why is there so much talk about xml and iso 20022

8/13/2019 Why is There So Much Talk About XML and ISO 20022

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Why is There so Much Talk About XML and ISO 20022?

Olli Khknen! "ordea # 22 May 20$2

The har%onisation &ork on XML standards! the introduction o' the sin(le euro

)ay%ents area *S+,A- and the initiati.es to e%bed XML into enter)riseresource )lannin( *+/,- syste%s are 'actors dri.in( to&ards 'urther

&ides)read ado)tion and )ro%otion o' XML and ISO 20022! the 'uture

standard 'or the 'inancial industry

Banks and corporate clients have for years been frustrated about the lack of end-to-endstraight-through processing (STP) in the market for wholesale payments. !"#$%T& an

international electronic data interchange standard developed under the 'nited ations&

tried to deal with this problem& but did not succeed& mainly because it never was acceptedas an international standard. ow& a new format plus a new standard have entered the

scene e*tensible +arkup ,anguage (*+,) and "S //. But will they be able to

address this deficiency more efficiently0

"t seems so& and the benefits are obvious. *+, and "S // are not a proposition forthe future1 they can be achieved and implemented today. +ore and more users are

seriously taking-up *+,& even though the standard is still new and young in its lifecycle.

The harmonisation work on *+, standards& the introduction of the single euro payments

area (SP$)& the initiatives to embed *+, into enterprise resource planning (2P)systems and the limitations of electronic data interchange (!") are all factors driving

towards further widespread adoption and promotion of *+, and "S //& the future

standard for the financial industry.

XML and its Ob1ecti.es

riginally& *+, was a synta3 used for transporting inventory data& but later it was

e3tended to cover a wide range of services& such as financial data. Today& a standard

*+, core payment kernel for corporate-to-bank payment initiation and status messagesis available. This core payment kernel consists of an agreed set of key financial data

components re4uired for a payment message in any currency. The payment kernel can be

processed by any bank irrespective of location and can be issued by any corporation

irrespective of the business line.

Two factors in particular have been critical to the success of this pro5ect. #irst& all partiesagreed to use the latest "S standard& "S //& for the definition of the core payment

kernel message models and *+, schemes. Second& all have committed themselves to

include it in their own e3isting sets of standards. The ob5ective of "S // is to enablecommunication interoperability between financial institutions& their market

infrastructures and their end-user communities& all using *+, messages.


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lobal XML Messa(in(

+any international forums have been working to develop the new "S // messages

and several banks have participated in this work& including ordea. ne of these6ground-breaking7 forums is the %ommon 8lobal "mplementation (%8") 9orking 8roup&

which was established in //: by ma5or global banks& corporates& 2P vendors andS9"#T. The goal of this forum is to ensure the introduction and success of *+, on a

global level. The overall ob5ective of the work is to simplify implementation forcorporate users and thereby to promote wider acceptance of "S // as the common

*+, standard used between corporates and banks.

So far& %8" has published a set of implementation rules covering the latest versions ofcredit transfer initiation (pain.//;)& payment status report and account statement report.

9ork will be carried forward to include credit and debit notification reports& transaction

reporting and direct debit messaging.

+/, 3endors and XML

+a5or players in the global transformation of the present financial infrastructure are the2P vendors. %lose co-operation with the software vendor community is therefore

important. Banks are currently co-operating with 2P vendors& including S$P& about

implementing the %8" *+, standard& so it can be understood and used by all banks and2P vendors. "n addition& S9"#T is working with 2P vendors to help them integrate

the new "S // standards.

+ost of the ma5or 2P systems are already supporting *+, which means that

corporates do not need to custom-build solutions. The move by 2Ps to embed *+, into

their systems and core business applications will no doubt encourage the whole progress.

+4I5s Loosenin( ri)

The current !" systems and standards were insufficient in aiding the reconciliation

process. *+, is well placed to supersede !"& but naturally this change will take placeover a number of years.

Today& !" is accommodated in most bank systems because many customers are still

using it. But mapping across applications and the lack of clarity across legacy formats

makes the task of getting a reconciliation number across the clearing system a daunting

task. !" and *+, are likely to co-e3ist for some years.


