20022 in 2011: The Emergence of a Standard
by Helen Sanders, Editor
XML ISO 20022 and the benefits
The ISO 20022 standard provides the financial industry with a common platform for the development of messages using standardised XML syntax. Currently, corporates that operate internationally typically have multiple formats for exchanging data with their banks. This means that interfaces are cumbersome to maintain (even if using a single channel such as SWIFT, as banks require/provide data in different ways). Automated processes such as reconciliation are impeded as rules cannot be applied consistently and banks provide and require different levels of detail.
By standardising the way that data is exchanged between banks, between banks and corporates, and between corporates’ own internal systems, integration of systems and processes is far easier, and greater automation can be achieved. It also prevents companies becoming too reliant on an individual bank if their data and processes become entrenched.
SEPA payment products are based on ISO 20022 so by the migration deadline, all corporations in Europe will be using ISO 20022 for at least some of their payments; however, the standard has far wider applicability and can be used as a standard for payments globally.
The ISO 20022 standard for financial messaging has developed strongly over recent years, with growing corporate adoption and considerable commitment to success across the industry. There remain, however, some misgivings about the feasibility of a single standard that can be adopted and interpreted in a consistent way across a diverse financial community that comprises banks, vendors and corporates. Previous attempts, such as EDIFACT, have achieved a certain degree of success, but have never won universal acceptance. However, ISO 20022 has been introduced to a different marketplace than previous standards have been.
Firstly, the new SEPA payment products are based on ISO 20022 standards, which guarantees a certain degree of take-up on a pan-European basis.
Secondly, there is far greater recognition of the value of collaboration than there has been in the past. The days of limitless budgets are over, and banks need to prioritise where they put their investment dollars. The process of exchanging financial messages delivers no competitive advantage; however, the quality of information that is exchanged can be a major differentiator.
Thirdly, the change in the banking landscape also means that corporates have a louder voice. Today’s biggest corporations are a great deal larger than any of the banks, and are prepared to exert their influence on the development and priority of initiatives that enable them to exchange financial messages globally in a consistent way. This article features the views of five of the banks that are playing a leading role in the development and adoption of ISO 20022 on how the standard is progressing, the challenges, and how it is likely to develop in the future.
Wherever in the world a company is located, the reasons for implementing ISO 20022 are consistent.
Adoption of ISO 20022
There are already a number of corporate ISO 20022 case studies in publications such as TMI, and featured at treasury conferences, but it is often difficult to determine whether these companies are isolated examples or reflective of a wider trend. Rene Shuurman, Director – Global Product Manager, Connectivity Services, Citi Global Transaction Services, believes the latter,
“We are now past the initial early adoption stage when only the most visionary companies were implementing ISO 20022. Based on those early successes, ISO 20022 has been embraced by the mainstream group of companies and every RFP now contains questions about the standard. For example, we have now supported more 60 clients to implement ISO 20022. Although this is still not a huge number of organisations, it is very significant bearing in mind the complexity of some of these projects that involve transforming every element of corporate-to-bank communication, and often between internal systems as well. For early adopters in particular, there often had to be agreement between banks on a uniform deployment of the standards, so these projects represent a major milestone.”