March 16, 2023
Japanese Banks’ Payment Clearing Network
Building of the API Gateway and the Formulation of the Basic Policy
for the Next-generation Zengin System
Japanese Banks’ Payment Clearing Network (Zengin-Net, Chairperson: Matsuo Tsuji)
determined to build a new connection method using an application programming interface(API Gateway). The new method is expected to start in July 2025.1 This determination
was made from the perspective of improving the convenience and raising the cost
efficiency of both the existing member banks and funds transfer service providers willingto participate in the Zengin System.2
In addition, the “Task Force for the Next-Generation Payment Systems” and its working
group have discussed agenda including the direction to the future Zengin System during
this year, to prepare for the 2027 upgrade deadline of the current 7th Generation Zengin
System. Based on the results of the discussions and other relevant inputs, the Basic Policy
for the next-generation Zengin System has been formulated (see the Attachment).
As an operator of the Domestic Funds Transfer System, which is part of the social
infrastructure, Zengin-Net will maintain the appropriate and stable operation of theDomestic Funds Transfer System and the Zengin System. Zengin-Net will also continue
to work on improving the Systems in response to the needs of payment users, participantsin the Zengin System, and the society.
End

1 Based on the progress of preparations by member banks, the detailed schedule of starting services will bedetermined separately.
2 In principle, the costs for building and operating the API Gateway will be allocated proportionately to allparticipants in the Zengin System, except for certain expenses.

Japanese Banks’ Payment Clearing Network（Attachment）

Background of Formulating the Basic Policy for the Next-GenerationZengin System• The Zengin System has generally been upgraded every eight years since its launch in 1973. Six upgrades have been made todate, and the current system is the 7th Generation Zengin System, which started operation in 2019.
• In preparation for the upgrade deadline of the current system arriving in November 2027, Zengin-Net has discussed thedirection of the ‘to-be’ Zengin System in a forward-looking manner this year at meetings of the Task Force for the NextGeneration Payment Systems (the “Task Force”) composed of external stakeholders and member banks and those of aworking group established under the Task Force (the “WG”).
• Based on such discussions and other relevant inputs, Zengin-Net has formulated the Basic Policy for the Next-GenerationZengin System.
[History of the Zengin System upgrades]
Key changes
1st Generation (1973-)
2nd Generation (1979-)

3rd Generation (1987-)
4th Generation (1995-)
5th Generation (2003-)
6th Generation (2011-)

7th Generation (2019-)-•

Added payroll transfers to the telecommunication items; Allowed the participation of additional
business types in the system•

Added MT data file transmissions; The Zengin Center divided into two centers•

Extended the operating hours of telegraphic transfers; Expanded the range of the send date forpost-dated transactions•A paperless approach introduced to providing information via the information server system•

Introduced a new file transfer facility; Introduced RTGS to large-amount domestic fund transfers* In the intervening period (2018), the Zengin System initiated a 24/7 operation.
•Strengthened cybersecurity; Terminated MT data file transmissions, Reduced electricity
consumption1

（Attachment）

Japanese Banks’ Payment Clearing Network

Basic Policy for the Next-Generation Zengin System (Overview) ①
Concept and future roadmap• Given that the Zengin System is a critical infrastructure for Japan’s payment system and thus needs to be sustainable, thenext-generation Zengin System is expected to adopt a new architecture in a forward-looking manner.
• The next-generation Zengin System will contribute to further improving the convenience for participants and users by
simultaneously achieving at a high level (a) “safety” to maintain a high level of safety and service of the current system, (b)“efficiency” to improves the cost efficiency of participants by terminating or streamlining unused/excessive functions andenjoy cost-related benefits over the medium to long term, and (c) “flexibility” to be capable of responding to future changes
in the environment.
[Future roadmap]2Japanese Banks’ Payment Clearing Network（Attachment）

Basic Policy for the Next-Generation Zengin System (Overview) ②
Basic matters/Assumptions
Mission critical area•Grand
design••Coretechnology

Connection
methodAgile area

Realize a layered structure interfacing the “mission critical area” that assumes the Zengin System’s main operations (e.g.
domestic fund transfers, funds clearing) and the “agile area” that provides functions and services ancillary to the mainoperations.
In addition to delivering the agile area’s functions and services through implementing the functions into the Zengin
System, another potential option is to deliver them through interfacing with external systems.
Open technology* will be used while maintaining theon-premises in consideration of the following: thediscontinuation of sales/maintenance service of themainframe used by the Zengin System is alreadydetermined; there would be a concern about a cost
increase arising from future changes in supply anddemand; and hiring/retaining engineers is expected tobecome difficult.

