ISO20022 Messages | PACS (Payments Clearing and Settlement) and PAIN (Payments Initiation) | PACS.008 | PACS.009 | PACS.002 | PAIN.001 | PAIN.

When it comes to payments messages used in ISO20022, we see two acronyms have become increasingly important: PACS (Payments Clearing and Settlement) and PAIN (Payments Initiation). These message types are frequently used between financial institutions to communicate and process payments. Let's dive into what these messages are, how they're used, and what they're replacing in the payments ecosystem.

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PACS: Streamlining Payment Clearing and Settlement

PACS messages are designed to facilitate the clearing and settlement of payments between financial institutions. There are three key PACS messages that payments professionals should be familiar with:

PACS.008: The New Standard for Customer Credit Transfers

PACS.008 is the go-to message for Financial institution (FI) to Financial institution customer credit transfers. It's part of the Payments Clearing & Settlement Message Definitions within the Payments & Cash Management Business Domain. When a debtor agent (debtor's bank) needs to move funds from a debtor account to a creditor, they send a PACS.008 message to the credit agent (creditor's bank), either directly or through intermediaries.

This message type is primarily used for commercial payments and cross-border/international transactions. It's essentially replacing the older MT103, MT103+, and MT103 Remit message types, bringing more structure and efficiency to the process.

PACS.009: Facilitating Financial Institution Transfers

PACS.009 comes into use when one financial institution needs to transfer funds to another. Like PACS.008, it's sent by a Debtor FI to a Creditor FI, either directly or through other agents or clearing systems.

What makes PACS.009 has dual use. Not only is it employed for moving money between financial institutions, but it also serves as a cover message for settling PACS.008 transactions. In this latter role, it's known as PACS.009 COV, replacing the older MT202COV message type.

PACS.009 finds its application in treasury payments, cross-border transactions, and as mentioned, in covering customer credit transfers. It's the new equivalent of the MT202 message type.

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Please note: In ISO 20022, a "financial institution" (FI) is broadly defined as an organization that provides financial services. This includes, but is not limited to:

1. Banks
2. Credit unions
3. Investment firms
4. Insurance companies
5. Brokerage firms
6. Payment service providers

(mostly banks)

It's important to distinguish financial institutions from other participants in the financial system, such as corporations or individuals.

Although PACS.008 is exchanged between financial institutions (FI to FI), it represents a transfer initiated by or intended for corporations or individuals.

PACS.002: Keeping Everyone Informed

Coming to PACS family is PACS.002, the Payment Status Report message. This message plays a important role in maintaining transparency throughout the payment journey. The Instructed Agent (receiving bank) sends it to the previous party in the chain to report on the status of a payment instruction – whether it's been successful, failed, or is still pending.

PACS.002 can also serve as a rejection message when needed. Interestingly, this message type doesn't have a direct equivalent in the older MT system, highlighting the enhanced communication capabilities of the new messaging standards.

PAIN: Initiating Payments with Precision

While PACS messages handle the inter-bank communication, PAIN messages focus on the initiation of payments. Two key PAIN messages are reshaping how payments begin their journey:

PAIN.001: Kicking Off the Payment Process

PAIN.001 is the Customer Credit Transfer Initiation message. It's the starting point of many payment journeys, sent from the initiating party to the debtor agent. This message is used to request the movement of funds from a debtor account to a creditor.

PAIN.001 is taking over the role of MT101, providing a more structured and detailed way to initiate payments.

PAIN.002: Providing Payment Status Updates

Complementing PAIN.001 is PAIN.002, the Customer Payment Status Report. This message keeps the payment chain informed about the status of an instruction, whether positive or negative. It's replacing the MT198 message type, offering more comprehensive status reporting capabilities.

The Changing Face of Payment Journeys

As these new message types take hold, they're also bringing changes to how we refer to the parties involved in a payment journey. Here's a quick comparison between the MT103 terminology and the new PACS.008 terms:

• Ordering Customer becomes Debtor
• Ordering Institution is now Debtor's Agent
• Intermediary Institution translates to Intermediary Agent 1
• Account with Institution is referred to as Creditor's Agent
• Beneficiary is now simply called Creditor

It's worth noting that in complex transactions, there may be multiple Intermediary Agents involved.

Conclusion

The shift from MT messages to PACS and PAIN represents a significant evolution in financial messaging. These new message types offer more structured, detailed, and efficient ways of handling payment initiation, clearing, and settlement.

As financial institutions continue to adopt these new messaging standards, we can expect to see improvements in payment speed, transparency, and international interoperability. The future of financial messaging is here, and it speaks the language of PACS and PAIN.

Thank you for reading.

Santosh Kumar, GFIN

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