Standards are essential

Whenever the buzz of new technologies reaches a certain pitch, those responsible for integrating them into mainstream workflows start to ask questions. This relative reticence does not reflect a lack of enthusiasm. Rather, it is a recognition that for successful implementation, any technology needs to be able to work with what is already in place – at least in the short to medium term. This requires standards.

At Sibos 2017 Toronto, several sessions explored this theme, but one – “New Technologies and Business Standards” – tackled it head on. The point was made convincingly that end-users do not care about the technology a solution is built on: They will judge it by whether or not it does what they want it to do. That means agreeing sufficient common practices and procedures to support information flowing efficiently within and between the organizations involved.

ISO 20022 – a way to develop message standards

For some years now, SWIFT has promoted ISO 20022 as the standards glue for the industry. In a discussion paper released to coincide with Sibos, the industry cooperative pointed out that there are over 220 ISO 20022 standard adoption initiatives in the global financial industry. The paper suggested that, “entrenched as a common business language for the financial marketplace, ISO 20022 is firmly positioned as a unifier for new and contrasting Fintech innovations, such as Distributed Ledger Technology (DLT), Smart Contract (SC) and Application Programming Interfaces (APIs). The optimal way for a Fintech solution to be adopted is to display interoperability by leveraging the use of ISO 20022 standards for financial messaging.”

ISO 20022 was created by the International Organization for Standardization (ISO) as a way to develop message standards within the financial industry. It is designed to facilitate data interchange between financial institutions, and with their customers, users, suppliers, market infrastructures and regulatory authorities. ISO itself describes the standard as “a single, common language for all financial communications supporting interoperability between all parties – no matter where the business is based”.

Thorough as it is, a question raised in the session was whether ISO 20022 is nimble enough for APIs and DLT-based Fintech innovations. With ISO 20022 increasingly being harnessed for industry messaging beyond simple payments, its use for APIs would suit those institutions that are already ISO 20022-literate.

The ISO standard for APIs

In November 2017, following Sibos 2017 Toronto, 23 countries under the governance of ISO TC68 Financial Services agreed to work with China, Singapore and the UK to pool resources and to focus efforts on defining the first ISO standard for APIs in financial services. The end of January 2018 saw the release of “ISO 20022 and JSON: An Implementation Best Practices Whitepaper” by members of the ISO 20022 Registration Management Group and the Technical Support Group.

DLT and the lack of standardization

As for DLT, most projects are still at the Proof-of-Concept (PoC) stage. However, in January 2018, SWIFT and seven central securities depositories (CSDs) signed a Memorandum of Understanding (MoU) to work together to demonstrate how DLT could be implemented in post-trade scenarios, such as corporate actions processing, including voting and proxy-voting. SIX Securities Services is part of this group.

The International Securities Services Association (ISSA) recently endorsed the group and included it as part of a new work stream within its existing DLT working group. Thomas Zeeb, Division CEO SIX Securities Services and ISSA Chairman: “The work being led by the CSD working group on DLT is tackling a key challenge related to emerging technologies, which is a clear lack of standards. As the industry evolves, DLT-specific standards such as ISO 20022 will provide a great foundation, in terms of both existing business content and approach.”