First of all….Sorry about this title. No offence intended. Actually I picked this title from SIBOS 2009 Brochure..Now let us move on..

Standards are constantly evolving. New standards are being developed and old ones are being maintained and improved constantly. However few people know how a new standard gets started and how the ISO 20022 process really works. This blog will attempt to give you insight into the development process and will introduce you to the different groups involved

‘ISO 20022 - Universal financial industry message scheme’ is the platform proposed by ISO to develop all financial messages. ISO 20022 does not describe the messages themselves; it is a ‘recipe’ to develop message standards. The main ingredients of this recipe are a development methodology, a registration process and a central repository.

You will agree that we would all benefit from tremendous cost savings if we could use ONE single message standard for all our financial communications:

• Whichever the counterparty (financial institutions, market infrastructures, supplier of financial information, private and corporate customers, etc.);

• Whichever the business domain (payments, securities, treasury, trade services, etc.);
• Whichever the network (public or proprietary, domestic or international).

At the beginning of the decade, the general interest in IP (Internet Protocol) and XML was perceived as a unique opportunity for the industry to move to such a single common XML-based language. There was a problem however: XML is not a language, but a meta-language which everyone can use to define their own dialect and this is what has happened: several standardisation initiatives started developing XML messages each using their own dialect. This led to:

• an increased risk for several ‘languages’ and

• a waste of resources (duplicated efforts) and a further risk of divergence when more than one initiative focus on the same business area.

• whichever the counterparty (financial institutions, market infrastructures, supplier of financial information, private and corporate customers, etc.);

• whichever the business domain (payments, securities, treasury, trade services, etc.);
• whichever the network (public or proprietary, domestic or international).

In an attempt to solve that problem, ISO proposes ONE single standardisation approach, a common ‘recipe’ - which includes a common development methodology, a common process and a common repository - to be used by ALL financial standards initiatives.

This recipe is called ISO 20022.

If all financial standards initiatives were using this recipe, we would avoid the duplication of efforts and the messages developed in parallel by all these initiatives would look as if they were developed by a single developer.

ONE standard approach used by ALL is, however, a very long term objective. It will not happen overnight.

In the interim, several standards need to coexist if we want to respond efficiently to competitive pressures and regulatory demands.

One of the most interesting characteristics of ISO 20022 is that it provides a way to achieve the long term ‘convergence’ objective, and at the same time, it also provides a way to facilitate the short term ‘coexistence’ of several standards....

When standards are developed independently of each other, ‘translating’ from one standard to another requires to map data directly from one application to another and vice-versa. This is costly, unscalable and difficult to implement and maintain.

Each time you add a new standard to support, it increases the complexity and cost exponentially.

Let us take an example. If we have seven standards that each need to communicate back and forth with each and every single one of the six others we need 7*6 = 42 translation interfaces. But, if we increase the number of standards with, say, three additional ones, we have ten standards altogether that each need to communicate with the nine others. Therefore, we need more than the double number of interfaces, in fact 10*9 = 90 interfaces.

Using a single message model for each of our seven standards, the translation would only need to be made once into the message model and once to receive from the model. In other words, we would need to develop only two translation interfaces per standard (to the model and from the model).

Such an approach of developing syntax-independent business models is the core of the ISO 20022 standard…