Building ISO 20022 Payment Framework in R12

Ravikanth Prabhu, PMP

Broadridge Financial Solutions, Inc.

Abstract:

ISO 20022 Payment Framework provides a great opportunity to build Global Payment Process with
embedded Local requirements. This paper shares implementation and design considerations for building and
standardizing payments using ISO 20022 compliant XSL Payment Template. It also shares our company's
implementation experiences of developing ISO20022 compliant Payment Process using Oracle EBS R12.1.3.
In addition, this paper also provides a list of valuable references on ISO 20022 payment framework and
implementation best practices.

About International Organization for Standardization

International Organization for Standardization was formed after World War II (in 1946) with 65 delegates from
25 countries met in London to discuss standardization. A very interesting fact about the name 'International
Organization for Standardization' would have different acronyms in different languages (IOS in English, OIN in
French for Organisation internationale de normalisation), ISO founders decided to give it the short form ISO.
ISO is derived from the Greek ISOS, meaning EQUAL. Whatever the country, whatever the language, we are
always ISO.

ISO 20022 Standard

Wiki Definition
ISO 20022 is the ISO Standard for Financial Services Messaging. It describes a Metadata Repository
containing descriptions of messages and business processes, and a maintenance process for the Repository
Content.

The ISO 20022 standard is also called as UNIFI provides the financial industry with a common platform for the
development of messages in a standardized XML syntax, using:
• a modeling methodology (based on 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

Reference URL : http://www.iso20022.org/

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ISO 20022 Standard

The ISO 20022 standard is described in the document "ISO 20022 Financial Services - Universal financial
industry message scheme". The current edition of the standard includes eight parts, published in May 2013,
details of which are outlined below.
• ISO 20022-1: Metamodel
• ISO 20022-2: UML profile
• ISO 20022-3: Modelling
• ISO 20022-4: XML schema generation
• ISO 20022-5: Reverse engineering
• ISO 20022-6: Message transport characteristics
• ISO 20022-7: Registration
• ISO 20022-8: ASN.1 generation

Source : http://www.iso20022.org/the_iso20022_standard.page

Oracle eBusiness Suite with ISO 20022 Payment Process Standardization Benefits

Building a ISO 20022 payment process in Oracle eBusiness suite R 12.1.3 provides the following benefits
1. Embedded Industry Standard Best Practices
R 12.1.3 version of Oracle eBusiness Suite has embedded industry standard best practices in every
module and area.
2. Facilitate Shared Services Processing
By design application has built in capabilities for shared services process which provides a great
opportunity to implement standardized business processes acros locations.
3. End-to-end processes for global payments
ISO 20022 Payment is industry standard process for global payments. This ensures global standard
process for payments.
4. Out of the Box Oracle EBS SEPA Components
SEPA development components which are part of Oracle eBusiness Suite R 12.1.3 provides a head
start for development for other locations as the foundational blocks are already available in the
application which has to be extended for each location as per specific requirements.
5. Reduced cost of development and maintenance through simpler system integration
As foundational blocks are embedded in the application development and maintenance become easy
as the out of the components are scalable and extensible.
6. Provides foundational blocks for rollouts
Additional rollouts for other locations become easy as the foundational blocks are available as a
standard reference in the application.
7. Improved Straight Through Processing and quality of information flows end-to-end using a
Global Standard
As the payment adheres to the ISO 20022 standard there is great improvement in straight through
processing and quality of information flows end to end as there is minimal data updates within the file
generated.
8. Process Driven Regulatory Compliance
ISO 20022 is an international validated standard and as such by adhering to the validated standard
regulatory compliance is in built as the standards mandate all the required information as necessary
for such compliance.
9. More efficient routing between systems
As there is minimal data updates / changes ISO 20022 standards provide a more efficient routing
between systems.

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ISO 20022 Business Areas

ISO 20022 standards classify the various business areas and messages pertaining to each. At a high level
following are the list of various business areas.

