ISO20022/UNIFI is the Answer - What was the question?

By Wayne Meikle, Financial Services Director, IONA Technologies

People tend to equate ISO20022/UNIFI directly with XML. The benefits are a global set of common standards based on more open and cost-effective XML technology platforms-so life gets easier, doesn't it?While there is some truth in this, the real picture is more complicated. This article will discuss the historical background of financial services standards, the origins of ISO20022, and how you can map out an ISO20022/UNIFI adoption program for the next five years.

Historical Context The world of financial services is about highly-reliable, fast, auditable and seamlessly processable inter-firm communications of instructions to enable business transactions. This is the way money and other fungible instruments work-they move financial assets.

Historically, these movements (or messages) evolved into standard formats based on national or regional boundaries, market participant initiatives, or standards mandated by specific industry utilities such as SWIFT. These message standards developed around silos of automation based on market practice or geographical locations, and the message standards were not compatible.

In order to address this compatibility challenge, the International Standards Organization [ISO], a worldwide federation of National Standards Bodies, developed the UNIversal Financial Industry message scheme (abbreviated to UNIFI),

What is UNIFI? UNIFI is a standard for standards-a methodology for the creation of consistent message standards using data to describe data and interactions. This flexible framework allows communities of users and message development organizations to define message sets according to an internationally agreed approach and to migrate to the use of common XML-based syntax.

The base ISO20022/UNIFI standards methodology provides for variants based on usage by services utilities such as SWIFT, the current appointed ISO20022/UNIFI Registration Authority, as well as for other utilities and market participants.

The current ISO20022/UNIFI standards incorporate lessons from the first implementations of ISO 20022/UNIFI Funds Distribution messages and Customer-to-Bank payment messages, as well as from FpML, FIX and others that provide examples of successful market best practices.

ISO20022/UNIFI is essentially the roadmap to having a consistent lingua franca in global financial markets.

What does this new global standard for standards do for my business?

Mandated change is initiated by regulation, through migration by network providers such as SWIFT from the old MT to the new MX standards, or by demands of the business to support new transaction flows only available in ISO20022/UNIFI. To understand the effects of mandated change, we can look at the payment standards used by the Single Euro Payment Area [SEPA] initiative, a current example of applied UNIFI.

The short-term incremental service provision costs to the business to comply with SEPA will be significant. There will be an indeterminate period of co-existence-at least two years and possibly much longer-that existing systems will be required to support both legacy and new standards. The current SEPA program teaches us that banks, infrastructure providers and corporations need to support the old domestic payment standards, the new UNIFI/EPC/SEPA standards, and still support the SWIFTNet FIN standards for international transactions.

While it will increase costs in the short term, ISO20022/UNIFI also offers opportunity for competitive advantage. Business transactions based on the ISO20022/UNIFI standards increase the reach of firms to more customers in more locations with less concern for national boundaries and local legacy standards. This also allows more firms to reach into new markets with lower barriers to entry.

How do I map out my ISO20022/UNIFI adoption program for the next five years?

Most firms now realize that ISO20022/UNIFI based standards adoption has reached critical mass. It is not optional and all firms need a cohesive plan for how they will support both legacy standards and new standards during the transition period. One option is to simply trust that their vendor suppliers have the answers. If this is the case, firms should be sure to ask them for a road map.

Alternatively, and more advisedly, the firm should have an architectural road map that capitalizes on reusing ISO20022/UNIFI messaging and integration services. They should look to use standards-based integration technologies that support the legacy and the new XML-based merging standards, as well as solutions that provide platform-neutral deployment technologies to use with existing computing infrastructure.

Adoption of ISO20022/UNIFI standards is not a big-bang approach, but a market-driven migration to a common language.

The question is: What is the lingua franca of the global financial services markets?

ISO20022/UNIFI is the answer.

Wayne Meikle is the financial services director for IONA Technologies, providers of standards-based solutions to IT organizations.