Why we all need standards
The lack of agreed standards for communication has been the subject of many initiatives over the years, as trading groups and industry collectives developed their own ways of communicating with each other and, in particular, exchanging information on payments. Most of these have faded over time or remained isolated examples of effective co-operation. Attempts to establish universal standards for corporate to bank communication have failed. Now we are seeing two new initiatives which will have a lasting and substantial impact, on corporate to bank communication standards.
The first is the rapidly developing SWIFT corporate access model. Historically, SWIFT has been a closed shop exclusively used by the banks. The new access model allows qualifying corporates to use a single access point to communicate with all their banks without the need to join each bank’s MA-CUG (Member Administered Closed User Group). This effectively opens up the SWIFT network to corporates. There are lots of limitations to this at present, and it will only be of interest to high volume users, but it does establish an important precedent for corporate access and more importantly, the use of SWIFT format messages. Early adopters are finding that standard formats are not always standard formats. Any SWIFT user will tell you that messages often need a technical tweak or two to get them through to individual banks, but this is a very important step toward facilitating universally agreed formats. With XML and ISO standards being applied to these formats in the near future, the nirvana of a universal language for payment messages that can be used by banks and corporates alike, may actually be getting close to being realised.
Less satisfactory are the formats being developed for SEPA – the introduction of true pan-European payment systems. These systems are being developed with formats and rules which are common to all the existing systems – a lowest common denominator, say the critics, which offers little or no advantage for the corporate user. With industry estimating that only 3% of euro payments are cross border, there is going to be no incentive for the remaining 97% to move to the SEPA schemes – a fact emphasised by corporate speakers at the EuroFinance conference in Amsterdam last month. SEPA will change the payment landscape and is here to stay, but the formats need a lot more development before corporate Europe will embrace the new systems. Getting from here to there is going to be painful.
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