It is easy to think of ISO20022 as a Europe-only set of message definitions because of the machinations around SEPA, and so the broader value of ISO20022 and its global applicability can be lost when it is viewed only as a SEPA issue.
At Sibos 2010 I was delighted to participate in a panel discussion at the SWIFT Standards Forum hosted by Marc Delbaere, head of standards strategy and architecture at SWIFT. The other panelists were Richard Valk from ING Investment Management and Dominique Sheuren of Bizliner, and our discussion topic was the value of ISO20022 for internal and not just external use. We had a pretty lively discussion, because ISO20022 has typically been considered a ‘new standard’ for external integration of payments from banks to the outside world; but all of us could see tremendous value of adoption internally within banks. My view is that ISO20022 is in fact more an architectural component: a foundational element in any bank’s payments infrastructure. Because of a standard dictionary and defined transaction flows, it is a natural candidate for a ‘payments bus’ to transport transactions between applications, regardless of payment type.
I was asked a question about the likelihood of adoption in non-European markets – particularly the USA. One aspect is certainly that solution vendors more widely support ISO20022 because it makes their solution architectures more efficient. Banks in any country therefore stand to realize these benefits as a critical mass of applications support the standards – and more importantly – that are typically deployable globally.
But capability and adoption are two different things. Mass adoption still requires a forcing function. Are there drivers for adoption other than the unlikely (and unwelcome) event of it being regulated? Absolutely – although still in early stages, ISO20022 adoption can grow globally. For example:
· Growing use of the SWIFT MX messages which are XML based upon ISO20022 definitions.
· Green field payment infrastructures such as in China. CNAPS, the Chinese National Advanced Payment System, is a new national high value payments infrastructure and supports ISO20022. It’s a strong likelihood this will drive ISO20022 payments solutions within banks.
· Payment systems technology renewal – and the growing availability of ISO20022 based applications.
· Countries for which SWIFT is a national market infrastructure, such as Canada. I’ve talked to several of the big Canadian banks that are considering internal adoption as they need to renew payments technology. This may in fact be the beachhead into North America.
So what of the US? It is possible? Even in that most proprietary of domestic markets, there is a chance. Consider some of the activities currently in progress:
· The Common Global Implementation (CGI) initiative – and its adoption by major cash management banks and global corporate treasuries, such as Microsoft group treasury – is driving a unified standard implementation of ISO20022. Microsoft takes a leading role in CGI definition and adoption.
· Fedwire and the CTP format for extended remittance. Although not true XML or ISO20022, the CTP does use common data definitions. Banks adopting this may well adopt ‘pure’ ISO20022 in their internal systems and then do final conversion to Fedwire CTP.
Some of you may be aware that Microsoft is a founding member of the Banking Industry Architecture Network (BIAN) which maintains a proactive and complementary relationship to ISO and the value proposition of the ISO20022 standard. The payments service landscape being developed by BIAN defines business semantic models for payments and is integrated with the ISO20022 definitions and dictionaries. This gives banks the opportunity to define their payments business models in accordance with BIAN definitions, and implement actual transaction flows using ISO20022.
In closing. the following links provide additional information about BIAN, and also the specific collaboration between BIAN and ISO20022 in an article in Finance in Windows. Of course – you can always just drop me a note too – I’d like to hear your thoughts.