ISO20022 Archives - Payment Topics

What is ISO 20022?

ISO 20022 logo

ISO 20022 is a common language and model for financial messages across the world.

It covers five financial areas:

Payments
Securities
Trade services
Cards
FX (Foreign Exchanges).

More information can be found here

A key part of the SEPA is the use of the ISO 20022 messaging standard using XML during payment processing.

The ISO 20022 payments standard will apply to domestic, ACH, high value and cross-border payments and by 2025 it will be the universal standard for high value payment systems of all reserve currencies.

The standard breaks down to the following areas:

Account Management (acmt)
Cash Management (camt)
Payments clearing and settlement (pacs)
Payment initiation (pain)

Over 70 countries have adopted the standard including Japan, China, and India. Currently over 200 payment types are supported. This facilitates harmonisation between different payment methods and systems around the world.

Messages are available within the standard for the complete end-to-end payments chain: customer to bank (payment), bank to bank (payment clearing and settlement) and reporting (cash management).

Advantages of ISO 20022

Improved Straight through processing rates through the use of common language and format among payment systems.
Facilitates better analytics. This leads to better AML more effective claims and investigations.
More enriched data should lead to improved understanding of customer needs and new sources of revenue such as Request to Pay.
Supports a much larger character set than that of MT messages. This is very important in countries such as China.
Greater protection against Anti Money Laundering (AML) and other financial crimes.

What is its relationship to SEPA?

All banks operating within the Single Euro Payments Area must adhere to the SEPA payment standard which conforms to the ISO 20022 standard. All SEPA payment messages are compliant with ISO 20022. However SEPA payment messages will be more restrictive in applicable business rules than their ISO 20022 counterparts.

What is the difference between ISO 15022 and ISO 20022?

ISO 15022 is an ISO standard for securities messaging used in transactions between financial institutions across the SWIFT network. ISO 20022 will replace the ISO 15022 standard.

How is the ISO 20022 standard defined?

The financial industry uses different terms and different message formats across to describe payment processes. This leads to barriers in facilitating payment integration. ISO 20022 aims to define common payment business processes and consistent message standards to ensure financial institutions have a common understanding of payment information exchanged. The ISO 20022 standard is defined as individual 3 layers:

Business Concepts
Logical models
Syntax

Business Concepts

The ISO 20022 standard is defined using a business model which describes the roles, actors and processes that make up the flow of payment information. This business model will define concepts such as debtor, creditor, debtor agent, creditor agent, credit transfer and direct debit.

Logical Models

The logical model describes all of the parts needed to perform a business activity such as a credit transfer. Its independent of syntax. The following diagram shows a simplified data model for a subset of the CreditTransferTransactionInformation.

Syntax

To generate the physical syntax, we use the logical model. The physical syntax of ISO 20022 is XML. An example of XML syntax within ISO 20022 is the pain.001 XML message.

The dictionary defines all the terms used in ISO 20022. This removes any ambiguity to the different terms used in the payments industry.

Pain.008 Message

The Pain.008 message initiates a direct debit and is part of the ISO-20022 message format. It is used to request single or bulk collection(s) of funds from one or various debtor’s account(s) for a creditor. It is sent by the initiating party to the forwarding agent or
creditor agent.

Pain.008 is the initiation message for the SDD message flow. You can download the Pain.008 Message Definition Report and XML Schema from here.

Pain.008 will contain one or more direct debit instructions.

Building blocks of Pain.008

GroupHeader

A Pain.008 will contain a GroupHeader which contains the common characteristics of all individual transactions included in the message.

The GroupHeader contains the following elements:

Message Identification – unique identifier for the message
Creation Date and Time – message creation date and time
Number of Transactions – total number of individual payment transactions
Control Sum – sum of control amounts of all the transactions within the message
Initiating Party – initiating party that initiated the payment transaction
Batch Booking – indicates whether the payments in the message should be booked as a batch or individually.
Payment Category Purpose – category of the payment transactions

PaymentInformation

A Pain.008 will contain a PaymentInformation block which provides information on individual payment transactions within the message.

The PaymentInformation element will contain the following elements:

Payment Information Identification – unique identifier for the payment information
Payment Method – payment execution method i,e direct debit.
Payment Type Information – provides additional details about the type of payment
Requested Execution Date – provides requested date for the payment transaction execution.
Debtor – party initiating the payment
Creditor – party receiving the payment
Amount – currency and monetary value of the transaction
Remittance Information – provides additional information related to the payment

Pacs.003 Message

The creditor agent sends the Pacs.003 message to the debtor agent, either directly or through other agents and/or a payment clearing and settlement system.

The Pacs.003 is a financial institution to financial institution customer direct debit message. It can contain 1 or many customer direct debit instructions.

A creditor bank will initiate the Pacs.003 in response to a Pain.008 direct debit initiation request to collect funds from a debtor account for a creditor. You can find the XML Schema and Message Definition Report here.

