Even early into adoption of the ISO 20022 messaging standard in its treasury services business, JPMorgan Chase's Louise Gorman can provide a peak into how the standard may hasten payment initiation and reporting far downstream.
"We have a large brokerage client that's using the standard to draw information about payments that they have accepted from their clients who bought stock, and now want access to quick information on those purchases. Our client's process of updating their system to allow its clients to see the new status of their portfolio used to take a day. Now it happens in almost real time," says Gorman, a New York-based managing director for JPMorgan Chase.
The benefits of instant verification of stock purchases are obvious, but that's just part of the possible impact of ISO 20022, which was introduced by the International Organization for Standardization and will serve as the core message standard for SEPA (Single Euro Payments Area). Widespread US bank adoption of 20022 will create a de facto international standard.
In the treasury services space, JPMorgan Chase's public announcement of the availability of ISO 20022 will not go unnoticed by other institutions, which are considering the standard but will now likely be pushed to make announcements of their own during the coming year.
"There's been a wait-and-see approach by top US banks," says Andy Schmidt, research director, TowerGroup. The cold feet have been partly driven by ISO 20022 being an international project and not a U.S. standard, Schmidt says, and partly driven by the cost of moving from proprietary formats to a common standard - revamping the architecture of a corporate payments platform can carry a seven-figure price tag for a large institution.
But corporates usually have multiple financial relationships, so JP Morgan Chase's embrace of ISO 20022 will force the hands of other large players in the treasury services business, such as Barclays, Citigroup, Bank of America, HSBC and Deutsche. "When you have a large institution that adopts the standards, from a competitive standpoint, it's going to drive the other large institutions to do the same," says Bruce Cundiff, director of payment research and consulting for Javelin Strategy & Research.
ISO 20022's capabilities, enabled by the incorporation of metadata into the syntax of messages used in financial networks, will allow JPMorgan Chase's clients to send and receive messages in XML (Extensible Markup Language). That enables myriad benefits, such as domestic and international integration of shared services centers; centralized payables and treasury functions; and the ability to send payment information, review remittance information, receive reconciliations and gather cash position data faster than via proprietary systems. Straight through processing (STP) can also be hastened, and communications between parties in corporate payments can be made consistent. Gorman says the functionality provided by ISO 20022 will be made available to corporate clients in step with clients' position on the processing automation curve.
