Demystifying standards: Why they matter and what’s next

Open APIs

New technology, and new applications of existing technology, are on the cusp of revolutionising the financial services industry. Open Application Programming Interfaces (APIs) is one example of how new technology is poised to challenge the structure of traditional banking systems and potentially alter the landscape of financial services providers themselves. Since the 1970s, the automation of the financial industry has been dependent on standardised messages that have evolved over the years to meet the need for new processes and data. The question today is whether common messaging standards will continue to form the basis of seamless interaction for these new technologies and applications in the future, hence allowing institutions to reap the full benefits of interoperability whilst minimising risk and cost. 

ISO 20022 is a global success. In the next five years the standard will dominate high-value payments business.

Open APIs have revolutionised mobile technology, and regulators would like to apply the same principles to the financial services industry to make it more open and competitive. The European PSD2 Regulation and the UK Open Banking Order will require banks to offer access to account balance and payment initiation services to authorised third parties via APIs.

The risk of non-standardisation in this new landscape would mean a complex world of each bank designing its own implementation. Whether we are talking about service aggregation or downstream compatibility with back-office systems, the potential for data to be misinterpreted or corrupted as it flows through the financial system would be great, meaning an increase in risk and cost for enterprises.  

There have been several organisations looking at the standardisation of APIs for banks, with many referring to ISO 20022 as the standard to be used for data exchange. This follows a logical evolution as the financial industry has been progressively adopting the ISO 20022 messaging standard over past years in order to deal with increased compliance and data demands. During Sibos 2018, the Standards Forum has dedicated an entire day to discuss this industry challenge and how ISO 20022 could be repurposed to support APIs. 

ISO 20022

In parallel, ISO 20022 remains top of Swift’s standards agenda at Sibos. Earlier this year, Swift launched a full-scale community consultation that set out the co-operative’s vision for migration of cross-border services to ISO 20022 and requested feedback from the industry on how and when migration should proceed.

“ISO 20022 is a global success,” says Stephen Lindsay, Head of Standards, Swift. “In the next five years the standard will dominate high-value payments business, supporting 80% of the volume and 89% of the value of transactions worldwide. The consultation comes at the perfect time and will give us good guidance to develop a roadmap for the future. We look forward to continuing this discussion with customers at Sibos.”

The formal consultation period closed in early June, with a final report expected before the end of 2018. The report will draw on the feedback from the consultation to propose a detailed roadmap for migration.

We hope delegates walk away with a greater appreciation for why standards matter in financial services.

With its ever growing popularity at Sibos, the Standards Forum offers a bit of everything from panel discussions to lunch and learn sessions for those new to ISO 20022 or APIs. Lindsay added, “The Standards Forum is stationed in the newly created Swift Hub this year. We are very excited about our new home at Sibos and really hope delegates walk away with a greater understanding of the key topics at hand, and a greater appreciation for why standards matter in financial services.”

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