Standards are more than messages

At the occasion of the 2016 Standards Forum to be held from 26 to 29 September in Geneva, I interviewed a number of SWIFT standards experts about the content of this year's programme. As each of the four days will focus on a specific theme, my four blog posts will offer readers a sneak-preview of what people can expect to hear about.

Day 4: Standards are more than messages – The value of standards is about more than just messages. On the closing day of the Standards Forum, we want to explore how the standards community is rising to the challenges of semantic data, reference data, metadata and the potential value of standards to business and information architects. This will be a great opportunity to refresh your understanding of what ISO 20022 is; you may be surprised!

1. Data Ethics in the Internet of Financial Things

How does the Internet of Things (IoT) relate to SWIFT and financial standards? Can you mention some of the opportunities and pitfalls lying ahead?

Stephen Lindsay, Head of Standards, SWIFT

The impact of IoT can be compared to the digitisation of physical goods. Things we can do easily today by exchanging money, we could just as well do digitally. As we use standards for payments, securities and so forth, we could envisage applying these standards in our day-to-day world. In this context, I would like to refer to a paper written by Mr Elon Musk about the future of Tesla, in which Mr Musk explains his vision of self-driving and car sharing.

In this paper, Mr Musk asserts that when self-driving will be approved by regulators and become main-stream, people will be able to summon their car from wherever they are. Once on board, they will be able to proceed with their business, sleep or do whatever, until they reach their destination. Apparently, most cars are only used by their owner for 5-10%. That means that people, for example when they are on vacation, will be able to add their vehicle to a shared fleet, thus having their car generate income, off-setting purchase or lease cost. The bottom line is that this would significantly lower the cost of ownership, making it possible for anyone to co-own or co-lease a self-driving vehicle. Such initiatives will represent a real boost for IoT. Projects such as this one will require building bridges between various industry standards, emphasising the importance of business standards, one of the foundations of ISO 20022.

Jamie Osborne, Standards Research, SWIFT

Most of the activities that IoT devices engage in today are purely technical or operational monitoring and reporting, such as temperature, energy consumption, water flows, heart-rates, but as Stephen hinted at, IoT activities increasingly have financial considerations.

Building on Stephen's example in the Tesla paper, it is obvious that a self-driving car that is operational 24x7x365 must be road-worthy at all times. This means paying to keep itself charged, serviced, insured, tax-compliant, etc. Perhaps on paper this car is owned by a real person or by a corporation, but in reality the car will make its own decisions about its day-to-day finances as it highly undesirable to be sitting around waiting for human intervention at any point. The car must decide how much to charge its users for a ride, how much to pay electricity providers, insurance companies, toll booths, mechanics, loan repayments, etc. – everything it needs to keep itself in business. Because there's no human discretion, the business rules by which these financial transactions happen must be defined with absolute precision and zero ambiguity. This is where business standards come into play!

As past industry investment on technical standardisation supported the exponential growth of devices connected to the IoT, we now need investment in financial business standardisation to support the increasingly complex financial operations that IoT devices are participating in. Business standards are needed to agree upon the meaning and content of shared data, business processes, roles and responsibilities, etc. This becomes even more critical to ensure correct processing, as IoT devices communicate with more mainstream financial players, such as financial institutions that hold their accounts.

Fortunately, we aren't starting from scratch, because the same financial business standardisation rails that drive efficiency across financial services can be re-used to ensure straight-through processing and business interoperability across IoT devices. As Stephen mentioned, those rails are rapidly evolving towards ISO 20022.

2. Reference Data and Semantics – New challenges and solutions for standardisers

How are semantic data important for the Internet of Things? The Sibos audience will want to hear about its impact on the financial standards landscape in the years to come. What can you tell us about this?

Andrew Muir, Head of Standards Operations, SWIFT

Just a few years ago, the financial business process landscape was relatively stable – and it was the world of standards that was changing. Now the balance is the other way around. Financial data standards are at least adolescent, if not fully mature; it is the world of business relationships, processes and platforms that is changing fast. This challenges the standards community to ensure that new participants are fully aware of the business standards that are already available; so that time and effort is not wasted on reinventing the wheel, and so that we don't see a raft of interoperability problems as the new systems start to interact with those in use today.

Looking briefly at the emerging IoT, it is interesting to predict semantic data misunderstandings between everyday objects, and fascinating to examine their potential impact, as Mr Scott Smith, Founder and Managing Partner of The Changeist, will help us to do at Thursday's opening session of the Standards Forum. When we start to discuss the impact of similar misunderstandings on our world, the need for properly authoritative semantic and reference data definitions becomes worryingly desperate.

However – there are significant challenges to overcome. Incredibly, it seems that we're still much better at designing standards than we are at making them known, attractive, accessible and consumable by new audiences. How can those new audiences access and consume this vast ISO 20022 e-Repository to best effect? How far can we already go down the path of preparing for an interoperable Internet of Financial Things? What can the standards community do to help, and where should the leadership imperative come from? Join this discussion at the Standards Forum; the opinions of all standards professionals and users are welcome, and important!

3. ISO 20022 for Architects / ISO 20022 for Beginners

What is the magic lotion that is making ISO 20022 the lingua franca for standards setters across businesses?

Jamie Osborne, Standards Research, SWIFT

In my mind, one of the keys to ISO 20022's success is that it was conceived from the outset to harmonise the fragmented financial standards landscape. It is not a coincidence that ISO 20022 is syntax-independent and is free and open to anyone in the industry to participate in. Everybody can implement it, whatever business they are in, whatever software environment they operate, whatever network they are on. And anyone can freely download the ISO 20022 e-Repository of already-standardised content to help their implementation.

One of the lesser-appreciated reasons why standards setters are so attracted to ISO 20022 is that the standard includes an abstract, domain- and technology-independent business model. This business model offers universally-agreed definitions that make sense to business, legal, and technical experts – importantly, these definitions are traceable down to the actual financial transaction data. This is unique in the industry and is incredibly powerful. For instance, in the context of regulatory reporting and data aggregation, it is critical that all reporting entities interpret the specification of the data to be reported in the same way. Without this consistency, data from different entities cannot be meaningfully compared or aggregated, and the policy goals of the regulation can become difficult or impossible to achieve.

There are just some of the unique characteristics that have helped make ISO 20022 such as success, and they help explain why the ISO 20022 Registration Authority (RA) is aware of around two hundred initiatives deployed or in progress globally. 

Please also read the previous blogs in this series:

1. The financial industry's landscape and roadmaps

2. Standards and transformation

3. Standards and initiatives