Comprehensive Global Payments Guide: ISO 20022 Configuration for Payments Within the UK, EU, and the Rest of the World

Introduction

The world of global payments is vast, encompassing various methods, standards, and regional regulations. Whether processing payments within the UK, to EU countries, or to destinations beyond, businesses require robust configurations to ensure compliance, efficiency, and transparency. ISO 20022 has become the global standard for financial messaging, enabling interoperability and consistency across banking systems.

This detailed guide provides a step-by-step approach to configuring ISO 20022-compliant payments for different scenarios:

• Payments within the UK
• Payments to EU countries
• Payments between EU countries
• Payments to the rest of the world (Asia, Africa, Americas, and Oceania)

We also cover configurations for ERP systems like Dynamics 365 Finance and Operations (D365FO), SAP S/4HANA, and Dynamics 365 Business Central (D365BC), along with treasury and compliance considerations.

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Why ISO 20022?

ISO 20022 provides a unified structure for payment processing across regions and currencies. Its benefits include:

• Global Standardization: A consistent format for financial messages, irrespective of destination.
• Efficiency: Enables automation of payment and reconciliation processes.
• Compliance: Simplifies adherence to country-specific regulations (e.g., SEPA rules or RBI purpose codes).
• Interoperability: Supports seamless communication between banks and ERP systems.

Key Payment Scenarios

1. Payments Within the UK

Payment Systems in the UK

1. BACS (Bankers’ Automated Clearing Services):
   • Used for bulk transactions, such as payroll or supplier payments.
   • Processing Time: 3 business days.
   • Service Level Code: UKDD.
2. Faster Payments:
   • Real-time or near-real-time payments in GBP.
   • Processing Time: Usually within seconds.
   • Service Level Code: UKFP.
3. CHAPS (Clearing House Automated Payment System):
   • High-value, same-day payments.
   • Service Level Code: SDVA.

XML Configuration for UK Payments

Key XML Fields

Field	Purpose
<SvcLvl>	Indicates the service level (e.g., SEPA, URGP, UKDD, NURG).
<CtgyPurp>	Categorizes the payment purpose (e.g., SUPP for supplier payments, SALA for salaries).
<Purp>	Specifies payment purpose codes required in certain countries (e.g., RBI codes for India).
<RmtInf>	Provides structured or unstructured remittance information (e.g., invoice references).
<ClrSysMmbId>	Used in BACS to specify sort codes for banks.

BACS Payment Example:

<PmtTpInf>
    <SvcLvl>
        <Cd>UKDD</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SUPP</Cd> <!-- Supplier Payment -->
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Invoice Payment #12345</Ustrd>
</RmtInf>

Faster Payment Example:

<PmtTpInf>
    <SvcLvl>
        <Cd>UKFP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SALA</Cd> <!-- Salary Payment -->
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Monthly Payroll</Ustrd>
</RmtInf>

CHAPS Payment Example:

<PmtTpInf>
    <SvcLvl>
        <Cd>SDVA</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>HIGH</Cd> <!-- High-Value Payment -->
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Invoice Payment #78910</Ustrd>
</RmtInf>

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2. Payments to the EU

SEPA Payments

SEPA (Single Euro Payments Area) enables seamless Euro payments within its 36 member countries. It supports:

1. SEPA Non-Urgent Payments:
   • Standard processing for business transactions.
   • Service Level Code: SEPA.
2. SEPA Urgent Payments:
   • Time-sensitive transactions with same-day settlement.
   • Service Level Code: URGP.

XML Configuration for SEPA Payments

SEPA Non-Urgent Payment Example:

<PmtTpInf>
    <SvcLvl>
        <Cd>SEPA</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SUPP</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Invoice EU56789</Ustrd>
</RmtInf>

SEPA Urgent Payment Example:

<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>GOODS</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Urgent Goods Payment</Ustrd>
</RmtInf>

3. Payments Between EU Countries

Payments between EU countries also leverage SEPA. The configurations are identical to those described above, with the same currency and service level codes.

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4. Key Payment Considerations of ISO 20022-compliant payments from the UK to major global regions—US, Russia, Africa, Australia, China, and India.

Considerations for Non-EU Payments

• Currency: Match the destination country’s currency (e.g., USD for the US, CNY for China).
• SWIFT/BIC: Mandatory for international transfers.
• Clearing Codes:
  • Routing Number (US).
  • CNAPS Code (China).
  • IFSC Code (India).

Common Elements for International Payments

• Service Level (<SvcLvl>):
  • Urgent Payments: Use URGP.
  • Non-Urgent Payments: Use NURG.
• Currency Codes:
  • Ensure the transaction currency matches the local currency of the recipient (e.g., USD for the US, RUB for Russia).
• SWIFT/BIC:
  • Mandatory for identifying recipient and intermediary banks.
• Purpose Code (<Purp>):
  • Required in certain countries (e.g., India and China).
• Remittance Information (<RmtInf>):
  • Structured or unstructured details for reconciliation.

