ISO20222 and Straight through processing (STP)

The main benefit of ISO20022 rests on the fact that it will allow higher STP throughput. Let’s peel this onion a little bit.

What we know:

-The ISO 20022 standard defines a methodology for the development of financial message standards.

- It relies on UML3 (Unified Modeling Language) models representing financial business processes, flows and transactions in a neutral notation.

-These business transaction models are then subsequently converted into physical messages in the desired syntax, like XML (eXtensible Mark-up Language).

- ISO 20022 defines the methodology for encapsulation business transactions and the data dictionary that is required to support those transactions. For example, a financial message can be completely compliant with ISO 20022 but be expressed as fixed width record layouts or API-based constructs such as JSON.

 

So what?

UML offers a standard way to visualize a system’s architectural blueprints and associated components like actors and activities.

What it means is:

-Take a business process such as a payment or securities instruction between parties.

-Break it down into the flow of information between the parties and/or systems (the actors)

-Think of an instruction sent (an activity), followed by status updates, a notification of settlement and a final end-of-day statement.

-Next,  break down into the components that define the information required, for example what is a currency, what is an account, etc.

Conclusion:

The result of the exercise is that you end up with a “Repository” of base business definitions that underpin all compliant messages that adhere to the standard. The advantage of this is that anyone who wants to create a compliant message is at liberty to call the elements what they like, but by linking them to the base types in the repository you can be sure that all parties involved in the processing of the message will have a common understanding of what a currency or account is and what its format is. This represents a major building block for effective inter-organization STP (Straight-Through-Processing) of information.

References:

www.volantetech.com