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I keep hearing about ISO20022 and notice that umpteen standards committees are in full swing together with SWIFT who are somewhere in the middle but what are they trying to achieve, for whom and for when? There appears to be a general agreement that ISO20022
is necessary but why and how will it be beneficial? In short there is an increasing amount of noise being generated about ISO20022 within standards but a deathly silence when it comes to the
real business benefits and how it will produce tangible rewards for financial services firms.
It seems to me that ISO20022 has created too many groups beavering away behind closed doors, who are way ahead of themselves in agreeing things, before a clear business case has been made and I wonder who will be producing one and by when?
I have been using ISO20022 for more than 2yrs now, comparing my pre-ISO20022 days, most interfaces were Pt-2-Pt and txt (then mostly MT based).
With XML as an evolving format with Java in steep use, ISO20022 has helped all banks, particularly in payments across the Supplier Chain - Product Suppliers, Banks, Corporates to commonly agree and exchange data. Though there are still numerous issues around
the formats, DTDs, etc.. but thats how Common industry-wide formats evolve.. i believe!
Thanks for your comments and totally with you
XML is now 10 years , so it’s about time that the financial world started embracing this technology. The question is why XML is a good format. You can read some examples of its benefits here:
The working of the ISO standard committees is quite transparent and everybody have the possibility to comment on the formats but few bother. SWIFT is pushing for the creation of many of these formats, as they realise SWIFT needs to update and one day drop
the old MT formats.
You probably rarely find a business case where an existing format is removed and replaced it with the ISO20022 XML format just for the sake of it. However, the business evolves and new processes and services are formed and some manual processes are automated.
When this happens it is only natural to implement this service in XML rather than continue with the outdated MT type formats. For example, with ‘Exceptions and Investigations’ the banking community is trying to automate manual processes and it is logical to
embrace XML and create a new ISO20022 standard supporting these new processes. Furthermore, we have an ocean of different national formats for payments and cash reporting. Again, standardisation of these formats will reduce the complexity of corporate to bank
communication and increase the STP rate.
It is difficult to find a business case for an individual corporate to replace a functioning interface with ISO20022, but for the community it makes sense to move to the latest technology platform. Individual corporates will then slowly embrace the new formats
as they upgrade their systems or implement new ones.
Thanks for this comment and I think you have answered the problem.
There is no business case!
How is ISO20022 going to be implemented without a business case?
I understand the values but without a business case will it just be another case of standards committees spending huge ammounts of time and effort and no doubt money, producing a solution that no one understands or wants?
Just because there is a solution this does not mean implementation unless someone can produce a compelling business case?
So is anyone out there with a compelling business case for the industry take up of ISO20022?
Actually, there are several business cases and I’ll explain a bit more about two of them.
I mentioned the new formats made for ‘Exceptions and Investigations’. There are 16 new ISO 20022 messages that will replace the old MTx99 free form messages. This will largely replace manual processes with processes that are supported and traced by systems.
Surely the banks involved in this see a business case, otherwise they would not do it.
The same is with the new format for bank-to-corporate bank account reporting. Ask the four pilot customers why they do it. Andreas Unterste from Dow Chemical, who is one of the pilot customers, said at Sibos this year that Dow will start a new project to
implement the ISO standard. From this they expect to achieve more consistent cash reporting globally, richer and better structured data, improved reconciliation, faster real-time reporting, and ultimately, improvements on cash reporting.
My point about it being difficult for an individual corporate to find a business case was related to a standalone ISO20022 project. Corporates will take up the ISO messages when they upgrade or change system or change bank. Because then they will test interfaces
anyway and may as well change to the more universal, richer, more flexible, and more modern format. At this time the marginal cost of switching to a new format is much lower, which gives you a strong business case. Edifact for example is no longer maintained.
Should the recent finance crisis for example lead to legislation that requires new or more information in payments, it may not be supported by Edifact. Nobody likes to rely on outdated technology.
It‘s just like when I get new tires for my car. I don’t specifically drive to the garage to get new tires (unless I really have to), but when the car is in for a service, I ask the mechanic to look at the tires. If they cannot last until the next service,
I get new ones.
So in most cases corporates don’t want to change the format if they are working. However, when other things change, which require them to retest the interfaces, they may just as well switch to new interface formats with an improved profile.
Thanks for your comment
OK, you have identified some operational efficiences that could be of interest. My first question as a budget holder would be,what cost? Second how much more business can I do and third what is the saving?
Can you give some insight on the cost benefit analysis?
Perhaps you could also say if you think this is a ISO15022 replacement or additional message. If it's a replacement, whats the cost?
I am always wary when network suppliers and consultants/vendors tell me of the value and straight away tell me its modern and future proof and then its going to cost huge amounts of money and no immediate payback.
To your earlier comment, ofcourse there cannot be a business case for implementing ISO20022, but coincidently most of the banks (atleast in UK!) are on a major transformation drive helping implement the new format.
- To support increase in volumes in thier Global Txn banking business and they also have to retire thier multi-decade old mainframe systems (chk the blog
- Implementing compliance (SEPA, FPS)
- Acquisitions and increasing global footprint
There maybe some but so far the general feedback is that ISO20022 will be a very very slow burner. The banks have other priorities now and the bussiness case is too thin to warrant the cost.
It looks like from the feedback the consultants are pushing but the users are more sceptical.
No one disagrees with the overall value but there is no concenus for implementation time frames
So no revelution with ISO20022 but very slow evelution
There maybe some but so far the general feedback is that ISO20022 will be a very very slow burner. The banks have other priorities now and the business case is too thin to warrant the cost.
It looks like from the feedback the consultants are pushing but the users are more skeptical.
No one disagrees with the overall value but there is no consensus for implementation time frames
So no revolution with ISO20022 but very slow evolution
ISO 20022 covers four business domains within the financial industry and within this it covers many processes. It is also being extended to cover even more. Some of the messages are designed to cover new processes and others are designed to replace (or co-exist
with) existing messages.
You can't just put all these messages in to the same bucket and generically talk about whether ISO 20022 is good or bad, worth it or not, and whether it is succeeding or not. You have to be more specific.
Let me continue to comment on what I know about: Corporate-to-Bank communication.
The world has moved on since the ISO 15022 was defined. At the same time more processes needs to be automated so new message types needs to be created. I assume you don't suggest that these new messages should be created using the old syntax. It is only
natural to create new message types in XML format - hence the new ISO 20022 format.
From a system point of view, XML messages are actually easier to work with than any other format. For most contemporary systems XML is the default format when exporting data. It is therefore easier to create a payment order file in the ISO 20022 pain.001
format than to create the MT101 file for example. Hence for new system implementations it is only natural to use this format. You have your business right there. XML costs less to implement when you implement new systems.
As I have pointed out finding a business case to replace an existing format in use is more difficult, but not impossible. For example, if your old bank account reports don't give you enough information and the new ISO 20022 format promises to improve the
daily cash flow forecasting you can fast compare the implementation costs with better yield on your cash reserves.
Thanks for this explanation
I agree with what you’re saying and i understand the advantage of ISO20022 and accept that there are cost savings in developments and how simple messages can be created
My demand for a business case for a bank is purely after a cost benefit analysis that also describes how much more business i can do at a cheaper price and how more competitive my business will become and how i can service my customers better.
As you will know the weakest case for more budget is cost saving and efficiency. In these times an if it not wrong why fix it will persist.
19 Sep 2007
This post is from a series of posts in the group:
A community blog about data and how to manage it