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Country-Specific Payment Configurations

1. Payments to the US

• Service Level: URGP for urgent transfers; NURG for standard.
• Currency: USD.
• Bank Details Required:
  • SWIFT/BIC: Sender and receiver banks.
  • Routing Number: US Federal Reserve routing code.
• Example XML:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SUPP</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Invoice Payment #56789</Ustrd>
</RmtInf>

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2. Payments to Russia

• Service Level: URGP.
• Currency: RUB.
• Bank Details Required:
  • SWIFT/BIC.
  • Russian Central Bank Code: Required for domestic clearing.
• Example XML:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>GOODS</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Payment for Import Goods</Ustrd>
</RmtInf>

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3. Payments to Africa

• Service Level: URGP (for urgent payments); NURG (standard).
• Currency: Local currencies (e.g., ZAR for South Africa, NGN for Nigeria).
• Bank Details Required:
  • SWIFT/BIC.
  • Country-specific clearing codes.
• Example XML for South Africa:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>NURG</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SERV</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Consulting Services Payment</Ustrd>
</RmtInf>

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4. Payments to Australia

• Service Level: URGP for same-day transfers; NURG for standard.
• Currency: AUD.
• Bank Details Required:
  • SWIFT/BIC.
  • BSB Code: Australian Banking System Code.
• Example XML:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>SUPP</Cd>
    </CtgyPurp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Invoice #34567 Payment</Ustrd>
</RmtInf>

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5. Payments to China

• Service Level: URGP.
• Currency: CNY.
• Bank Details Required:
  • SWIFT/BIC.
  • CNAPS Code: China National Advanced Payment System code.
• Purpose Code: Mandatory (e.g., GOODS for trade).
• Example XML:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>GOODS</Cd>
    </CtgyPurp>
    <Purp>
        <Cd>GOODS</Cd>
    </Purp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Payment for Invoice CN12345</Ustrd>
</RmtInf>

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6. Payments to India

• Service Level: URGP or NURG.
• Currency: INR.
• Bank Details Required:
  • SWIFT/BIC.
  • IFSC Code: Indian Financial System Code.
• Purpose Code: Mandatory (e.g., GOODS, SERV).
• Example XML:

xmlCopy code<PmtTpInf>
    <SvcLvl>
        <Cd>URGP</Cd>
    </SvcLvl>
    <CtgyPurp>
        <Cd>GOODS</Cd>
    </CtgyPurp>
    <Purp>
        <Cd>GOODS</Cd>
    </Purp>
</PmtTpInf>
<RmtInf>
    <Ustrd>Payment for Invoice IN12345</Ustrd>
</RmtInf>

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Implementing ISO 20022 in ERP Systems

a. Dynamics 365 Finance and Operations (D365FO)

1. Configure Payment Methods:
   • Create separate methods for:
     • SEPA Non-Urgent (e.g., “SEPA-STD”).
     • SEPA Urgent (e.g., “SEPA-URG”).
     • International Payments (e.g., “INTL-PAY”).
   • Assign the appropriate service level (SEPA, URGP, or NURG) in the Electronic Reporting (ER) configuration.
2. Electronic Reporting (ER):
   • Map the payment method to the <SvcLvl> field in the XML.
3. Payment Journal:
   • Create a payment journal and assign the correct method of payment to transactions.

b. SAP S/4HANA

1. Define Payment Methods:
   • Use FBZP to define:
     • Separate payment methods for SEPA and international payments.
   • Configure the payment medium for ISO 20022.
2. Maintain House Bank Details:
   • Ensure the IBAN, BIC, and SWIFT details are correct.
3. Payment Run:
   • Run F110 for batch payment generation.

c. Dynamics 365 Business Central (D365BC)

1. Set Up Payment Methods:
   • Configure separate methods for SEPA and international payments in Cash Management.
   • Assign a default export file format for each method.
2. Data Exchange Framework:
   • Map payment method codes to the <SvcLvl> field in ISO XML.
3. Payment Journal:
   • Assign the payment method when creating a payment journal and export the file.

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4. Comparison of Payment Types

Feature	SEPA Non-Urgent	SEPA Urgent	International Payments
Service Level	SEPA	URGP	NURG or URGP
Currency	EUR	EUR	Various (e.g., INR, USD)
Processing Time	1 business day	Same-day	Varies (SWIFT-dependent)
IBAN/BIC Required	Yes	Yes	Yes
Purpose Code	Optional	Optional	Mandatory (e.g., RBI in India)
Urgency	Standard	High	Depends on URGP/NURG

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Treasury Considerations

1. Compliance

• Adhere to local regulations (e.g., SEPA rules, IFSC for India, CNAPS for China).

2. Cost Management

• Use non-urgent payments (NURG) for routine transactions.
• Reserve urgent payments (URGP) for critical needs.

3. Efficiency

• Automate reconciliation by populating <RmtInf> with detailed remittance information.

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Conclusion

ISO 20022 enables businesses to manage global payments with accuracy and efficiency. Whether processing transactions within the UK, to the EU, or beyond, proper configuration in ERP systems ensures compliance and seamless operations. By leveraging this guide, finance and treasury teams can streamline payments, reduce costs, and enhance global connectivity.