1. BANK LOAN/DEPOSIT
2. CARD PAYMENTS
3. COMMODITIES
4. DERIVATIVES
5. FOREIGN EXCHANGE
6. MISCELLANEOUS/ GENERIC
a. Account Management
b. Administration
c. Authorities
d. Collateral
e. Reference Data
7. SECURITIES
8. SYNDICATED LOANS
9. TRADE SERVICES

Source : www.iso20022.org/documents/general/ISO20022_BusinessAreas.pdf

ISO 20022 Methodology

ISO 2002 Methodology as implemented by the Registration Authority (SWIFT) consists of the following areas
• Business / Conceptual
• Logical
• Physical
The diagram below outlines each of these with specific details.

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 ISO 20022 Payment Message Sets

The diagram below outlines the various payment message sets along with a sample example message.

EXAMPLE

Message Identifier Message Name

pain.001.001 CustomerCreditTransferInitiation

Broadridge ISO 20022 Payment Process Implementation Project Scope

The project goal was to build ISO 20022 compliant payment process in Oracle eBusiness Suite R12.1.3. The
locations that were in scope are listed below
1. Australia
2. Hong Kong
3. India
4. Japan
5. Singapore
6. Switzerland

Approach
Development approach for the process consisted of leveraging seeded available SEPA components in Oracle
eBusiness Suite R12.1.3, extend as per Oracle Recommended Best Practices and incorporate all local
requirements for location.

The implementation was phased in the following order based on business priority for implementation.
1. APAC (Australia, Hong Kong, Japan and Singapore)
2. SWITZERLAND
3. INDIA

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Build and Implementation Methodology

The initial development was completed in a development environment for one location, validated and certified by
the bank for the format. Rest of the locations were built in similar fashion sequentially. Once transitioned to User
acceptance testing, payment files were revalidated by the bank. Upon confirmation, developed components
were migrated to quality assurance testing and payment files were again revalidated by the bank final time before
migration to production. Upon production migration Bank Dry run consisted of a small payment for each location
to validate network transmissions. Following is the pictorial representation of the steps taken from development
to production.

Project Timelines
The table below outlines the milestones for the project and the dates by which they were accomplished

Milestone APAC SWITZERLAND INDIA

Project Kick-off 21-Jul-14 21-Jul-14 15-Jul-14
Conference Room Pilot 1 15-Sep-14 22-Oct-14 3-Nov-14
Bank Development File Sign-off 14-Nov-14 14-Nov-14 11-Dec-14
UAT Testing 14-Nov-14 14-Nov-14 16-Dec-14
QA Regression Testing and Sign-off 16-Dec-14 16-Dec-14 14-Jan-15

Bank QA Payment File Sign-off 16-Dec-14 16-Dec-14 7-Jan-15

Production Implementation 29-Dec-14 29-Dec-14 PENDING
ACTIVATION
PRODUCTION GO LIVE!!!!! 6-Jan-15 21-Jan-15 PENDING
ACTIVATION
LEGEND APAC : Australia/Japan/Hong Kong/Singapore

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R12 Payment Process Overview

Oracle R12 payment process flow is summarized in the following diagram which outlines the entire process from
beginning to end.

Oracle Payment process tasks are outlined in the sequence below

1. Payables user Select Invoices for payments and submits the payment build process.
2. Oracle Process builds the Payment Batch
3. Upon completion of the process pool of built payments are available for transmission to bank
4. Payment Files are transmitted to Bank
5. Banks confirm receipt of payment files automatically with control totals.

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Predefined Validation in SEPA Seeded FormatT

• The Bank charge bearer is SLEV.

• The Payer address fields are entered.
• The IBAN/bank account number of the internal bank account and the supplier bank account is present.
• The BIC codes for the internal and the supplier bank branches are present.
• The initiating party name and identification are present

 The predefined validations will have to be changed for each location. Banks specify their final layout
specification based on local requirements.

