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Streamlining Electronic Payments & Cash Management Using ISO 20022 XML Version 3

In April last year, version 3 of the ISO 20022 XML payment initiation message was published – 30 months after the version 2 publication, back in October 2006. Whilst this new version offers enhanced functionality around central bank and withholding tax reporting, it also addresses a number of gaps that have been highlighted during the plethora of customer implementations around the world. This new version looks like it could actually replace the previous global industry standard message – the UN/CEFACT D96A PAYMUL1 – in terms of message stability, usage and most importantly longevity.


Since June 2003, there has been much talk and indeed action, around the need for a single global multi-banking financial messaging standard that ultimately removes the current ‘lock-in’ or ‘stickiness’ typically provided by proprietary banking technology. Corporates are understandably demanding open standards and, based on the experience of version 2 early adopters, a new ‘inclusive’ group has been formed to take the original harmonisation effort one step further. The CGIWG – Common Global Implementation Working Group was formed in October this year and includes active participants from the key stakeholder groups – the banks, vendors, corporates and of course, the standards bodies. The objective is to establish a common global implementation of the version 3 message that includes specific in-country requirements, like the location of the BACS Originator Identification Number (OIN) required for UK ACH2 payments and the Listed Company Code for Taiwan. The group has also agreed to a common set of error codes, which means that the participant banks will report the same error code for the same type of error condition. This unique level of alignment will allow a corporate to simplify its internal multi-banking logic and allow vendors to build improved functionality on the back of this new ‘harmonised’ world.


I have been actively involved in the evolution of the ISO 20022 XML messaging standards since the start in June 2003 and the most popular question I hear from both corporates and banks is around the reasons for adoption. There are lots of people that consider ISO 20022 XML is just a format, like D96A PAYMUL and SAP IDOC, but it actually offers so much more, and the following points hopefully demonstrate some of the key reasons behind the significant interest in adoption that we are now witnessing.


  • Simplified Business Rules: The original model for implementing a file format, like D96A PAYMUL, was for the bank to confirm what information was required to make a particular payment in each country and, most importantly, that only this information could be provided. This approach meant the corporate had to build a layer of business rules to filter data contained in the master vendor record – rules that would be bespoke to each bank and which added a layer of cost to payments process. Under ISO 20022 XML, the mindset has changed and these business rules now sit at a receiving bank level, therefore removing this layer of cost.
  • Data Overpopulation: Closely linked with the first point, data overpopulation allows you to effectively provide your master vendor record data within the ISO 20022 XML messaging format, so that the banks can filter the data required in order to process the payment instruction. This unique concept also allows you to build a single common messaging template with agreement from participant banks that they will ignore data that is not actually required as part of their own internal payment processing.
  • Portability and Reduced Integration Costs: As the participating banks are working towards supporting a vanilla implementation, this provides the unique opportunity to finally have a plug and play financial message that removes a common barrier to changing or adding banks – the high cost of integration. With a plug and play message, it is much easier and quicker to change or add additional cash management banking partners – something that is becoming increasingly important in the current climate with counter party risk acknowledged as a very real concern.
  • Improved Operational and Financial Efficiencies: ISO 20022 XML allows simplification through standardisation. There is a golden opportunity to streamline internal processes, improve monitoring and controls and increase visibility to optimise the use of all balances.
  • Vendor Support: SAP, along with other key vendors, are interested in improving the speed of implementation within their own applications so that their customers ultimately have the opportunity for a plug and play implementation.


Whilst the CGIWG is working hard to define the country level rules, the commitment and appetite to succeed is clear. The future is ISO 20022 XML and the future is now.




  • 1. UN/CEFACT D96A PAYMUL is the global industry standard payment message defined by UN/CEFACT. Whilst the underlying PAYMUL is updated on an annual basis, the industry has remained on the D96A version.
  • 2. ACH stands for Automated Clearing House and is typically used to define a bulk payments clearing system.
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