Standards and initiatives

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 3: Standards and Initiatives - The ISO 20022 Harmonisation Programme has delivered a widely-adopted charter, which is now moving into implementation. On the third day of the Standards Forum, join us to hear from and discuss with the leaders and visionaries who are building the harmonised global ISO 20022 user experience, from market practices to Market Infrastructures’ implementation plans.  

1. ISO 20022 Harmonisation Programme – Theory becomes practice

How has progress been on the ISO 20022 Harmonisation programme since its announcement at last year’s Sibos Standards Forum? Have market infrastructures (MIs) and financial institutions (FIs) been keen to adopt it? What have been the most pressing challenges? What are the next steps?

Patrik Neutjens, ISO 20022 Programme Director, SWIFT

There has been progress in two major areas:

Firstly, we are seeing continuously growing appetite for the programme in the many-to-one space. That is why our focus is mostly on MIs. An increasing number of MIs are supporting, joining and endorsing the Harmonisation programme. Twenty-five MIs were part of the MI Summit Group that created the ISO 20022 Harmonisation Charter, and half of these organisations endorsed the charter when it was announced at Sibos 2015. Since then, we have been approaching the MI community worldwide, both on the payments and securities side. We are actively talking to about fifty MIs, and to date more than twenty have endorsed the ISO 20022 Harmonisation Charter. An increasing number of FIs, as ultimate beneficiaries of the charter, are showing active support of the ‘best practice’ principles.

Secondly, today the ISO 20022 Harmonisation Charter’s principles are being implemented operationally. This means that MIs are now using MyStandards functionality to provide detailed implementation-related information about each individual ISO 20022 service they offer, such as release timelines and message versions. In addition, MIs have started defining and publishing global market practice, such as Settlement & Reconciliation in Securities, and HVPS+ on the payments side. And finally, there is now common agreement on the adoption of a number of version and release management principles, which will be implemented operationally as from next year.

Kris Vanholst, ISO 20022 Programme, SWIFT

In terms of challenges, we have seen that it takes time for MIs to proceed to endorsing the ISO 20022 Harmonisation Charter. This means that these organisations take harmonisation seriously and are convinced that agreeing on a number of baseline principles is the only possible way forward for them. Another aspect I could add, and this is one we always see when undertaking harmonisation initiatives, is that synchronicity between securities and payments is not easy to achieve. They are two different worlds, each of which comes with specific requirements, experiences and expectations. In terms of commonalities, to name one example, there is overall appreciation for introducing an annual release cycle for ISO 20022, similar to the FIN release cycles that the industry is well familiar with. MIs that signed the ISO 20022 Harmonisation Charter are certifying that all new initiatives will comply with the charter’s principles right from the start. At the same time, we are continuing to liaise with other MIs to increase awareness and to garner support for the ISO 20022 Harmonisation Programme.

2. ISO 20022 Market Practice Development

How will MyStandards support ISO 20022 market practices underway in payments and securities?

Andrew Muir, Standards Operations, SWIFT

It has always been our vision that MyStandards will become the default tool for anyone wanting to engage with standards. Right now, it is being used by thousands of people worldwide, to speed up the processes of deploying standards-based connections with clients and counterparties, and understanding the impact of changes to standards definitions as they evolve. This year, we added the Change Request Forum to the MyStandards platform, so that people using MTs can see what change requests have been received for next year’s Standards Release. For the first time people can now comment on those changes before country voting takes place. In the future, we would like to see ISO 20022 benefit from the same level of engagement and transparency, including to use MyStandards to capture change requests as well as to broadcast them.

3. The Corporate Debate: Banks should stop differentiating non-competitive services

What standardisation opportunities do corporate treasurers see, in the context of their dealings with financial institutions?

Marc Delbaere, Head of MyStandards, SWIFT

Corporate treasurers believe that core functions, such as on-boarding, reporting, KYC, should all be carried out in the same way, as they are of a non-competitive nature. They feel that financial institutions should do more to standardise and streamline these non-competitive services so that corporates’ needs are better covered. They urge financial institutions to compete "beyond" these services. From financial institutions’ point of view, things are not always so clear cut. When is something common, and when is it part of the competitive space? SWIFT’s remit is to assist in the common space for the benefit of all its customers. At this session, we want to learn more about what is in the pipeline to better meet the needs of corporate treasurers.

Between now and 2020, the payments initiatives landscape will go through a number of changes. Could you mention some of these initiatives and touch upon the role that MIs will play in them? How are these initiatives important in the context of the ongoing ISO 20022 harmonisation?

Isabelle Bouille, Lead Standards Specialist Payments, SWIFT

During the past year we have seen several initiatives originate in the payments market; many of them initiated by payments systems such as Payments Canada, CIPS (Cross-border Interbank Payment System, China), the Federal Reserve (USA), CHIPS (The Clearing House, USA), ECB (Europe), which is considering the use of ISO 20022 for Target2, and EBA.

Another example that I want to mention is the recently announced Payments Strategy Forum in the UK. Their charter is to deliver a strategy to unlock competition and innovation in payments and, as such, plan the future of the UK’s payments systems.

