What is ISO 20022?
ISO 20022 is an international standard designed to simplify global business communication.
The standard enables efficient payments clearing and settlement among financial institutions globally through the use of a common set of messages and language that the institutions agree to use in a consistent way. It allows participants and systems across different financial markets (e.g. payments, securities, foreign exchange, cards) to communicate using consistent terminology or syntax, which supports interoperability and more remittance information within the payment message. It is an open standard that anyone can use, and to which anyone can contribute.
The ISO 20022 standard was developed by ISO (International Organization for Standardization), which is the world’s largest developer of voluntary International Standards.
The ISO 20022 payment messages are managed on behalf of ISO by SWIFT (the Society for Worldwide Interbank Financial Telecommunication), through a common dictionary of terminology known as the Financial Repository.
For an overview of the ISO 20022 Standard, visit ISO20022.org or our ISO 20022 Resource Centre.
Why is Payments Canada implementing ISO 20022 in Canada?
Canada’s core payments infrastructure has supported our industry for decades with good performance and clearing and settlement cycles, but Canada’s economy is being reshaped by digital technology, changing user demands, new entrants and changing regulatory oversight. To address these shifting needs, Payments Canada – with the help of the industry – has launched a multi-year initiative to modernize the Canadian payments system, with ISO 20022 at its foundation for payment messaging.
By adopting ISO 20022, Canadian payments system users will benefit from:
- Enhanced Remittance data: ISO 20022 addresses the current need in Canada for more remittance information to support automated reconciliation and straight-through processing. That means more information – such as information from multiple invoices – can be sent with a single electronic payment, reducing the need for manual intervention and re-keying of data, making business processes more efficient.
- Support for global interoperability: Canada is joining numerous countries around the world in adopting ISO 20022 to facilitate cross-border payments, which will also support global competitiveness for Canadian businesses.
- Efficiencies in managing/supporting multiple payments standards: ISO 20022 allows the financial services industry in Canada to consolidate the current LVTS, AFT and EDI payment standards into a single, global standard. This will reduce the cost and effort associated with supporting multiple standards, support innovation, and enable third-party service providers and payments system users to receive and generate both payment and remittance data in a single message.
- Reduction in the use of paper-based payment options: ISO 20022 will provide Canadians with attractive electronic payment options that reduce costs (think fewer and fewer cheques or drafts) reduce inefficiencies over paper-based alternatives.
These improvements will support domestic commerce and strengthen Canada’s competitiveness as a trading nation. It will also create new opportunities for every financial institution, payment service provider and business in Canada.
Read why our Members, Stakeholders and Canadian Businesses support ISO 20022 on our ISO 20022 endorsements page.
What is enhanced remittance information?
Remittance information is supplied to enable the matching/reconciliation of a payments entry with the items that the payment is intended to settle, such as commercial invoices in an accounts' receivable system
Why is enhanced remittance data so important?
Today’s digital economy and the rise of electronic payments has created a need for more information to travel along with the payment message. And while our legacy systems serve us well, they lack the ability to provide the information users need, resulting in in barriers to end-to-end straight through processing - key to allowing Canadian businesses, governments and financial institutions to initiate, receive and reconcile electronic payments efficiently.
The exchange of more remittance information with payments offers the potential for:
- Straight Through Processing
- Automated reconciliation of incoming payments with outstanding invoices
- Easier payment tracking, issue resolution and system reconciliation for both customers and financial institutions
- Consistency in providing remittance information, resulting in efficiency and cost benefit
Why is Canada concerned with domestic and cross-border interoperability?
Standards play an important role in the development and facilitation of business through the promotion of safety, quality and technical compatibility. The standards currently relied upon for domestic payment traffic in Canada are not consistently applied by all financial institutions and businesses. The application of different standards results in inefficiencies in the marketplace and an inconsistent user experience. There are also some domestic standards that are not interoperable for cross-border transactions, requiring financial institutions and their customers to develop workaround solutions (such as message conversion or translation) to overcome these limitations.
