Payment Domain Questions

1. Examples of few real time payment Schemes around world

Below are few popular examples of real time payment schemes

1. FPS(Faster Payment System-UK)

 Launched in 2008, the UK's Faster Payment System (FPS) allows almost instantaneous payments between accounts at different British banking institutions².

2. IMPS(Immediate Payment Service -India)

 India's Immediate Payment Service (IMPS) facilitates real-time peer-to-peer transactions within the country.

3. TCH(The Clearing House-US)

The Clearing House's Real-Time Payments Network (RTP) in the United States provides a robust real-time payments infrastructure

4. FedNow Service (US)

 Anticipated to launch in 2023, the Federal Reserve's FedNow will also fall under the definition of a real-time network in the US

5. Pix (Brazil)

Brazil's Pix system enables instant payments and has gained widespread adoption in the country.

6. PayNow (Singapore)

Singapore's PayNow system allows real-time fund transfers using mobile numbers or National Registration Identity Card (NRIC) numbers.

7. Swish (Sweden)

Swish is a popular real-time payment system in Sweden, allowing users to transfer money instantly using mobile phones.

8. NPP(New Payments Platform-Australia)

Australia's New Payments Platform (NPP) supports real-time payments, including features like PayID and Osko¹.

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2. Commonly Used payment message types from ISO20022?

1. pacs.008 (FI to FI Customer Credit Transfer):

This message is used for customer credit transfers between financial institutions. It includes information about agents, parties, payment type, account components, and remittance data.

2. pacs.004 (Payment Return)

 The pacs.004 message is sent by an instructed agent (e.g., a bank) to the instructing agent (e.g., another bank) to return funds that were previously credited to an account. It's used for payment reversals or returns.

3.camt.056 (FI to FI Payment Cancellation Request):

The camt.056 message allows an instructing agent (e.g., a bank) to request the cancellation of a previously sent payment instruction (e.g., pacs.008, pacs.009, or pacs.010). It can also be used for refund requests.

4. camt.029 (Resolution of Investigation)

The camt.029 message is sent by a case assignee (usually the instructed agent of the camt.056) to a case creator/assigner (usually the instructing agent of the camt.056). It informs about the resolution of a case (such as a cancellation request) and may include details about corrective actions taken and return information.

5. camt.030 (Notification of Case Assignment)

This is notification of case assignment. for example

Instructing agent has sent Camt.056 to instructed agent. then instructed agent will open one case in their book to investigate corresponding transaction. then creditor will send that case details in camt.035 message

6. camt.035 (Notification of Case Assignment)

Similar to camt.030, the camt.035 message notifies the case assignee (e.g., the instructed agent) about a case assignment. But It's part of the case management process.

7. camt.054 (Advice of Credit or debit):

 The camt.054 message informs the account holder (e.g., Corporate Y) about a credit or debit entry on their account. 

8. Pain.002 (Payment status Report)

This is reporting msg used by banks to convey the status of payment to the customer

3. Structure and important tags in pacs.008?

The pacs.008 message is used for Financial Institution (FI) to FI customer credit transfers, equivalent to the MT 103/MT 102 in the SWIFT system. 

Let's break it down:

It has 2 main blocks- 1. Group Hader, 2, Credit Transfer Transaction information

1. Group Header

Contains characteristics which are applicable to all individual transactions in the message.

It contains below elements 

Message Identification: A unique identifier for the message.
Creation Date and Time: The timestamp when the message was created.
Initiating Party: Information about the party that initiated the transactions.
Number of Transactions: Total number of individual transactions included in the message.
Control Sum: A sum of all individual transaction amounts, this is used for validation purposes.

2. Credit Transfer Transaction Information

Provides details specific to each individual credit transfer.

 Key elements include:

Instructing Agent- Sender in MT103

Instructed Agent- receiver  in MT103

 Debtor Agent: The agent sending the funds (F52a in MT103)

 Creditor Agent: The agent receiving the funds (F57a)

 Ultimate Debtor/Creditor: Information about the ultimate parties involved.

