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Research on General Financial Message Standards and Their Application

2013年05月17日   Views

1. Introduction

    Message is a formatted data unit used for exchange and transmission. As the information carrier, it implements the function of information transmission among different systems and platforms for different organizations and individuals.
In terms of its usage, first, financial messages can be widely used to record business information, including government affairs, payment and settlement, taxation, international trade, and a variety of commercial information, to implement applications such as online business processing, e-government, e-commerce, collaborative OA, and decision-making support, through message exchange. Second, messages can be used for real-time business information exchange. In securities, foreign exchange, and other industries, business processing involves multiple participants, and the way of business information exchange determines the transaction processing efficiency. Third, messages can be used to collect and exchange batches of business information.
    The information exchange function of messages greatly promotes the development of modern financial industry. With high sensitivity to information, the financial industry requires rapid information transmission in an accurate manner.

2. Development and Application of Standards for General Financial Messages

2.1. Development of Standards for General Financial Messages
    The financial market involves a large number of participants, including customers and investors, financial institutions such as banks, securities, insurance companies, exchanges, and clearing houses, etc., with their business processed through data exchange. Such data exchange certainly requires a transmission protocol in the form of financial messages, these financial message standards act as an important factor for determining and promoting the fast and safe development of financial markets.
    The development of international standards for data exchange in the financial sector has basically gone through three stages: information exchange from written format to electronic form, the formation of international standards for data exchange protocol, further evolution of international standards promoted by XML technology. During these stages, two international standards have been formed: ISO 15022 and ISO 20022. Over the past years, ISO 20022 has been widely used in the fields of trade services, payments, settlement of securities transactions, guarantees and derivatives, bank card services, etc.

2.2. Application of ISO 20022 Message Standard 
    Based on ISO 15022 Securities Message Model (Data Field Dictionary), ISO developed and released ISO 20022 Financial services — Universal Financial Industry Message Scheme in 2004. ISO 20022 was the result of the combination of international financial business and IT technology. It provides a solution to develop general messages for business, is helpful to increase market efficiency and reduce transaction cost. ISO 20022 greatly increases the interconnectivity, openness and expandability of financial messages, providing an advanced general message solution based on the internet and XML technology. 
    Great attention has been paid to the promotion and use of ISO 20022 around the world, with ISO 20022 standard message depository specially developed for free use in the global financial field and RMG, SEG and RA established for its maintenance and management. At present, according to ISO 20022 Financial Services — Universal Financial Industry Message Scheme, 322 message standards in five categories have been developed at the international level, covering payment, foreign exchange and derivatives, securities, trade services, cards, and relevant retail financial services, becoming the general message standards for global financial business. Meanwhile, many countries in the world attach great importance to the adoption of ISO 20022, and the standards have been widely applied in the European Single Euro Payments Area (SEPA) and Asia-Pacific area.

2.3. Application of Domestic Financial Message Standards
    At present, domestic financial message exchange is mainly applied and developed to meet regulatory and business requirements. The regulatory departments of the financial sector in China is composed of "one bank and three commissions", i.e., People''s Bank of China (PBC), China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), and China Insurance Regulatory Commission (CIRC). The regulatory requirements mean governmental orders and administrative information from these departments, as well as various statistical monitoring data and reports to these departments from all the financial institutions, which are mainly exchanged by ways of data copy, and message exchange based on TCP/IP network and website platform. The business requirements refer to message exchange among financial institutions for mutual collaboration in business development, integration and innovation.
    At present, message exchange for both regulatory and business requirements has been achieved mainly through the point-to-point interconnection based on TCP/IP network, which are spontaneously initiated upon consensus between regulatory authorities and financial institutions or among various financial institutions. Moreover, such messages are mainly exchanged between different business systems of financial institutions. 
    Message standards are different for different business systems and financial institutions; there are no unified standards and specifications. The ways in which messages are exchanged vary from each other due to the imbalance of informatization among financial institutions. Take the related business between banking and insurance industries for example, banks often take the lead while insurance companies need to follow the interface set by banks.
Considering the advantages of ISO 20022 in promoting the interconnectivity, openness and expandability of financial messages, this international standard was introduced to China in 2005 and gradually applied to some important development process of information systems in the financial sector, mainly including Accounting Centralized Data System (ACS) of the central bank, the 2nd Generation of China National Advanced Payment System (CNAPS2), Electronic Business Payment System (EBPS), PBC Electronic Commercial Draft System (ECDS), Cross-border RMB Receipts and Payments Information Management System (RCPMIS), etc. Regarding the practice and application of ISO 20022 as an opportunity, PBC will timely establish the "Interconnected Message Depository within the PBC System" and start from the message standardization to drive the standardization of interface and processing, so as to achieve the straight processing of information systems in the financial industry and promote the standardization of interconnectivity and information sharing between information systems.

