Identitii Limited | ASX:ID8

May 2019

ISO 20022Migration without data loss or truncation

Contents

who we are ISO 20022 migration our solution value added services

01 02 03 04

01Who we are

• Australian FinTech founded in 2014 and listed on the Australian Securities Exchange in October 2018 (ASX:ID8)

• Identitii is connecting buyers, suppliers, banks and regulators with the data they need to process, reconcile and report on payments, to reduce last mile hold ups and improve reporting

• Allows corporate banks to increase profitability, improve customer experience and better compete, by enhancing existing technology infrastructure to improve working capital for corporate clients

• All research conducted and software developed by in-house engineers with one patent pending

• In live production with HSBC since 2017

Identitii (ASX:ID8)

Following a large scale industry consultation, SWIFT Board recommends a migration of

payments traffic to ISO 20022 starting November 2021

Migration timeline

2023Fed switches to ISO for

USD payments

Q4 2025SWIFT’s coexistence period

ends

2022BOE switches to ISO for

GBP payments

Q2 2018SWIFT board announces migration of payments traffic to ISO 20022

Q2 2019Identitii & Trace Financial

announce partnership

Q4 2017SWIFT launches consultation

paper for ISO migration

Q4 2021SWIFT’s coexistence period starts

Eurosystem’s Target 2 migrates to ISO

£ $

€

Ultimate Creditor / DebtorStandardised way to communicate ultimate creditor/debtor information in the context of pobo/cobo payments

What’s new with ISO 20022?

Extended InformationExtended remittance information and reduced data truncation (for example due to long names or extensive regulatory information)

Structured InformationIndividual fields for each piece of information allows for greater STP rates and a significant reduction in false-positive compliance hits

Information loss

ISO messages are much richer than MT messages.When translating ISO to MT messages, information as well as context can be lost. It is up to each bank to screen payments based on all available information, and to ensure that this information is passed on down the payment chain.

Customer experience

As more banks migrate to ISO, corporate customers will expect end-to-end integrity of their remittance information.Relying on correspondents that are not yet using ISO messaging can lead to unpredictable results and reconciliation difficulties.

Legacy systems

Payment processing systems are integrated with countless other systems.Payment system upgrades can be expensive and time consuming, and any fundamental change in core systems can lead to risks of failure and downtime. This can cause problems when they are integrated with ledgers, reporting systems and compliance screening tools.

Migration considerationsThe complexities of migrating to a new message format in correspondent banking

Full RevisionRevising all payment processing capabilities can be a risky and costly affair

Complexity

Deeply intertwined, and often heavily customised solutions can be costly to replace. Payment engines, reporting systems, screening products, back office tools – everything needs to be adapted, and interoperability needs to be ensured.

Competition for resources

Even after budgets have been secured, replacing core systems requires resources such as consultants from solution providers, system integrators, and analysts specialised in payments. Competition for these resources will drive prices up and availability down.

Time to market

Reviewing the full stack of payment systems is a colossal project, for which testing alone can take months. Corporate customers expect the improved experience ISO provides, and early adopter banks can expect to win market share.

Risks

Payment engine upgrades can negatively impact the correct and timely processing of payments, with catastrophic impact on corporate customers. Upgrading multiple systems synchronously compounds these risks.

Central translationUsing a central translation service can have important limitations

Network lock-in

Eurosystem will enable multiple networks to connect to TARGET. Relying on one of these networks to perform translations will limit the potential to connect through an alternative and potentially less costly network.

Compliance screening

Payments must be screened based on all available information; some of which cannot be mapped to MT messages. As such, banks will still need to screen MX messages and reconcile them with the translated MT messages before executing the underlying payment.

FATF 16

Banks must include accurate originator and beneficiary information and pass it along the payment chain under FATF 16 . As ultimate creditor/debtor fields cannot be mapped to MT, banks are at risk of truncating this information when using a central translation service.

Loss of structure

When structured information is mapped to an MT it becomes unstructured. If an MX-based message related to the payment must be sent out later in the processing chain (eg for camt reporting), it will be forced to be in unstructured format.

03The best of both worlds

Translate payment messages between MT and ISO 20022, with enhanced data security and integrity, ensuring no information is lost in the process.

ISO20022 migration without data lossOverlay+ and Transformer

Information capture

Capturing the payment instructionOverlay+ is fed the payment instruction in any format via API, SFTP, MQ and more. An auditable copy of the payment instruction is stored, interpreted and indexed locally or in a private cloud.

