SWIFT releases discussion paper on use of financial messaging standard, ISO 20022, for unifying FinTech ecosystem
SWIFT (Society for Worldwide Interbank Financial Telecommunication) has released a new discussion paper on the use of the financial messaging standard, ISO 20022, for unifying FinTech.
New technologies have been proliferating in the last decade and are already transforming conventional banking systems as FinTechs and banks are working together to co-create the financial landscape of tomorrow. However, in the absence of adoption of common standards, the use of divergent technologies could lead to inefficient and ineffective fragmentation.
ISO 20022 is the universal financial industry message scheme developed in 2004 under the ISO Financial Services Technical Committee 68 (TC68). Since its inception, it has resulted in extensive adoption across market infrastructures, financial institutions and corporations.
SWIFT, the Registration Authority for ISO 20022, is working closely with the industry globally to standardise messaging and best practices. The discussion paper captured the opinions on the use of the standard in the context of established technologies such as RTGS and CSD systems, as well as new technological innovations such as contactless and mobile protocols, DLT (Distributed Ledger Technology) and APIs (Application Programming Interfaces).
The paper says that there are currently over two hundred and twenty ISO 20022 standards adoption initiatives in the global financial services industry. Over half of these are operating in a live capacity. There are more than twenty cases of ISO 20022-based financial market infrastructures in production mode in Asia, encompassing stock exchanges and central securities depositories (CSDs) in Singapore, Australia and Japan as well as real-time payment and settlement systems in India, China and the broader ASEAN region.
The discussion paper lists a number of benefits of ISO 20022 for FinTech innovation and says that it facilitates global interoperability. An open and collaborative standard, ISO 20022 can be used by any organisation and messages designed in a collaborative way. It provides the means to achieve uniform and unambiguous interpretation of the data exchanged among users, regardless of the technology used. The paper also says that the standard has a rich and proven data model and its repository contains reusable concepts and data components.
The paper clarifies that that it is not suggesting that FinTechs need to work directly together or to obtain funding from this ecosystem. Rather, the optimal way for a FinTech solution to be adopted would be to display interoperability by leveraging the use of ISO 20022 standards for financial messaging.
The paper notes the launch of the new Fast Track Maintenance Process in August 2017, due to which ISO 20022 can provide increased value in tune with fast-paced FinTech developments. Contrary to the current yearly maintenance cycle of ISO 20022 standards which typically spans three quarters’ of a year, this new accelerated process can be initiated at any time and may be reduced to as little as three months.
The paper also talks about the future evolution of ISO 20022 standards. Currently, the business layer of ISO 20022 standards are reusable. More work is being undertaken on the logical layer of ISO 20022 standards that define logical message definitions and the technical layer that defines physical syntax to optimally generate timely outputs in any required syntax. For example, while the ISO 20022 data models were created based on a messaging paradigm, their expansion must include concepts from DLT, such as read and write permissions.
In the areas of new addressing capabilities for real-time payments, ISO 20022 adoption is still evolving at the edges. This is giving rise to ISO 20022 recognising and incorporating concepts from compatible technologies to meet certain needs for realtime data processing in financial markets. The first ISO 20022 compliant API Resources are being developed and are estimated to be published by the Registration Authority around the change of year. Finally, the paper states that since a number of FinTech innovations focus on financial inclusion which remains low in many parts of Asia Pacific, ISO 20022 standards will have to evolve to support more financial services for retail and small enterprise levels, such as mobile payments, crowd funding, Islamic finance to name a few.