Ignoring financial standards - A missed opportunity

Standards play a vital role in the prudent management of financial systems.

With the advent of electronic payment products, transaction volumes are increasing  and the requirement to exchange data is becoming inevitable. The adoption of global technical standards is no longer a choice but a necessity for the financial services industry. Global banks and their customers increasingly recognize the importance of developing and implementing standards.

Individual customers often transcend national borders while buying goods and services but demand a standardized solution for their payments. Increasingly regulators are demanding that the financial services industry move from limited proprietary solutions to open standardized frameworks to allow for data backup procedures, surveillance, disaster recovery and daily operation and maintenance. While moving towards this is no longer a choice, it has to be recognized that standardization confers great benefits. 

Benefits of affirmative action

Standards can bring increased efficiency, improved service, reduced complexity and substantial cost savings. Standards have helped the financial service industry to grow from batch oriented processes to real-time processing. Open standards allow for automation of workflows and integration of systems to provide a single consistent experience of transaction processing.

Open standards help to strengthen interconnections and the exchange of data between financial and non financial agencies. The European Commission estimates that the introduction of SEPA, combined with the development of a European e-invoicing framework, could lead to savings of EUR 123bn in the payments area and EUR 238 bn in invoicing over six years – provided both demand and supply-side players apply the new standards. The benefit of users and providers moving to the same framework is not linear and the benefits are exponential.

In payments, cards, securities and trade-related services, customers can be serviced only if standards are adopted globally. ISO 20022 is an open source framework for financial messaging and is being increasingly supported by banks and financial institutions. It is the next generation messaging standard for SWIFT and is being increasingly adopted by payment systems globally. 

SWIFT corporate access provides a single gateway for corporate clients who previously had to manage multiple banking relationships.  This common platform gives corporate clients a single window with greater visibility on cash, increased control and security, lower costs and reduced risk. 

In summary, the adoption of global standards by banks, while reducing complexity, will lead to better serviced clients, cross selling opportunities, cost savings, better brand leverage and, most importantly, help maintain competitiveness.  As global standards become increasingly adopted, banks that do not upgrade their value proposition quickly could be at a disadvantage.