 Debtor: Debtor account number, name and address(F50)

 Creditor: Creditor Account number ,name , address(F59)

Debtor Acc No:

Creditor Acc no:

 Settlement Information: Specifies the settlement method (e.g., CLRG, COVE, INDA, INGA)

 Remittance information:  Elements that give details about the payment, e.g, Invoice details(F70)

 Instructed Amount :The amount that was instructed to be moved(F33B)

Charges Information Amount :Amount deducted as charge

Interbank Settlement Amount:Actual amount moved after deduction of charges(F32a)

Charge Bearer: who will be charged for the transaction (CRED,DEBT,SHAR,SLEV )(F71G)

Transaction Identification: Unique identifier for the transaction

Instruction id-Sender reference assigned by bank who is sending payment(F20 in MT103)

End to end id-this id is assigned by debtor agent will be passed as it is to next bank

 UETR  (Unique E2E trxn ref): A mandatory identifier for traceability(F121 in block 3)

4. Structure and important tags in pacs.004?

Pacs.004 is composed of 3 main building blocks

1. Group Header 2. Original Group Information 3. Transaction information

1. Group header 

 contains characteristics which are applicable to all individual

  transactions in the message.

It contains below elements 

Message Identification: A unique identifier for the message.
Creation Date and Time: The timestamp when the message was created.
Initiating Party: Information about the party that initiated the transactions.
Batch Booking: Indicator of whether the transactions should be processed in a batch.
Number of Transactions: Total number of individual transactions included in the message.
Control Sum: A sum of all individual transaction amounts, used for validation purposes.

2. Original Group Information

This is optional element and contain information like msg id of original pacs.008.

3. Transaction Information

This contains elements like

return Identification- unique id for return pacs.004

original group information (original msg id-msg id of pacs.008, original msg name id ex- pacs.008.001.08)

Original instruction identification (instr id of original message)

Original Transaction identification (tx id of original message)

Original Interbank Settlement amount

Return reason-return reject code and additional information

Original Transaction reference

Instructing agent, instructed agent, debtor and creditor along with agent, from original msg

5. Structure and important tags in Camt.056?

camt.056 is composed of four building blocks

1. Case Assignment

This is mandatory building block

Contains elements like -

-Assignment id(Unique id assigned by assigner to camt.056

-Assigner bic(sender of Camt.056, instructing agent of Pacs.008)

-Assignee bic(receiver of camt.056 , instructed agent of Pacs.008)

2. Case

This is optional block as per ISO20022. it contains case id and case creator details

3. Control data

This contains information about total number of transactions in camt.056

Control sum(sum of amount of all transactions which need to be cancelled)

4. Underlying

This is mandatory element in camt.056 it contains information related to original instruction and also contains cancellation details.

it contains elements like

Cancellation Identification: identifies the Cancellation Request itself and remains unchanged throughout the payment chain.

Case: Case Identification and the Case Creator details

 Original Group Information: contains the original message format and identification of the message being cancelled.

Original Instruction Identification:  instruction ID of original message.

 Original End to End Identification: End to End Identification of original message

 Original Transaction Identification: transaction Identification of original message

Original UETR: contains the original UETR, which is mandatory

Original Interbank Settlement Amount: contains the original interbank settlement amount. 

 Original Interbank Settlement Date: contains the original interbank settlement date. 

Cancellation Reason Information: this is mandatory contains .cancellation reason code(FRAD, DUPL etc) and additional information

Sample-

5. Structure and important tags in Camt.029?

Camt.029 is sent as response to cancellation request, modification request and few others

Here we will discuss Camt.029 structure when it's sent as response to camt.056

Camt.029 is composed of 4 building blocks

1. Case Assignment 

This is mandatory building block

Contains elements like -

-Assignment id(Unique id assigned by assigner to camt.029)

-Assigner bic(sender of Camt.029, instructed agent of Pacs.008)

-Assignee bic(receiver of camt.029,  instructing agent of Pacs.008)

2. Resolved Case

This is optional block as per ISO20022. it contains case id and case creator details

3. Status

the camt.029 message has 3 statuses, which represent the status the assignee sends to the initiator of the camt.056: 

  CNCL-Cancelled

 PDCR-Pending

  RJCR-Rejected

4. Cancellation Details

It contains transaction information and status which include below elements 

Cancellation Status Identification: identification of cancellation status

Original Payment cancellation id- it contain assignment id from camt.056 , used for matching camt.056 with camt.029

Resolved Case: contains the identification of the creator for the cases. This is mandatory and covers the entire lifecycle of the investigation message. 

Original Group Information: gives information on the pacs.008 for which cancellation request is in process

Original Instruction Identification: Instruction id of pacs.008 for which cancellation request is in process

Original End to End Identification: E2E id of pacs.008 for which cancellation request is in process

 Original Transaction Identification: Transaction id of pacs.008 for which cancellation request is in process

Transaction Cancellation Status:

Cancellation Status Reason Information 

     -Originator -Party that issues the cancellation request.