The move to the ISO 20022 standard not only aligns domestic payment systems and addresses the needs of Canadian financial institutions and businesses, it also broadens interoperability of the Canadian payments marketplace with the rest of the world where ISO 20022 is increasingly being adopted.
Canadian financial institutions will be able leverage the initial investments in ISO 20022 as it is rolled out across global services and systems, enhancing or easing access to international markets and customers. At the same time, the use of a future oriented standard based on widely accepted and accessible technology can remove barriers to entry and create a healthy competitive environment.
How will ISO 20022 promote efficiencies in payments?
In today’s environment, financial institutions and their customers are required to manage payments standards for each of the existing payments systems, including AFT (also known as EFT), EDI and LVTS. Implementing and supporting these standards is costly. While all of the current standards carry the requisite information to ensure that the funds can move from one account to another, they use different formatting, terminology and technologies to describe specific data fields and to create the different messages.
Using a single standard decreases the complexity and cost associated with supporting multiple standards over time. It also provides more flexibility for customers when dealing with multiple financial institutions and lessens the need for customization and manual intervention.
Payments Canada & ISO 20022
What is Payments Canada’s role in ISO 20022 in Canada?
Payments Canada is leading the effort to introduce ISO 20022 for payments in Canada. It has defined new ISO 20022-based payment messages and rules to be used between its member financial institutions, and acts as the knowledge leader for ISO 20022 in Canada by providing resources and support with its participant financial institutions and stakeholders through education, training and operational support.
Payments Canada acts as the ongoing manager of the Canadian ISO 20022 standards and usage guidelines, while managing changes based on the needs of participant financial institutions and stakeholders. It will also actively support the adoption of ISO 20022 and communicate results to participant financial institutions and stakeholders on a regular basis.
How is Payments Canada leading the industry effort to implement ISO 20022?
In February, 2016, Payments Canada completed the multi-year development of new ISO 20022 payments messages, related rules and standards, and an adoption strategy for its participant financial institutions. This work involved extensive industry consultation to ensure the ISO 20022 Payments Standard is successful in meeting the needs of Canadians and payments system users.
The key deliverables from this first phase of work include:
- ISO 20022 messages for AFT, LVTS and EDI payments.
- A support structure for managing the standard on an ongoing basis.
- A communications strategy
- Payments Canada Rule amendments to accommodate ISO 20022.
- A comprehensive strategy for the adoption of ISO 20022 in Canada.
It also involved extensive industry consultation to ensure the ISO 20022 Payments Standard is successful in meeting the needs of Canadians and payments system users.
Going forward, the next phase of Payments Canada’s ISO 20022 initiative will focus on the multi-year task of implementing and supporting the new standard in Canada.
Key deliverables include the development of:
- Payments Canada’s ISO 20022 Resource Centre
- The launch and maintenance of ISO AFT payments messages for use and, for information purposes, ISO messages for EDI and LVTS payments
- Testing and Validation Services for use by Payments Canada Members.
How did Payments Canada consult payments system users?
Throughout the first phase of Payments Canada’s ISO 20022 Payments Standard Initiative, industry stakeholders were engaged through a variety of forums. Extensive outreach and consultation sessions were conducted to ensure that the approach, policies and strategy for adopting the ISO 20022 payments standard is successful in meeting the needs of Canadians and payments system users.
More specifically, outreach and consultation included:
- The development of the Payments Canada ISO 20022 Resource Centre.
- Conducting Targeted Consultation sessions with 24 Payments Canada Member and Stakeholder organizations.
- Hosting a Public Consultation to collect input on the proposed messages, policies and adoption strategy for ISO 20022-enabled AFT payments.
- Conducting a Survey of Corporate Stakeholders on the prevalence of ISO 20022 today, and their plans for ISO 20022 in the future.
- Inviting Indirect Clearers to participate in various consultation/education/plenary sessions.
- Featuring ISO 20022 as a key theme at Payments Panorama 2010, 2012, 2014 and 2016.
- Partnering with SWIFT to host ISO 20022 Standards workshops for Members, Stakeholders and Corporates.
