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Messages play a vital role in the financial industry, facilitating the exchange of information and promoting the fast and safe development of financial markets. Therefore, the development of standardized message exchange is an essential and important task for the modern financial industry.
Financial message processing is a complex and diverse process that involves a number of different industries. It is also characterized by complex application environments, diverse underlying hardware platforms and operating systems, various data existence forms, and a wide range of network environment.
Regulatory Requirements
Today’s financial players connect with one another by exchanging structured electronic messages to perform common business processes, including making payments or confirming trades. These messages are defined in standards like Swift MT, which is used for international payments, cash management, trade finance and treasury services.
The standard defines the data elements that can be included in these messages, the meaning and format of those data elements, and specifies which of them should be mandatory and which optional. Using these standards, institutions can automate their messaging processes and reduce costs.
The Department of Financial Services regularly publishes regulatory proposals and encourages all stakeholders to provide feedback in writing as part of the public comment process. The Department will not discuss any proposed regulation with interested parties outside of this process, barring extenuating circumstances. It is also important to note that the Department takes public comments seriously and will carefully review each submission. Specifically, all proposed regulations are subject to at least one public comment period of at least 60 days.
Business Requirements
Before a project starts, managers start by creating a business requirements document (BRD). These documents map out the product’s structure, features, and limitations. They also give the team a roadmap to allocate resources and budget accordingly.
Generally, there are two kinds of requirements: functional and nonfunctional. Functional requirements are specific to a particular software or system, while nonfunctional requirements describe general properties of a product.
In information processing, financial institutions usually develop one or more message standards based on their own business applications and systems, but there is no unified message standard for the industry as a whole. This makes it difficult to exchange and share messages, which is unsatisfactory for reliability, security, expandability and operational performance.
To address these issues, it is essential to focus on unified message standards. This will help financial institutions avoid costly development of messages, while promoting the straight processing of information systems in the industry. It is also necessary to mobilize the industry strength to reinforce the standard development of general messages.
Platform Requirements
The financial industry routinely sends structured electronic messages to one another to perform common business processes. The standardized ones can be a challenge, particularly when multiple players are involved.
In the case of payment messaging, it is no small feat to deliver a smooth, error-free message transmission between financial institutions around the world. Fortunately, an internationally agreed on structure and lexicon have been developed to reduce the risk of misunderstandings between a variety of different systems.
The standard is aptly titled ‘ISO 20022’ (pronounced ISO twenty-oh-two-two). The name translates to ‘universal financial industry message scheme’ and is designed to provide a framework to support structured electronic messages, including those involving non-Latin alphabets. It also provides a set of design rules and a modelling methodology to ensure that a message is the smallest possible size. The standard is expected to be a game changer for banks, payments companies and even large corporations with legacy infrastructure. It is an opportunity to re-evaluate their business models and prepare their infrastructure for the digital future of payments.
Operational Requirements
Financial institutions have different requirements for message exchange and processing. For example, real-time and funds business (such as payment messages) have higher requirements for instantaneity, security, confidentiality and reliability, while management information type has fewer requirements.
Currently, various message standards and applications are developed based on the financial institutions’ own business needs. This creates a lot of inconsistencies, which greatly affect the reliability, security and expandability of message systems.
To overcome these issues, it is necessary to build the general message platform. This will enable the separation between business and message processing, and provide every accessing institution with services, such as message access, message standard upgrade, message standard analysis, message standard conversion, so that they only need to focus on the change of their own business requirements, thus improving responsiveness to business changes and reducing overall cost.
In addition, a unified financial messaging system will be beneficial to both financial institutions and their customers. This will help FIs reach new levels of compliance, improve operational efficiency and streamline business operations.
