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Financial services

Commentary:

An evolving payments environment

Microsoft’s Colin Kerr and SWIFT’s Stephen Lindsay look at the importance of developing standard models for the evolving payments environment.

One cannot discuss the topic of payments without the subject of standards cropping up. Every mature payments market has a legacy of payments standards that date back to the 1970s; the bulk of which were typically developed by national payments associations to meet the needs of the local banking industry.

Perhaps the only universal standards applied in payments have been those developed by SWIFT, the interbank global messaging network. Of course, in Europe an important goal of the Single European Payments Area (SEPA) was to homogenise payment standards (resulting in ISO 20022 message definitions) in an effort to simplify the exchange of payments data across borders. But each of these standards has primarily been an enabler of communication among industry participants – and less so a model for how internal payment applications should operate within a bank.

Payments are complex transactions that weave through a bank’s internal systems, often across different technology platforms and data formats, from delivery channel to clearing and settlement mechanisms.

As banks re-engineer their systems, there is a growing reluctance to invest in applications built on proprietary ‘standards’ because they add complexity to the current environment.

In contrast to this protectionist view of formats and architectures, the development through collaboration of open standards to improve interoperability and reduce costs are rightly viewed as an enabler of efficiencies. Accordingly, the development of standard services and semantic models (as a complement to payments formats) is the essence of what the Banking Industry Architecture Network brings to payments modernisation.

This article first appeared in the Autumn 2010 edition of Finance on Windows. To read the full article, check out page 54 on the digital edition.

Colin Kerr is the worldwide industry manager for payments and core banking at Microsoft, and Stephen Lindsay is head of standards automation at SWIFT. Both are also heavily involved in BIAN. Kerr participates in BIAN through the Marketing and Communications working group, and as a member of the Strategy Advisory Board, while Lindsay is SWIFT’s BIAN representative, working on architecture topics. He is also chair of the BIAN Payments Working Group.

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