       -Reason code-(LEGL, CUST) this is present only when Camt.029 status is RJCR

       -Additional Information (2 X 105 characters) 

Original Interbank Settlement Amount 

Original Interbank Settlement Date 

Assigner 

Assignee 

7. Structure of Pain.001

It contains 2 major blocks-1. group header, 2. payment information

1. Group Header

Below are the key tags in group header

1. Msg id- file specific unique id

2. Creation Date and Time

3. Number of Transaction

4. Control sum

5. Initiating Party

2. Payment Information

1.Payment info id-Batch specific unique id

2.Payment method (CHK-for cheque payment, TRF- for credit Transfer)

3. Payment type info-(SEPA, URGP(urgent Payment))

4. Debtor

5.Debtor Account

6.Debtor agent

 

        2.1 Credit Transfer transaction information

1.End to end id

2. instr id

3. UETR

4. Instructed amount

5.Creditor agent

6. Creditor Account

7.Creditor Name

5. Charge Bearer (DEBT, CRED, SHAR, SLEV)

6.Remmitance Information

  

8. Structure of Pain.002

It contains 3 imp building blocks 1. group header, Original Group information and status, original payment information and status,

1. Group Header

Group header has below key elements in it

1.msg id- Unique identifier for message

2. Create Date and time

3.Initiating Party

2. Original Group information & Status

this block contains below key elements

1.Original msg id-Message id of original pain.001 message who status to be reported

2.Original message Name id -Original msg type and version

3.Original Number of transaction-Number of transactions in original message

4.Original Control sum-sum of amount of all txn in original msg

5.Group Status

this is status of entire file conveyed to sender of pain.001 msg. possible values are ACTC, RJCT)

ACTC-Accepted Technical validation

RJCT- entire Pain.001 file is rejected

3. Original Payment information and Status

this block contains below key elements

1.Original payment info id- payment info id from pain.001 payment

2. Payment information and status-status of entire batch of pain.002 transactions

ACCP = Accepted technical validation

ACWC = Accepted with change

PART = Partially accepted and rejected

PDNG = Pending further processing

RJCT = Rejection

3.1 Original Transaction information and status

This block contains below key elements

Original Instruction id-instruction id of original transaction

Original end to end id- E2E id of original pain.001 msg

Original UETR- UETR of original pain.001 msg

Transaction status- status of original pain.001 transaction

6. Explain clearing, Settlement, difference between clearing and settlement, types of settlement?

1. Clearing:

   - Clearing refers to the process of reconciling and calculating financial positions between parties involved in a transaction.

   - Net positions are calculated before actual settlement occurs.

   - When only two parties are involved, it's called **Bilateral Clearing**.

   - If there are more than two parties, we use **Multilateral Clearing**.

2. Settlement:

   - Settlement is the actual transfer of funds or securities to fulfill the financial obligations determined during clearing.

   - There are two main types of settlement:

     - **Bilateral Settlement**: Involves only two parties directly exchanging funds.

     - **Multilateral Settlement**: Involves multiple parties, and the central bank often facilitates the movement of funds.

7.What is difference between Net Settlement and Gross Settlement?

In Gross settlement transactions are processed on one-to-one basis.

but in case of net settlement first net positions are calculated and then actual fund transfer with netted amount takes place

8. What is difference between correspondent bank and intermediatory bank?

The purpose of both the bank is similar they act as third-party service provider in fund transfer. key difference is correspondent can work with multiple currencies and intermediatory works with only single currency.

9. what is difference between E2E id and UETR?

UETR is a 36-character unique tracking id which remains unchanged through payment cycle. it is also  used by SWIFT GPI to track the payments. so when any bank shares status of payment with SWIFT GPI, it includes that UETR in that msg.  with the help of UTER all instructing agents can track the transaction throughout cycle.  banks do not share end to end id with SWIFT GPI and that's the main difference.

10. Why it is important to migrate to ISO?

1. More information can be exchanged in the messages using ISO messages as compared to MT messages.

2. ISO messages  are well structured and easier for processing for the systems

3. Use of ISO messages will also help in compliance checking to avoid false positive.

let me give you one examples which I read somewhere.

for example, Trump is a hit word and that is for account holders name. This is just an example..  Now there is an customer who is sending payment and is living in trump tower. now in MT messages , we don't  have separate fields in MT103 for account holder name and address. so if we screen this msg for compliance check it will fail due to address. but in ISO we have dedicated fields for building name and ordering customer name. so we can screen that particular fields and avoid such false positives.