The Pacs.003 will contain:

GroupHeader

All transactions in the message share a set of common elements within the GroupHeader. It will contain the following elements:

Message Identification – A unique identifier assigned to the entire group of payment cancellations within the message
Creation Date and Time – Date and time of the creation of the payment cancellation message
Number of Transactions – The total count of payment cancellation instructions included in the group
Original Group Identification – The identification of the original group of payment instructions to which the cancellation instructions belong. It links the cancellation instructions to the original payment instructions
Original Message Identification: The identification of the original payment instruction within the original group to be cancelled. It specifies the specific payment instruction targeted for cancellation

DirectDebitTransactionInformation

The DirectDebitTransactionInformation will contain information about each direct debit transaction.

Mandate Identification: A unique identifier assigned to the direct debit mandate authorizing the payment that is being canceled.
Creditor Scheme Identification: Specifies the scheme or system used for the direct debit payment
Original Debtor Account: Debtor account which the original direct debit payment debited
Original Creditor Account: Creditor account which the original direct debit payment credited.
Original Payment Information: The cancellation of the original direct debit payment includes the payment amount, payment date, and any additional payment details.
Cancellation Status: Indicates the status of the cancellation instruction, such as accepted, rejected, or pending
Cancellation Reason Information: Provides additional details or reasons for the cancellation status

SEPA Credit Transfer Overview

A SEPA Credit Transfer (SCT) is a payment instrument which facilitates the transfer of funds from the sending or originating bank to the receiving or beneficiary bank.

They generally used for once off payments and clear within a day. To send/receive a SEPA Credit Transfer, the originating and beneficiary banks must be SEPA participants.

Debtors and creditors use SCT Transfers conducted in Euro currency, which include IBANs and BICs for identification.

A SEPA Credit Transfer(SCT) involves the exchange of a number of messages between a debtor, their bank, the clearing and settlement (CSM) exchange and the beneficiary bank.

The SCT relies on 4 actors:

Originator, i.e the person making the payment
Originating bank, i.e the bank which contains the account of the originator
Beneficiary, i.e. the person receiving the payment
Beneficiary bank, i.e the bank which contains the account of the beneficiary

The originator and beneficiary use different ISO 20022 messages to initiate and complete the credit transfer. These messages are categorised as follows:

Payment Initiation (Pain). Sent/received between the customer and their respective banks.
Payment Clearing and Settlement (Pacs). Sent/received between the originating/beneficiary banks and the CSM.
Cash Management (Camt). Sent to the originator/beneficiary to inform them of their account balances as a result of payment transaction.

Pacs.008 Message

The Pacs.008 message belongs to the Payment Clearing and Settlement family of messages. The Pacs messages are used within the bank to bank interface.

Pacs.008 is sent by the debtor agent to the creditor agent, directly or through other agents and/or a payment clearing and settlement system. It is used to move funds from a debtor account to a creditor account.

The actual movement of funds will only happen after the clearing and settlement process. Each pacs.008 will have a settlement date which is the date when the transfer will take place.

The XML Schema and Message Definition Report can be found here.

Building blocks of Pacs.008 Message

The Pacs.008 message comprises of 3 blocks:

GroupHeader – contain all the common characteristics of all transactions contained within the Pacs.008.
CreditTransferTransactionInformation – set of elements providing information specific to the individual credit transfer(s).
SupplementaryData – contains additional information that cannot be captured in CreditTransferTransactionInformation or GroupHeader blocks.

Pain.001 Message

Overview

The Pain.001 message is initiates a SEPA Credit Transfer. It is sent by an initiating party to the debtor/forwarding agent to request the transfer of money from debtor to creditor. It is the initiation message for the SCT flow.

Like all, ISO-20022 messages, Pain.001 is specified in XML.

The XML Schema and Message Definition Report can be downloaded here.

The Message Definition Report will additionally specify business rules governing the relationships between elements in the pain.001.

Pain.001 will contain one or more credit transfer instructions.

Building blocks of Pain.001 message

GroupHeader

The GroupHeader block will contain all the common characteristics of all transactions contained within the Pain.001.

The most elements within the GroupHeader are:

MsgId – This is a unique identifier identifying all payments within the message.
CreDtTm – this indicates the creation date and time of the message.
NbOfTxs – this indicates the number of transactions contained within the message.

PaymentInformation

The PaymentInformation block will contain all the common characteristics that apply to the debit side of the payment transactions included in the credit transfer

The PaymentInformation block will contain information such as:

Debtor Agent – contains information about the financial agent acting on behalf of the debtor
Creditor Agent – contains information about the financial agent acting on behalf of the creditor.
Amount – specifies the value of this payment.
Payment Identification – unique identifier used to identify the payment transaction.
Remittance Information – contains additional information regarding the purpose of the payment
Payment Method – indicates the payment type such as Credit transfer or direct debit.
Payment Type Information – provides details about the purpose of the payment

SupplementaryData

The supplementary data element contains additional information not captured in PaymentInformation or GroupHeader blocks. It can include non-standardised information related to the payment.

SEPA Credit Transfer in Detail

When a SEPA Credit Transfer the originator exchanges a series of messages with the beneficiary through the originating and beneficiary bank and CSM.

The following diagram indicates this flow of messages.

Customer to Bank Messages (PAIN)

A customer will send Payment initiation (Pain) message(s) to their bank to initiate a payment. Pain messages are customer to bank messages.