Translation: Incoming

Feeding the payment engineIndexed information is transformed into the format of the existing payment engine and processed. Screening solutions can be integrated to ensure the full XML has been screened.

Translation: Outgoing

Translating and enriching the outbound paymentThe payment message / status is captured and transformed into the format required for the outbound payment or reporting. Information captured can automatically enrich or be restructured.

How it worksCapturing rich information and reintegrating it into the outbound message

04Value added services

Overlay+ enhances existing payments infrastructure with a private blockchain to securely share data and documents about

transactions, in real-time

Know Your Transaction

Securely collect and share data and documents with permissioned counterparties to support transfer of funds and understand the origin, purpose and beneficiary of a payment

Overlay approach

Enhance existing technology infrastructure using a simple overlay approach Open Banking ready API

Private blockchain

Timestamping, verification and auditability as everything is recorded on a decentralised ledger, establishing a provable history of document contents

Intelligent Information Exchange

Collect data from any source and record it on the private Overlay+ blockchain.

Unique Identitii Tokens cryptographically represent data and documents on the blockchain, then travel with a payment message over existing technology infrastructure, enabling the secure exchange of information

Private blockchainand tokenisation

Remove bottlenecks created by non-ISO enabled parties in the payment chain, by enabling the full richness of XML to be shared directly between Overlay+ implementations live in other institutions

Permissioned messaging systemIdentitii enables information sharing between silos

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Sanctions screening within Overlay+

Identitii has built a library of partner integrations enabling customers to conduct compliance and sanctions checks from within Overlay+. With the added benefit of creating an auditable record of the check on the blockchain.

Integrate with technology from Dow Jones Risk and Compliance, Fircosoft or Wallstreet via API connectivity.

Overlay+ custom integrations

Identitii is vendor agnostic. If you have a preferred vendor, we’re happy to find a solution together.

Using either API connectivity, an integration layer, or integration via Robotic Process Automation (RPA), we’re confident in our ability to find the right solution for you.

Banks are required to screen payments based on all available information. If your screening solution is not ISO ready, we can help.

Identitii Partner LibraryOverlay+ integrates with sanctions/AML screening tools and more

In the coming weeks, SWIFT will extend gpi for corporates beyond the current pilot group to all gpimember banks. We can help you be ready.

gpi 4 corporates made easy

Leverage Overlay+ and Transformer to provide g4c functionality to your customers in either MT199 and pain.002 format. Overlay+ is capable of ingesting your SWIFT’s g4c data, and reconciling it with the payment instruction in order to provide you with a payment status report to your specifications, along with the debtor’s BIC. All you need to do is send it.

Enhance SWIFT gpi

THANK YOU

Identitii Limited | ASX:ID8

+61 2 9056 4160

info@identitii.com

identitii.com

Trace Financial• Trace Financial Limited has been supplying software

solutions to the financial industry in the UK, Europe and globally for over 30 years.

• Provides solutions to a diverse range of clients, including RBS, Earthport, and Tier-1 North American Banks.

• Transformer, Trace Financial’s flagship product, specialises in message transformation, validation, and enrichment, without the need to perform complex coding or scripting.

The fact that Transformerdoes not require any coding stageeliminates the need for any riskyhandover between analyst and developerteams, decreases time to market,increases productivity and improves quality.

Corporate / FI

Channel

Integration Layer

Legacy PaymentProcessing Legacy Compliance

Screening(Option A)

• Store all fields from pre-translation; pre-payment engine message

• Convert to PE-compatible format• Re-enrich PE output with stored field

Example architecture

Payment Instruction(eg pain)

Overlay+ ComplianceScreening Integration(Option B)

Integration LayerPE-compatible

Instruction(eg MT101)

MT103MT202cov

pacs.008pacs.009

SWIFT’s Translation ServiceKey limitations, as expressed by SWIFT in their Migration Consultation Study

“For MT users, data may be dropped between the ISO 20022 message received and the MT back-office. This risk is mitigated by the existence of clearly defined community translation rules, which will highlight any data elements that cannot be copied to the MT format, and by the delivery of the full message, which can be processed manually, by ancillary systems or by cloud-based servicesIn the payments domain, this could cause difficulties for MT users that act as intermediaries. In many jurisdictions, intermediaries are required to pass on all the payment details they receive.”