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throughout the euro area from a single payment account using a single set of payment

instruments as easily& efficiently and safely as they can make payments today in the

domestic conte3t. $mong the first to benefit from SP$ are all customers doing businessor travelling within the '. ver time& the benefits of the standardised and more

competitive infrastructure will benefit citi=ens.

SP$ will have a huge effect on accounts payable ($>P) and accounts receivable ($>2)&

as all SP$ countries will replace their standards and automated clearing houses andadopt new formats and networks. SP$ will be an accelerator for the adoption of new

technologies and more universal formats& such as *+,& and it will allow more

information to be transmitted through the payment systems.

n an end-to-end basis& the uropean Payment %ouncil (P%) is going down the *+,

road in its re4uirements for the implementation of SP$. $ll banks will offer the *+,

format before the end dates. *+, will be the format used for customer file content to and

from the banks.

The +nd 4ate 'or S+,A I%)le%entation

"n !ecember /;;& the ' %ouncil completed the process for creating a regulation that

establishes technical re4uirements for credit transfers and direct debits in euros& and end

dates towards their implementation replacing e3isting national instruments. Theregulation was finally approved by the ' Parliament in #ebruary /;.

The regulation sets the migration end date of ; #ebruary /;?. #inland& as a full euro-

member country& took a faster national path to migrate credit transfers already by /;;.

The solutions used are fully compliant with the coming regulation. on-euro countries

(such as !enmark& orway and Sweden) will have a longer transition period untilctober /;@.

The new regulation puts an end to speculations which were inspired by the slow

voluntary migration from legacy to SP$ products. ow& the users of payment serviceshave a firm perspective and certainty to invest in and complete the changes re4uired to

start using the new services based on SP$ infrastructure.

The coming end dates will no doubt force all corporates to deliver SP$ payments to the

banks in the *+, file format only. The regulation will be even more interesting forcorporates in non-euro countries inspiring them to use %8" *+,& since from ctober

/;@ the ' will demand that all corporates use *+, for all payments and direct debittransfers between customers and banks. "f only the SP$ *+, definition is used&corporates will have to deliver one file type for euro payments and another file type for

domestic payments. %8" implementation plans allow more fle3ibility for corporate

clients to make several payment types& such as salaries& urgent payments& domestic& andcross-border transactions& with a single implementation guide& and the market is already

seeing solutions where payment is a payment is a payment.


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"ordic 7ar%onisation

The first "S // implementations in the ordic countries were based on version for

payment messages and payment status message. $ll ordic banks present in #inlandhave implemented this. The ne3t "S // version for payments& version A& is used by

the %8" forum. Banks are therefore supporting two parallel versions and naturally thegeneric recommendation is to use the latest one. "n case there is a burning need to go for

the ne3t versions (which are not yet even in the pipeline)& then the oldest will be droppedand not supported by the market. eedless to say the transition will take place over a

period of time.

%omplying with the re4uirements of SP$ schemes and the new regulation has re4uiredordea to invest in changes in the payments systems in all 6ordea countries7. The bank

today offers %orporate e8ateway as a single point of entry for corporates& which supports

one technical interface in terms of file format& communication and security. ordea will

add *+, format to this service and has already implemented the payment& credit>debit

advises and the account statements.

The purpose of implementing *+, is to deliver harmonised file format services to

ordea customers whether they are operating on a local or global basis. This process will

make sure that information is delivered and>or received according to globalstandardisation rules ("S& %8"& S9"#T& etc) in worldwide standard formats& such as

S9"#T #"& !"#$%T and *+, "S // formats& and the relation of information

across these messaging formats. This work will include message implementation guidesand customer documents.

8onclusion

ordea believes that the "S // standard and the %8" implementation guide will be

the main stream for standardisation and implementation in 2P systems for the comingyears. +oving to %8" *+, will be a huge advantage for both corporates and financial

institutions.

There is still much to be done to reach a consensus on how "S //-based payment

message standards should be used and implemented. #inland is ahead of the pack inurope& but naturally this will change with the forthcoming directive (through the SP$

%redit Transfer (S%T) and SP$ !irect !ebit (S!!)). #ull benefits wont be realised

until there is a critical mass of banks& corporates and 2P vendors all using the same

standard and implemented in a similar fashion.

why is there so much talk about xml and iso 20022

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