Development Baseline and Reference Documents

Oracle eBusiness Suite R 12.1.3 has embedded SEPA Components for building the processes. My Oracle
Support has multiple documents which provides step by step for building the payment process. The tables below
outline the Development baseline components and related patches, along with MOS reference documents found
to be very useful for the project.

DEVELOPMENT BASELINE

XSL IBY_SEPA_STR_REM_V3.xsl

PATCHES 17733212:R12.IBY.B
15914531:R12.IBY.B
MY ORACLE SUPPORT REFERENCE DOCUMENTS

Doc ID TITLE

1391460.1 R12: IBY: Understanding What the Oracle EBS

"Payments" (IBY) module Is, and What It Does
1594441.2 R11i/12: AP/AR/IBY: Setting Up, Using, and
Troubleshooting SEPA Payments in Oracle
1420049.1 R12: IBY: White Paper - SEPA Core Direct Debit v5
support in Oracle Payments
1613794.1 R12: AP/IBY: SEPA White Paper - ISO20022 Credit
Transfers Support in Oracle Payables
787467.1 Format Customization in Oracle Payments for
Oracle Applications Release 12

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ISO 20022 Payment Format Build Design Considerations

The goal of the payment format build design was to keep the design as simple as possible, scalable and
repeatable build process for multiple locations. The XSL Template for the process was kept different for each
locations in order to keep the build process simple and location specific. However this would result in multiple
XSL templates depending on the locations you have. It is better to have simple template per location, rather than
one template for all locations which would complicate the testing with each additional location onboarding.

Table below summarizes the rationale for choosing separate template for each location.

ISO 20022 Payment Format Build Location Specific Requirements

Every country has its own specific requirements and it is advisable to include as many requirements as possible
in the process so that all requirements are completely met. In addition, the payment file can also have
placeholder columns which can be used to tag application related details (e.g invoice #, po # etc) for any related
troubleshooting later.

Table below summarizes local requirement for the locations in scope for the project.

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ISO 20022 R12 Payment Process Setup

Oracle eBusiness Suite payment process tasks are outlined below along with a diagrammatic representation of
the same.
1. Register XML Template
2. Setup Payment Format
3. Setup Internal Bank/Bank account and Payment Document
4. Setup Payment Process Profile
5. Setup Payment Template

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ISO 20022 Payment Framework Best Practices

Best practices for building a ISO 20022 complaint payment framework is outlined below, based on the
experience of this project.

1. Business Driven Technology Enabled

Implementation should be business driven with strong support from business users. Technology should
work with business closely to enable the process. With collaboration and support from each other the
implementation can be completed as planned (and in some cases ahead of schedule).
2. Automate Host to Host File Transfers
All payment files must be transmitted to the bank automatically by design. This ensures process driven
audit compliance for file transfers. It is recommended to utilize the enterprise approved transmission
tools to achieve this.
3. Separate XSL Template for each Location
It is recommended to have separate XSL Template for each location. This will ensure your overall
design is simple, maintainable and scalable as any local requirements for specific data elements has to
be included in the template. It will avoid complex testing as would be the case if there was only one
template for all locations.
4. Test, Test, Test, Test and RETEST
Testing is the key to success of the project. The more you test, luckier you get. By extensive testing all
potential issues would have been resolved before you reach the QA phase of the project.
5. Negative Testing
Negative testing should be part of your testing to see what part of the process would fail. This will
ensure that all such issues are captured ahead of time and you have a robust process in place before
you reach the QA phase of the project.
6. Naming Convention
Naming convention is very critical from application development perspective. It is recommended you
have defined naming standards which are scalable. Some of the items listed below should have specific
naming standards so as to ensure ease of maintenance and upgrade.
a. Process
b. XSL/XML Templates
c. Payment File Names
7. Transmission Time of files based on Bank’s Originating Server
As there would be cutoff timings for payments based on the location where it would be paid, any such
cutoff time should be based on Bank’s originating server where the files are transmitted. This would
ensure you have a accurate schedule for all locations.
8. User Readiness for New Process with cutoff times
User readiness for the new process with cutoff times is very critical. This will ensure users have
reviewed the bank cutoff times and have addressed any operational issues before go live.
9. Utilize the Power of Payment Process Template
Oracle ebusiness suite R 12.1.3 provides a great opportunity to standardize your business process in
many ways in all modules. One of the key features of the payment process is the payment process
template which when effectively utilized will allow you to logically segregate your payments in a manner
you can manage it well.

