New technologies and business standards

At the occasion of the 2017 Standards Forum to be held at Sibos in Toronto, Canada from 16 to 19 October, I interviewed a number of SWIFT standards experts about the content of this year's programme. During the coming weeks, my posts will offer readers a sneak-preview of what people can expect to hear about in Toronto.

During recent Standards Forums in London and New York, there has been a lot of talk about the advent of new technologies and how ISO 20022 is suited to support these. Today, I talked to Jan Noppen, Head of Tools and Methodology, and Kris Ketels, Lead Standards Architect, about this.

Paul Miserez: Jan, can you explain our readers in simple terms what these new technologies are and how they relate to the message standards (MT, MX) people have grown familiar with?

Jan Noppen: The main technologies that are emerging in the financial services industry are Application Programming Interfaces (APIs) and Distributed Ledger Technology (DLT).

APIs are not new in IT communication. They are frequently used when functionality offered to end-users by websites is needed by other applications. So typically, user-to-application (U2A) communication is evolving to application-to-application (A2A) communication. APIs captured the interest of financial services through implementation requirements of global initiatives, such as the EU's Payment Services Directive PSD 2, that recommend using APIs to open up markets to new types of participants whilst encouraging technological innovation.

DLT has evolved and adapted to the requirements of the financial services industry. DLT-based solutions provide an authentication and data distribution framework to participants, as well as a shared data model and workflow by using so-called 'smart contracts'.

Both API and DLT introduce a paradigm shift from traditional messaging in the sense that more of the data definition moves to the common space that is shared by the financial industry. When designing API calls (in- or outside of a DLT-based solution), they are usually more precise and concise than traditional MT or MX messages. The reason for this is, rather than carrying the entire business content in each message, APIs and DLTs can rely on an existing central resource state to allow for more concise specifications.

Miserez: What are the benefits of standardisation in the context of these new technologies?

Noppen: As I just mentioned, having APIs access a centralised application introduces a paradigm shift. A shared data model can easily be standardised. Application providers with APIs in the same business domain will typically have a common user community. Designing these applications with a common standard like ISO20022 in mind will lead to a more harmonised set of APIs. This is to the benefit of the entire financial industry.

Miserez: What makes the ISO 20022 business standard suitable to support these new technologies?

Noppen: First and foremost ISO20022 is a business standard. This means it analyses the business processes independently of the solution that will be used to implement these processes. As a next step we will determine how these business processes should be implemented; by using APIs, traditional peer-to-peer messaging, DLT, etc. Re-using the same semantic components in various implementations decreases implementation and maintenance cost.

Miserez: Is there any truth in the claims of some solution developers who say that the ISO 20022 process is too complex to be applicable to new technologies?

Noppen: Well, I would say to them that the benefits that apply to solutions development also apply to technology. Even more, using ISO 20022 can give these technologies a boost because they will benefit from a widely agreed framework of underlying business concepts and data definitions right from the start. Not to mention the ease of integration the technologies will enjoy.

Miserez: Kris, let me turn to you now. ISO 20022 was built for the future, "to easily accommodate new features without having to change the core principles of standards design". How important are business standards – a core component of ISO 20022 – for technology standards?

Kris Ketels: Business standards define the financial service landscape, independently of how these financial services are implemented. These business standards are the building blocks for any kind of architectural solution: peer-to-peer-messaging, hub and spoke market infrastructures, DLT, web services using XML or JSON. Consequently they can be used for any new technology standard around the block. They are therefore key for all current and future technology standards.

Miserez: How important is technology for the financial community?

Ketels: During the last decade, technology has caught up with business and even surpassed it in terms of innovation. There are now no or very few technical constraints that impede innovation. But, as business is the driver for innovation, we have entered into a rapidly changing financial landscape where new types of services emerge around the clock at a very fast pace. We are especially seeing this in consumer-facing services that extend the payments domain, such as frictionless payments, mobile and web payments, wallets, cryptocurrencies. I do believe that DLT, whether or not in the shape it was initially conceived, can become a powerful technology in any financial domain.

Please also read the other 2017 Sibos Standards Forum interviews:

1. Highlights and approach of the 2017 Sibos Standards Forum

2. ISO 20022 as innovation enabler