ben Poole is the editor of gtnews.

This article is an excerpt from the Summer 2009 issue of Global Treasury Briefing. Global Treasury Briefing is the quarterly journal from the publishers of It is essential reading for anyone who needs to keep up with the latest thinking in the treasury profession around the world. Available in print and electronic versions, Global Treasury Briefing brings 24 pages of comprehensive, practical and authoritative analysis and advice about the challenges facing the treasury profession globally. It includes content on the full range of subjects covered on gtnews, such as cash management, the financial supply chain and risk management, and is delivered directly to you, anywhere in the world. To subscribe for your copy every quarter, please visit:

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Shortcut to the SEPA Data Format

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  * SWIFT's role is two-fold. It provides the proprietary communications platform, products and services that allow its customers to connect and exchange financial information securely and reliably. It also acts as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest. SWIFT has its headquarters in Belgium and has offices in the world's major financial centres and developing markets. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an on-going basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity.

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