Published: October 01, 2009
Whilst the ISO 20022 XML journey only really started in June 2003, at SWIFT’s offices in La Hulpe, the progress in terms of harmonisation, coverage and most importantly adoption, has been amazing. Initially driven by a section of the corporate community under the RosettaNet PMP (payment milestone program), it embraced contributions from all of the major stakeholders – the banks, the software vendors, the standards organisations and the corporate community. The primary objective was to drive a single payment standard that could be used globally by any corporate, irrespective of size and sector and by any servicing bank regardless of location.
In the beginning and before the revolution in the corporate to bank environment, there was significant complexity. This was a direct consequence of the implementation of proprietary standards and proprietary banking technology.
It is widely acknowledged that there are three core components in the customer to bank space, which cover the following aspects:
Figure 1 provides a simple overview of the customer to bank challenge for the multi-banking corporate customer: multiple connections, with each interface typically requiring a different file format and sometimes a different security protocol. [[[PAGE]]]
This complexity increases costs, both in terms of the number and variety of physical connections and the ongoing IT development and maintenance support. However, these are not the only challenges – the lack of a global open standard has created the following additional challenges:
From the humble beginnings in 2003, the level and spirit of collaboration between the various banking participants has been unique. The banking community has generally accepted the corporate view – that the banks should not be competing on the file format, security or even the underlying method of connectivity. Figure 2 confirms the competitive space in the eyes of the corporate community, which is logically around service, coverage, price and value added solutions.
As a direct result of the corporate view, the banks have worked with SWIFT and a number of corporates and vendors to agree a common message implementation guide. While this first version has been published, the appetite remains to achieve a greater level of harmonisation as banks recognise the importance of supporting a truly global standard. Furthermore, the banks are continuing to work together to achieve consensus on common usability issues and requirements, through the CSTP (Corporate Straight-Through Processing) Bank Group. This was formed back in June 2003 and is open to all banks who want to join the collaborative efforts around message harmonisation.
Considering the above, XML does deliver in terms of the original requirements of achieving a single global standard as banks continue to follow the spirit of the original discussions. [[[PAGE]]]
XML provides the opportunity for corporates to achieve ‘simplicity through standardisation’.
From a corporate perspective, the argument in favour of a global payment standard is overwhelming. The benefits can be achieved throughout the entire financial supply chain process, as the following points highlight.
The XML roll-out and adoption is clearly gaining momentum, as more corporates start to take the first step on the road to adoption – investigation and initial analysis. Whilst the fact SEPA transactions are typically initiated via the XML payment initiation message, the XML message set offers so much more in terms of coverage, functionality and richness of bank services. The timeline in Figure 3 provides an overview of the evolution of XML to date.
This also confirms that the core messages for payments, collections, status acknowledgements and account reporting have all been defined, reviewed, signed off and published on the ISO website. The focus is now firmly on adoption, both in the SEPA community and globally. Indeed, if you consider the usage profile of the early adopters, a large percentage are actually processing transactions outside of the SEPA community, emphasising the global benefit of this new messaging standard.
Figure 4 confirms that for the first time ever, corporates now have the ability to use the same single message to initiate multiple payment types – globally. And just to clarify, by ‘same message’ we actually mean a single implementation of the message, which will be received by the various banking partners.
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Whilst collectively we have made significant progress since these early beginnings, HSBC was one of the first banks to recognise the global importance of this initiative during the early stages. Although some debated whether XML would ever satisfy the early expectations, HSBC acknowledged that the introduction of a set of messages that would simplify the multi-banking environment would solve one of the main challenges in the corporate to bank space – complexity through proprietary standards. The landscape was clear - standardisation was inevitable and the competitive boundaries would change for ever.
As a strong advocate of ISO 20022 XML messaging, HSBC has been pro-actively involved in the on-going evolution of this standard through its work in various industry working groups. This in turn has helped HSBC develop a strong XML messaging capability, which leverages both its unique and extensive global footprint and existing value added cash management solutions. Despite the challenging economic conditions, HSBC is continuing with its strategic vision of rolling out its XML capability across all countries by 2010. Significant progress has already been made, with Asia, parts of Europe (including SEPA) and Latin America, the Middle East and the US/Canada already live.
At a messaging level, HSBC has initially focused on the following three core messages:
Development of the remaining set of XML messages will be progressed in due course, based on the core HSBC service proposition and customer demand. The Direct Debit message is currently under definition with a view to going live later this year.
While from a functionality perspective HSBC is now live in 33 countries (plus SEPA), from a payments, status reporting and end of day statement messaging perspective, the focus remains on supporting the numerous implementations currently underway. Through our close interaction in the standards world and via the various industry working groups, like the SWIFT Early Adopters Working Group, HSBC has been able to help guide the initial early corporate adopters through the challenges of an XML implementation. Indeed our unique approach is helping corporates all over the world to have a more positive experience around banking integration.
Despite the challenging economic conditions, HSBC is continuing with its strategic vision of rolling out its XML capability across all countries by 2010.
In June last year, IKEA became one of the ‘early adopters’ of the new global ISO 20022 XML payment message standard and HSBC’s first live customer. This project covered IKEA sending the payment initiation message (pain.001.001.02) to make ACH (batch) and RTGS (real time gross settlement) payments from a UK bank account including SEPA (Single European Payments Area) payments. In order to complete the automation of the end to end process, HSBC is returning the associated payment status report (pain.002.001.02) which provides both the file level and individual payment level status. As HSBC continues its global rollout of XML across its footprint, the plan is to continue working with IKEA across other countries. In June this year, IKEA also went live with the associated XML statement message (camt.053.001.01).
In October last year, HSBC went live with Unilever. The scope of this project was to initiate payments across 17 countries in Asia. We are now completing the testing in the final country and from the progress so far, the benefits of adoption are clear. [[[PAGE]]]
With five live customers and a significant number of implementations now underway in a number of countries, it is clear that XML is the future and the future is now. There is a big wide world out there and XML is simplifying the ability to process transactions in these countries, using a single messaging standard.
Now whilst a single harmonised message is already reality for some corporates, there are some steps around the underlying implementation process that should be followed to ensure this is also a reality for you, but that is a question for another day.
Conclusion
Whilst the path to XML adoption is still in its infancy, it is clear from the initial early adopters that the financial and operational benefits are very real and adoption is the right approach. Selecting the right partners will help ensure that your XML experience is extremely satisfying.
Notes:
1. The RosettaNet organisation is a self-funded, non-profit 520 member consortium dedicated to creating and implementing open and industry wide e-business process standards in information technology, electronic components and semiconductor manufacturing. This programme is aimed at reducing processing costs through automating accounts receivable reconciliation and improving the flow of payment information to facilitate the efficient and timely use of available funds.
2. ISO: International Organisation for Standardisation. Responsible for the standard 20022.
3. XML: eXtended Markup Language. A simple, very flexible and easy to read text. Format.
4. Payment Standard Evaluation Group: The ISO expert sub-group responsible for the review and ongoing maintenance of the XML payments message set.
5. SEPA: Single European Payments Area. This is an initiative for the European financial infrastructure where a euro-zone has been created in which all electronic payments are considered domestic.
6. SWIFTnet FileACT is a file based transfer protocol.
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