As new technologies are developed and change the banking system, a discussion paper by SWIFT looks at how the financial messaging standard ISO 20022 is unifying the use of financial technology (fintech). It says that the adoption of common standards means that divergent technologies are deployed cohesively, rather than leading to inefficiency and fragmentation.
SWIFT, the registration authority for ISO 20022, says it is working closely with the industry globally to standardise messaging and best practices. The paper - ISO 20022 for Unifying FinTech - says that ISO 20022 is an open, collaborative standard that can be used by any organisation, providing the means to achieve uniform and unambiguous interpretation of the data exchanged among users, regardless of the technology used. SWIFT's Lisa O’Connor commented: “ISO 20022 as a standard is built to evolve with the pace of new technological developments, and there is great potential to reuse the standard for fintech innovations.”
Five initiatives where ISO 20022 is unifying fintech
This paper focuses on several examples of how ISO 20022 has unified emergent fintech applications:
- Australia's New Payments Platform (NPP), which is due to go live before the end of 2017, uses “design and definition of common data structures to support interactive addressing service dialogues that enable resolution of beneficiary account identification through mobile numbers and email addresses”.
- SWIFT GPI, which uses ISO 20022-based components for payment status and tracking. SWIFT states: “This fosters mapping with the corresponding ISO 20022 messages for which these API calls were defined and are operated.”
- APIs for SEPA Instant Payments, which uses ISO 20022-based payment data sets to exchange information between third party payment providers and account servicers by APIs, in compliance with PSD2.
- DLT and Smart Contracts for bonds. “ISO 20022 business model and content are applied to automate the securities transaction lifecycle of bonds including auto-coupon payments to achieve interoperability between DLT/ SC platforms and other automation mechanisms.”
- DLT and APIs for nostro account reconciliation. The business data sets used for DLT and APIs are based on ISO 20022 to ensure data consistency between the ledger content and APIs and interoperability with banks’ ledgers.
The paper also found that the nine fintech experts surveyed as part of the research were in agreement that global adoption of ISO 20022 and user base growth will be abundant across the financial industry in the next five years. The report stated: “Adoption will be driven by market demand together with regulation mandated by financial service authorities and industry stakeholders whom are likely to adopt international standards for global interoperability. This said, the experts anticipate there will be some challenges associated with harmonising standards and market practices.”
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