Cash & Liquidity ManagementPaymentsSTP & StandardsAccess All Areas – SWIFT’s Role in the Standards Age

Access All Areas - SWIFT's Role in the Standards Age

Since its foundation as an industry-owned cooperative 30 years ago, the development of internationally-approved standards for the financial services industry has been at the heart of SWIFT’s activities. Throughout that period, the size of its user community has expanded to encompass banks, securities market participants, market infrastructures and, more recently, the corporate customers of our user base. The need for appropriate standards has grown accordingly.

From the outset, SWIFT has embraced the concept of open standards. While we do provide a network for our community to interconnect, we are happy for our standards to be adopted by any other messaging service or framework, including banks’ existing proprietary networks for communication with their corporate customers.

There are significant economies of scale to be gained if our community members can reuse their investment in the implementation of SWIFT standards to communicate not only among themselves, but also with any other counterparties they choose to.

Prior to the Memorandum of Understanding that gave rise to the current convergence initiative, SWIFT had already developed a range of corporate-to-bank messages, including payment initiation, status, credit advice and statements. RosettaNet was, in fact, an early adopter of these messages, which can also be used in Member Administered Closed User Groups by the SWIFT community.

These messages were a product of SWIFT’s new, ISO-compliant modelling methodology. Essentially this begins with an understanding of the business processes concerned. These are then modelled together with the necessary transaction flows and, once these models are validated, specific messages can be given physical representation in the desired syntax, such as XML.

The development process, which SWIFT has spent 30 years refining in line with its experience, is relatively straightforward, provided it is tightly managed. A very small modelling group is formed, containing experts in the field for which the standards are required. These experts are selected for their business, rather than their technical, expertise. The modelling group addresses two specific questions: what is required for us to perform our business processes; and what kind of information do we need and generate. From the answers to those questions, we determine where to find the information and what elements of information need to be exchanged between the parties doing business. Once we have the necessary content of the messages in business terms, we present our conclusions to a business validation group. This is a larger body than the initial modelling group and represents the future user community. The physical representation of the validated business content in XML is, at SWIFT, almost an automatic process. The key challenge therefore consists in ensuring that the business modelling is as accurate as possible.

The value of Convergence

One of SWIFT’s long-term strategic priorities is to promote the convergence of standards. This means allowing all financial institutions to speak the same language among themselves and with their suppliers, market infrastructures or clients. To achieve that goal, SWIFT is involved at three different levels simultaneously. At the apex of the process are the de jure international standards setters. These bodies – ISO and the United Nations – mandate the adoption of specific standards. We support them in defining an overall standardisation methodology and process that could be used not only by the financial industry but by other industries as well.

Within the financial industry, we promote this single approach to all the standards setters with initiatives that touch our community, including TWIST and others. Third, we work with those groups not directly involved in financial services, but whose efforts to automate their supply chain will at some point ‘cross the border’ into financial services. RosettaNet is an example of an initiative with which we have collaborated successfully in that regard. As we become aware of such initiatives, we inform them of what has already been developed using the common standardisation approach. More often than not, they’re happy not to ‘reinvent the wheel’.

Standards convergence has another tangible benefit for financial institutions as it avoids duplication of effort through involvement in diverse initiatives, each requiring a commitment of resources, often from the same institutions.

The core payments kernel is an excellent example of a practical approach to convergence. A number of banks were involved at the same time and in parallel, in SWIFT, TWIST, RosettaNet, IFX and OAGi. Often, those involved in one initiative were unaware of a colleague’s involvement in another. The Memorandum of Understanding signed in November last year provided a crucial opportunity for financial institutions to focus their energies in a way that would benefit them and their customers without squandering resources on duplication.

We recognised at the outset that this is not an amalgamation of initiatives. Each standards organisation has its own brief, defined by the community that established it. Starting with the SWIFT UML modelling for corporate-to-bank payments transactions and the messages already developed by the other organisations involved, the International Standards Team Harmonisation Group has, in the course of a few brief months, been able to agree on the data in the financial component of a payment message that any bank in the world should be ready to process and that all corporations in the world could send to any bank. Remittance information on the other hand, could be standardised by each industry according to its specific information needs.

To advance this process, we established an extended business validation group to validate the core payment kernel and it is currently assessing the work to date. Although the initial focus on payments initiation and status may appear narrow, it provides a solid framework for future extended collaboration in areas such as credit advice, statements and possibly even direct debits – although development in the latter domain should wait until the particular needs of the new Single Euro Payment Area are fully defined. Key to success is the commitment from all participating parties to include the ISO-compliant core payment kernel XML in their own standards.

We anticipate that, by the end of the year, the participating parties will publish their updated message formats giving the entire financial services industry and their corporate customers access to a core payments kernel in XML that is compliant with the latest ISO standards. The more application vendors that integrate this XML kernel and the more networks that carry messages containing this XML kernel, the greater the benefits will be for the industries that buy into this standards vision.

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