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References

Following table provides list of valuable references on the subject.

USEFUL REFERENES
TYPE URL CONTENTS
MUST READ http://www.iso20022.org/ ISO 20022 Standards Portal
http://www.iso.org/iso/2012_friendship_among_ Friendship Among Equals
equals.pdf
http://www.sepahungary.hu/uploads/ISO20022_f ISO 20022 For Dummies
ordummies.pdf
http://prisiotechnologies.com/pdf/9766_gryen_w Oracle Payments in Release 12 –
p_1.pdf Take It To the Bank!
LOCATION http://www.zengin-net.jp/en/ Japanese Banks Payment Clearing
SPECIFIC Network
http://www.zenginkyo.or.jp/en/banks/payment_s Japan Payment Systems
ystems/index/paymentsystems.pdf ISO 20022 Swiss Business Rules
http://www.six-
telekurs.com/dl_tkicch_standardization_isopaym
ents_ch_business_rules_v2.1.pdf ISO 20022 standard message
http://rbidocs.rbi.org.in/rdocs/RTGS/PDFs/RTGI formats - Reserve Bank of India
SO20022.pdf

ORACLE https://support.oracle.com R12: IBY: White Paper - SEPA Core

REFERENCE Direct Debit v5 support in Oracle
DOCUMENTS Payments (Doc ID 1420049.1)
http://www.oracle.com/us/industries/public- Oracle White Paper - Impact of the
sector/sepa-euro-payment-wp-194393.pdf Single Euro Payment Area (SEPA) for
Government Revenue Management
Agencies

Conclusion

ISO 20022 Payment Framework provides international standard scalable and adaptable framework.
Oracle eBusiness Suite R12.1.3 provides a great opportunity to reengineer your payment process using the
ISO 20022 standard payment templates with built in compliance local and international and ensure efficient,
international standards driven with local compliance for cross border payments. By leveraging the available
seeded SEPA components within the Oracle eBusiness Suite application and extending it to suit your
organization’s specific requirements you can ensure a scalable payment framework fully compliant with global
standards with ease of maintenance and increased productivity.

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About the Author

Ravikanth Prabhu (Ravi), PMP is an experienced Oracle eBusiness Suite Professional with over 19 years of
Shared Services implementation experience. He is PMP Certified and Oracle Certified Professional in
Procurement and Order Fulfillment. He has a deep understanding of Oracle Applications Architecture with
broad technology background. His interests include application frameworks, implementation standards,
automated application deployment tools and processes, Single Sign On and Identify Management, Master
Data Management, CRM, ECM, automation of key business processes, standard Global Business Processes
and managing IT cross functional teams. Ravi has been a regular presenter at OAUG since Collaborate 10,
at KOFAX Transform 11 and at Dun and Bradstreet DAAS Roadshow, New York in June 2012.
Ravi is a Senior Director – Development-HT, GBS at Broadridge Financial Solutions, Inc in Jersey City.

About Broadridge Financial Solutions, Inc.

Broadridge is a technology services company focused on global capital markets. Broadridge is the, market
leader enabling secure and accurate processing of information for communications and securities transactions
among issuers, investors and financial intermediaries. Broadridge builds the infrastructure that underpins
proxy services for over 90% of public companies and mutual funds in North America; processes trillions of
dollars in financial settlements per day and over one billion investor communications annually through its
technology solutions. . For more information about Broadridge, please visit www.broadridge.com

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