- Participating in various speaking engagements and industry events, including the SWIFT Canadian Business Forum, SIBOS, NACHA Payments Conference, and more.
- Conducted research on the economic benefits of ISO 20022: Understanding the Economic Benefits of Adopting the ISO 20022 Payments Messaging Standard
I'm a Canadian business: What does ISO 20022 mean for me?
ISO 20022 will support efficiencies in business processes for business clients. Enhanced remittance data will support automated reconciliation and straight-through processing. That means more information – such as information from multiple invoices – can be sent with a single electronic payment, reducing the need for manual intervention and re-keying of data, making business processes more efficient.
ISO 20022 also allows the financial services industry in Canada to consolidate the current LVTS, AFT and EDI payment standards into a single, global standard. This will reduce the cost and effort associated with managing multiple payments standards, support innovation across the payments landscape, and enable third-party service providers and payments system users to receive and generate both payment and remittance data in a single message.
Multi-national corporations will also benefit from global interoperability as more and more jurisdictions are moving to the ISO 20022 Standard.
Business clients are encouraged to work with their financial institution and their business partners to determine how best to implement and take advantage of the benefits of ISO 20022 payments messages.
Payments Canada’s Strategy for ISO 20022 Adoption
What is Payments Canada’s Strategy for adoption of ISO 20022?
Payments Canada has published ISO 20022 messages and rules for the exchange of AFT payments between its participant financial institutions, based on a market driven approach. Payments Canada will monitor implementation rates to determine if a mandated end-date for ISO AFT adoption is required to ensure the industry transition to the new payments standard is completed in a timely manner.
Why AFT first and why a voluntary approach to adoption?
This approach addresses the primary need for significantly more remittance information to be accommodated in domestic payments in Canada and it minimizes adoption risk by allowing Members to move to the new standard when they are prepared to do so.
What other factors are influencing adoption of ISO 20022?
Adoption of ISO 20022 will be tightly integrated with the work of Payments Canada’s Modernization initiative, because the scope, timing and impact of this work may also impact strategic investment decisions, related to ISO 20022, by our participant financial institutions.
What do you mean by coexistence?
As participant financial institutions migrate to the new ISO 20022 messages, on a voluntary basis, they will be required to support and maintain the existing standard as well, during what is known as a coexistence period. Ideally, this period of time will be as short as possible to help participant financial institutions avoid unnecessary duplication of costs and effort required to support multiple standards.
ISO AFT Messages
Where can I find the Payments Canada’s ISO 20022 messages?
Payments Canada messages for ISO-enabled AFT messages can be found in the ISO 20022 Resource Centre. ISO 20022 messages for EDI and LVTS payments are also available for information.
Which ISO 20022 messages have been defined within Payments Canada’s portfolio?
In building the portfolio of Payments Canada ISO 20022 messages for AFT payments, Payments Canada began by mapping the current AFT standard to the relevant ISO 20022 formats as close to “like-for-like” or “equivalent” as possible, while also providing for the inclusion of optional structured and unstructured remittance information.
The breakdown of the Standard 005 Logical Records and the ISO 20022 messages formats that were mapped against them is available in the ISO 20022 Resource Centre.
How does Payments Canada manage the ISO 20022 payments messages?
Payments Canada has developed a comprehensive Standards Management Framework to support the maintenance and management of ISO 20022 messages. It includes processes to manage change and evolution within the messages, as well as incorporating new messages as required by Members and Stakeholders.
How will the new ISO 20022 payment messaging standards accommodate enhanced remittance data?
Through a mix of mandatory and optional data elements to be included in the payment messages. More information is available in the ISO 20022 Resource Centre.
Will there be any data elements that are mandatory for ISO 20022 payments that are not mandatory for today’s AFT, EDI or LVTS payments?
For the most part, there is no new mandatory information required to be generated by the payment originators once ISO 20022 is implemented. There are a few elements (e.g. transactional reference numbers and other technical information) that will be required for the inter-bank exchange of ISO 20022 payments.
What type of information is included in the remittance data?
You can find all of the information is included in Payments Canada’s remittance data on the ISO 20022 Resource Centre.