••If functions are delivered in the Zengin System, plan toadopt open technology (on-premises or cloud system).
If functions are delivered through interfacing withexternal systems, the core technology used by thosesystems would be taken into account in the selection ofsystems, assuming the agile area’s roles depending on
the Zengin System’s core technology.

* Hardware and OS/MW will be shifted to the open platform andgeneral-purpose SW (open source/vendor products), respectively. The
programming language used is will be changed from COBOL to Java,etc.

•Seek to further control or reduce electricity consumption as part of ongoing initiatives to reduce greenhouse gas
emissions for achieving carbon neutrality.

•When the next-generation Zengin System goes live, bothconnections methods (i.e., via RC or API Gateway) will
be available. However, RC will be terminated by 2035 tomake the API Gateway an only available option.

••

If functions are delivered in the Zengin System, APIconnection will be used as the connection method forboth the agile area and the participants’ systems, etc.
If functions are delivered through interfacing withexternal systems, the connection method (APIconnection) would be taken into account in the selectionof systems.

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Japanese Banks’ Payment Clearing Network（Attachment）

Basic Policy for the Next-Generation Zengin System (Overview) ③
Operational, functional and non-functional requirements for existing operations/functions in the mission critical area
• In principle, functions, etc. that ensure the safety and service level of payments will continue to be used.
• From the perspective of improving efficiency, infrequently-used/excessive functions will be integrated or streamlined asmuch as practicable in consideration of the importance of such functions and their effects on participants’ systems.
New functions/services in the agile area
• Among the new functions/services, such as the Confirmation of Payee, Addressing Service, and Request to Pay, priorities will
be selected and necessary preparations will be made so that these additional functions can be implemented in a phased mannerin consideration of changes in user needs during the next-generation Zengin System’s operation period.
• Taking into factors including usability for existing and new participants, Zengin-Net aims to make the Confirmation of Payee
available from the go-live of the next-generation Zengin System.

[Overview and action plan for new functions/services]
New functions,etc.

Overview

Action plan

Confirmation ofPayee• A function that automaticallydisplays the payee’s name when thepayer enters the payee’s accountnumber and other information in IB,etc.

• From the perspective of improving usability for users, aim to make thisfunction available from the go-live of the next-generation ZenginSystem.
• It is necessary to compare and consider possible action options mainly
based on the system impact and cost.

AddressingService• A function that enables credit
transfers without entering deposit
account information if the user
enters information such as a mobile
phone number or e-mail address• It is useful to start discussing matters including the delivery method aspart of the preparation for its implementation initiative in considerationof factors such as future changes in environment and user needs.

• A function that realizes a payeeinitiated remittance flow

• It is useful to start discussing matters including the delivery method aspart of the preparation for its implementation initiative in considerationof factors such as future changes in environment/user needs.
• However, as this differs from the traditional remittance flow, it isnecessary to sufficiently consider the impact on participants in terms ofsystems, operation and other elements.

Request to Pay4

Japanese Banks’ Payment Clearing Network（Attachment）(Reference) Grand Design of Next-Generation Zengin System
Communication Cotra
line
CenterFinancial EDI (ZEDI)(Data interchange)

Participant (RC)

Mission critical area [Open (in principle, on-premise environment)]
Communicationline

Telegraphic transfer server

In-house systemRCNew file transfer facility server
New file transferfacility

Data exchange/storage server

Application

Participant (API)Participant
information
management

Device forapplication, etc.

Telegraphictransfer
New file transfer
facility
Collateralmanagement

Bank of Japan
GW server

Data received

Collateralmanagement

Communication Bank ofJapanline

Telegraphictransfer(Large amount)

BOJ-NET

Device forapplication, etc.

Control

Cotra

Telegraphictransfer

Common platform* Integration/redeployment according to functional characteristics

In-house system

Agile area [Open (on-premises or cloud system)]
Confirmation of Payee

APIGW

Addressing Service

Request to PayAPI* Establish an environment that can respond quickly and flexibly as an overlay
service for the Zengin System, and ensure quality as services ancillary toremittance, payment and other related services.