Message	Description
pain.001	This is the payment initiation message. Used to initiate the credit transfer. For more information see here
pain.002	This message is used to inform a customer whether their transaction was successful or not. For more information see here

Cash Management Messages (CAMT)

Customers receive their cash management reports from banks using the Cash Management (CAMT) family of messages.

Message	Description
Camt.052	This message is the account report. It used to inform the customer of their account balances after a transaction.
Camt.053	This message serves as the account statement. Additionally, it will include an opening and closing balance, along with the details of processed transactions. For more information see here
Camt.054	This message is used to inform a customer about a debit or credit on their account. For more information see here
Camt.056	This message is used by the originator bank to recall an SCT. For more information see here
Camt.029	This message is used by the beneficiary bank to inform the originator bank that their request to recall the SCT has been denied. For more information see here

Interbank Messages (PACS)

Banks use Payment and Clearing messages (PACS) to settle and clear funds.

Message	Description
Pacs.008	This message facilitates the movement of funds from the originating bank to the beneficiary bank. For more information please see here
Pacs.002	This message represents a payment status report message. For more information please see here
Pacs.004	This message is used to undo a payment that has already been settled. It is issued by the beneficiary bank. In general, there are a number of reasons for this to occur, such as the account being previously closed at the beneficiary bank. Moreover, this message is also utilized to indicate that a recalled SCT has been successful.

Pain.002 Message

The Pain.002 message is a status message and is part of the Payment Initiation family of messages within ISO 20022.

It is sent by an instructed agent to the previous party in the payment chain. It is used to inform the party about the success/failure of payment request.

The definition of the pain.002 schema and its message definition report can be found here

Building blocks of Pain.002

GroupHeader – contains all the common characteristics of all transactions contained within the Pain.002. The GroupHeader will contain the following elements:

Message Id: A unique identifier assigned to the message group or batch.
Creation Date and Time: The date and time when the message was created.
Number of Transactions: The total count of individual transactions included in the message.
Initiating Party: Information about the party initiating the message such as their name, address, and account details.
Message Id of the original Pain.001 Message: If the pain.002 message is a response to a pain.001 message, it may contain the message identification of the original pain.001 message to which it refers.

OriginalGroupInformationAndStatus – Original group information concerning the group of transactions, to which the status report message refers to. The OriginalGroupInformationAndStatus will contain the following elements:

Original Message Identification: The unique identifier assigned to the original message.
Original Creation Date and Time: The date and time when the original message.
Number of Transactions: The total count of individual transactions included in the original message.
Initiating Party: Information about the party who initiated the original message, such as their name, address, and account details.
Original Message Name Identification: The identification of the original message, such as pain.001, camt.056, or other relevant message types.

OriginalPaymentInformationAndStatus – Information concerning the original payment information, to which the status report message refers.

Original Payment Information: Includes details about the original payment, such as the payment amount, currency, payment date, payment method, and other relevant payment-related information.
Payment Status: Indicates the status of the original payment, providing information on whether the payment was successfully processed, partially processed, or rejected.
Transaction Information: Provides additional details about the specific transaction within the original payment, such as a unique identifier for the transaction, the debtor and creditor involved, and any related payment references.

Pacs.002 Message

The Pacs.002 message is a payment status report message used in ISO 20022. It is sent by an instructed agent to the previous party in the payment chain indicating the status of the payment instruction. It will indicate whether a payment was successful or not.

The Pacs.002 can provide status information on:

Credit Transfer instruction
Direct Debit instruction
Cancellation requests.

The XML Schema and Message Definition Report for Pacs.002 can be downloaded from here.

Building blocks of Pacs.002 Message

GroupHeader

Set of characteristics shared by all transactions in the status report. The GroupHeader contains the following elements:

Message Identification: A unique identifier assigned to the message group or batch for tracking and referencing purposes.
Creation Date and Time: The date and time when the message group or batch was created.
Number of Transactions: The total count of individual transactions included in the message group or batch
Initiating Party: Information about the party initiating the message group or batch, such as their name, address, and account details.
Message Identification of the original pacs.008 message

OriginalGroupInformationAndStatus

Original group information concerning the group of transactions, to which the status report message refers to. It contains the following elements:

Original Message Identification: The unique identifier assigned to the original message.
Original Creation Date and Time: The date and time when the original message was created.
Number of Transactions: The total count of individual transactions included in the original message.
Original Initiating Party: Information about the party who initiated the original message group or batch, such as their name, address, and account details.
Original Message Name Identification: The identification of the original message, such as pacs.008 or other relevant message types.
Status: The status of the original message indicating whether it was successfully processed, partially processed, or encountered any errors or rejections.

TransactionInformationAndStatus

Information concerning the original transactions, to which the status report message refers. It contains the following elements:

Transaction Identification: A unique identifier assigned to the transaction.
Payment Information: Details about the payment, such as the payment amount, currency, payment date, and other relevant payment-related information.
Status: The status of the transaction, indicating whether it was successfully processed, partially processed, or encountered any errors or rejections.
Status Reason Information: Additional information regarding the status of the transaction, providing more context or explanation for the status code or status description.