Sibos highlights ISO 20022 as key enabler of financial innovation

At the forefront of the wide and diversified agenda presented on the stages of Sibos this year is the realisation that enriched data is a key enabler of financial innovation.

Panels at Sibos 2023 have highlighted ISO 20022 as an innovation springboard

On Tuesday afternoon, experts took to the stage to uncover how standardised data through the likes of ISO 20022 could unlock the next evolution of the industry.

Chaired by Rachel Levi, Swift’s head of innovation engineering, the panel included Alexandre Kech, head of digital securities at SIX Digital Exchange; Masayuki Tagai, managing director, industry issues executive (APAC) for JP Morgan Payments; and Dr Steve Yang, an associate professor at the Stevens Institute of Technology.

Opening the discussion, Levi described the standardised messaging format promoted by ISO 20022 – the key focal point of the panel – as the “driving force” behind financial services’ most prominent emerging trends, and promoted it as “a living, breathing framework that adapts to the changing needs of our ecosystem”.

When quizzed on how the standards facilitate the exchange of enriched data for the financial ecosystem, Tagai emphasised how ISO 20022 is “a process that invites real participants, real actors in the financial market, to start exchanging views about how they can automate their underlying processes, how they can define the data that needs to be exchanged, and then develop a data model that can be registered and further developed into a syntax that can then be shared”.

Adding to this, Kech recognised ISO 20022 as “a common language for data” which has enabled interoperability between traditional and emerging systems, particularly in the realms of blockchain tokenisation and payment settlements using digital assets.

Despite the continued realisation of the benefits of implementing payment messaging, the process, as with many of the industry’s innovation endeavours, is not without its challenges. For Tagai, one of the primary challenges is being able to select the right data and apply it to the right application to meet the purpose of the data itself.

“If you are trying to develop new messages for new participants in the market,” he shared with the panel, citing digital asset providers as an example, “then the challenge is to make sure that you secure resources from that particular industry, so that they can provide input to the process”.

Despite this, Tagai reassured the audience that “there are challenges here and there, but we know what the challenges are and how they can be solved”.

Adding to Tagai’s comments, Yang discussed how emerging technologies, and particularly artificial intelligence (AI), could be leveraged to overcome these challenges.

Describing AI as a “tremendous opportunity” in the context of ISO 20022, Yang explained how large language models (LLMs) could be trained and fine tuned with data concerning payment messaging standards to enable the context behind the development of specific concepts to be fully understood.

He identified the “common problem” of translating between different standards as being overcome through the insight and transparency promoted by the use of AI, but added that both the vulnerability of the technology and the vulnerability of the humans implementing its capabilities remain high on the agenda of policy reform, particularly in light of potential biases.

For attendees of Sibos this year, the topics of data messaging and AI have been central to a variety of discussions throughout the week. Reflecting on the prevalence of these discussions, Tricia Balfe, CEO of financial messaging solutions company XMLdation, recognised ISO 20022 as a “business vocabulary”.

“It’s a way of describing all the things that you need to do for financial services in payments and beyond,” she shares with FinTech Futures.

Headquartered in Tampere, Finland, XMLdation has retained a key focus on ISO 20022 since it was first introduced for SEPA payments back in 2010, and provides testing services for a range of different parties in the ecosystem for ISO 20022 messaging and APIs.

When questioned as to why such standards would be viewed as integral to innovation in financial services, Balfe draws a clear link between financial service messaging and other areas of innovation within the industry.

“I think the most important thing I can say around innovation and ISO 20022 is in conjunction with open banking initiatives and APIs,” she shares. “The business vocabulary that’s used for extensible markup language (XML) messaging, for integrating systems globally, is also being used as the basis for a lot of the APIs that we see in open banking initiatives around the world.”

Balfe adds that she is currently seeing “many, many innovations” on the customer experience side, particularly within the realms of corporate real-time payments and capital management.

As Sibos accelerates into its highly anticipated second half, the event continues to test the boundaries of what the industry is capable of and advocates for the innovative and compelling outcomes it’s able to deliver to all those who rely on the interconnectedness of financial services.