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Japanese Banks’ Payment Clearing Network（Attachment）

Timeline• Based on the Basic Policy, Zengin-Net plans to conduct an RFP in the first half of the next fiscal year, select adevelopment vendor, and start working on the requirements definition from the second half of FY2023.
• The approach to new functions and services in the agile area will continue to be discussed with external
stakeholders.
[Timeline of the next-generation Zengin System development]
FY2023Q1

Q2

Q3

FY2024Q4

1sthalf

2ndhalf

FY2025
1sthalf

2ndhalf

FY2026
1sthalf

2ndhalf

FY2027
1sthalf

2ndhalf

Development/implementation of anRFP
RFP assessment/Vendor selection
Requirement definition
DesignProduction/Unit test – System test
User acceptance test/System operations
testTransition(Note) The timelines for the design and subsequent processes are tentative and will be refined based on proposals from the vendor, etc.

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Japanese Banks’ Payment Clearing Network（Attachment）(Reference) Realizing Expansion of Qualification for Participationin the Zengin System•

On October 7, 2022, the Operational Procedures was revised to expand the qualification for participating in the Zengin System to include funds
transfer service providers.

•Upon the participation of a funds transfer service provider in the Zengin System, money transfers from a bank account to the account of the funds
transfer service provider, from the account of the funds transfer service provider to a bank account, and between accounts of different funds transfer
service providers will be made possible via the Zengin System.

•By ensuring interoperability in the Zengin System, seamless payment services will be delivered. This will solve potential issues currently faced byusers and other stakeholders, and contribute to further promotion of cashless payments.

•Zengin-Net plans to continue engaging in dialogue with relevant bodies and individual funds transfer service providers in order to enhance theunderstanding of the funds transfer servicer providers as a whole and to encourage their participation.
[Illustrated Structure after Participation of Funds Transfer Service Providers]
P2P Payment/RemittanceP2B Payment/Remittance(Account of Bank A)(Account of funds transfer service provider C)

Zengin System

Zengin System(Account of Bank X)(Account of funds transfer serviceprovider B)(Account of Bank D)

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Japanese Banks’ Payment Clearing Network（Attachment）(Reference) Building the API Gateway•

In September 2022, from the perspective of reducing the burden on both existing financial institutions and funds transfer service providers, ZenginNet determined a policy to build a new connection method using an application programming interface (API Gateway) during the period the current

7th Generation Zengin System is in operation (up to 2027), assuming that certain conditions such as ensuring the maintenance of the current level ofservice are met.
•In response, the Task Force for the Next-Generation Payment Systems (the “Task Force”) and a working group established under the Task Force
have discussed agenda including the expected start date of providing services and cost allocation rules in detail. Taking into account factors
including the intention of member banks and funds transfer service providers for using the API Gateway, and the timeline for developing the nextgeneration Zengin System, Japanese Banks’ Payment Clearing Network (Zengin-Net) decided to build the API Gateway, setting the expected

timing for starting the provision in July 2025, which is the earliest possible time to complete. *1, 2*1 The start date of providing will be finalized in consideration of factors including the progress of development and the status of system operation test participated by existing member banks and new
applicants seeking to use the API Gateway from the start of the service.
*2 In principle, the cost allocation rules will be applied to all members based on the beneficiary-pays approach (depending on the volume of payments), except for certain expenses.

[What is API Gateway?]➢ The API Gateway intends to achieve the standardization of connection
specifications by utilizing API instead of connection via a relay computer (RC).

Zengin System➢ The API Gateway aims to achieve cost reduction, enhanced flexibility of member
banks’ systems, and encouragement of new applicants to participate in the system
RCRC

RC

API Gateway

both from funds transfer service providers and banks by transitioning from RC(proprietary specifications) to API (standard specifications), while ensuring thesame service level as RC (e.g. performance, security).

Proprietary specifications

Standard specifications➢ Unlike an open API used in the financial sector (connect to financial institutions’systems to activate applications, and reference and update data), the aimed role of
the API Gateway is only to send/receive fund transfer data by a simplified
method (API) using standard connection protocols (e.g. HTTPS).
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