Real-time retail payments are also high on the agenda. In Europe, the EPC is preparing the SEPA SCTInst Rulebook and Implementation Guidelines for Instant Payments. To ensure that ISO 20022 is rolled out in a consistent way, global market practice groups have been created, such as the ISO 20022 Real-time Payments Group (RTPG).

In the high-value payments world then, work of the new Global Market Practice Group for High-Value Payments (HVPS+) has started. It will result in an additional set of ISO 20022 market practice guidelines for high-value payments that will reflect the evolving needs of MIs and their members, such as more structured, more accurate and richer end-to-end data. Based on this common foundation, Payments MIs can build community implementations, whilst supporting global interoperability. Many of the initiatives I mentioned show the growing importance that organisations attach to harmonised implementation approaches for ISO 20022.

5. From Practice to Performance – ISO 20022 Implementation planning in Securities Initiatives

What are some of the important ISO 20022 harmonisation initiatives on the securities side?

Karin De Ridder, Head of Standards Development, SWIFT

In Europe, a number of countries started the Nordics ISO 20022 harmonisation initiative with the purpose to try to move the Nordic market to ISO 20022 for all their securities business lines, e.g., settlement, corporate actions, account management, funds, static data etc.

In Asia, a few harmonisation initiatives are taking place using ISO 20022 as basis. The ASEAN+3 bond market Initiative aims at creating a regional market for corporate and government bonds amongst ten South East Asian countries, China, South Korea and Japan. The post-trade model advocated by the group is based on ISO 20022. Under the same bond market initiative, a Cross-border Settlement Infrastructure Forum (CSIF) was set up that aims at interlinking Central Banks and CSDs to enable cross-border transactions in central bank money. ISO 20022 was chosen as the common language between infrastructures.

The Asia Funds Standardisation Forum, launched by the Korean Securities Depository, is looking at how the distribution of funds can be harmonised and automated to support the various funds pass-porting schemes in the APAC region. The forum has selected ISO 20022, which is consistent with other funds activities around the world. Regional Asian securities harmonisation initiatives are expected to deliver results in the next five years.

6. ISO 20022 – an End-to-End Success Story

Transferring funds and re-registering assets in the UK was a manual process until quite recently. How did different parts of the savings and investment industry come together to tackle this challenge? What effect has this had on financial institutions and consumers? What can the standards community learn from this initiative?

Andrew Muir, Head of Standards Operations, SWIFT

I’m looking forward to hearing Mr Carol Knight’s case study on Wednesday afternoon. The TISA Exchange (Tex) initiative is a great example of end-to-end innovation. It features great community engagement and intelligent re-use of existing standards and technologies to tackle the cross-sector challenge of automating fund transfers.

Sean Sarginson, Business Development, UK & Ireland, SWIFT

Taking a step back, in 2012 the Retail Distribution Review (RDR) was introduced to make retail investment markets work better for consumers. These rules raised the minimum level of adviser qualification, removed commission payments to advisers and platforms from product providers and aimed to improve the transparency of charges and services. In the pre-RDR world, transferring accounts and re-registering funds from one retail investment platform to another was a highly manual process that took several weeks. During this time, investors would have no control on their assets and would be exposed to market movements without the ability to trade.

With RDR, the Financial Services Authority mandated the timely re-registration of assets between platforms and the Financial Conduct Authority has kept its sights on platform re-registration delays ever since. TISA, a cross-sector industry association, brought together investment platforms, fund managers, technology vendors and standards bodies to address the challenge of establishing a common automated transfer process.

The collaborative approach led to the creation of an end-to-end transfers framework including a standard legal agreement, a common service level agreement and a technical standard based on ISO 20022. The standard was shaped in the UK Funds Market Practice Group, part of the Securities Market Practice Group (SMPG). TeX was created to act as a contracts club to run the complete set of non-commercial agreements. This framework has allowed the industry to avoid bilateral agreements, to get rid of wet signatures, and has enabled interoperability resulting in considerable improvements in transfer times.

When discussing what best approach to adopt to solve the transfers challenge, some parties in the industry called for a centralised system. However there was little appetite or agreement on how to fund its development. An open standards approach emerged with competing technology vendors developing solutions for the market but collaborating to enable interoperability using the non-profit, industry owned SWIFT network and ISO 20022 standards.

The open standards approach has increased competition between technology vendors, kept costs low and encouraged innovation. Electronic transfer volumes continue to increase year on year as different parts of the industry adopt the solution. Retail investors have seen transfer times go down from weeks to days demonstrating the industry’s ability to collaborate and innovate cost-effectively when faced with new regulation.

Without a doubt, cross-industry collaboration on shaping open standards can be an arduous process. Moreover, adoption of those standards can be equally challenging as different parts of the financial industry have their legacy processes and ways of working. However, the benefits of competition, interoperability and forward compatibility largely outweigh the initial investment in time and effort.

Looking to the future, as SWIFT continues to develop new tools to ease standards management and adoption, open standards initiatives will carry on delivering benefits for both consumers and the financial industry by reducing cost, risk, ensuring compliance and improving the customer experience.

Please also read the other blogs in this series:

1. The financial industry's landscape and roadmaps

2. Standards and transformation

4. Standards are more than messages