2.4. Analysis on the Trend of Financial Message Exchange
    The constant innovation of financial business puts forward higher requirements for information technology. With the progress of information technology, financial informatization has already entered a golden period of rapid development. Driven by the development trend of technologies and business, like data warehouse, cloud computing, mixed operations, and service outsourcing, there will be considerable electronic information exchange among financial institutions. Message exchange, as the main pattern of information exchange, will face new developmental needs and trends as well.
   First, unified standards. In information processing, in order to adapt to the requirements of message exchange for business systems, financial institutions often develop specific standards for specific business application, then multiple message standards for various business are developed. The inconsistency of standards causes poor reliability, security, expandability of systems which are also difficult to operate and maintain. For the financial industry as a whole, a large number of message standards will inevitably hinder information exchange and information sharing between institutions. To establish an unified mechanism for message exchange, it is a must to develop unified message standards, regulate the design and development of messages in the system construction of the financial industry (at least including business systems for information exchange with other institutions), and constrain message upgrade and management, so as to unify relevant standards and pave the way for subsequent message transmission and processing.
    Second, straight-through processing. Financial industry boasts a variety of business and a considerable number of participating institution types. In the financial business process, transactions are often completed via multiple intermediary service agencies or companies, or even through several transaction data conversions. This not only increases transaction cost and difficulty, but also hinders the development of financial business and reduces market efficiency. With the development of information technology, it is necessary to explore and establish an automatic network and platform which enable direct end-to-end transaction and straight-through processing of business information without participation of any intermediary companies or intermediate conversion.
    Third, unified platform for message exchange. The unified platform is the concrete implementation for unified financial message exchange. The message exchange platform uses a shared message transmission network and message delivery system, to achieve safe and efficient transmission, preservation and processing of financial business messages. With Financial institutions accessed to the message exchange platform to achieve "face-to-face" transactions and straight-through processing between each other, redundant network and system construction can be avoided. 
    Based on the internet connection, message depository, and message exchange system at the infrastructure layer, the platform determines standardized message exchange processing mode through general financial message depository and unified message standards, and identifies specific requirements for message exchange and processing according to the characteristics of different financial business, so as to finally achieve the generality and unification.

3. Characteristics and Problems of Domestic General Financial Message Standards in the Financial Industry

    At present, the following characteristics are reflected in domestic financial message exchange and application of message standards:
    First, message exchange is mainly driven by single business needs, and most messages are exchanged along single business line, for example, the High Value and Bulk Payment System in payment and settlement, common business for networking bank cards, Treasury Information Processing System (TIPS), etc. 
    Second, financial institutions have different needs for message exchange. Different types of business may pose different requirements for instantaneity, security, confidentiality, reliability and range of message exchange applications, and also have different requirements for message transmission, exchange timeliness, quality, redundance and fault-tolerance, response mechanism, etc. Real-time and funds business (such as payment messages) have higher requirements for message exchange in various aspects, while management information type has fewer requirements (such as credit investigation messages and anti-counterfeit currency messages).
    Third, the application environment of financial messages is complex and diversified. The application environment of information systems at various institutions is very complex, with diversified underlying hardware platforms, operating systems, data existence forms, and network environment. There are both simple application environment for small and medium-sized financial institutions, and heterogeneous platform environment for large financial institutions; both one-to-one interconnection within the same industry, and complex many-to-many connection methods and forms among different industries.

    In the absence of unified message standards, financial institutions have the following problems in message exchange:
    First, various message standards and applications with no unified message standards. Financial institutions currently select one or more standards for message exchange based on their own business needs. Without unified interface standards and specifications, they need to develop messages or connection codes for each application system to communicate with other systems, in order to exchange and share data. Whenever adding a new system, it is necessary to reestablish a system-to-system connection with all the other systems and develop a separate resource connection code for each application system. This greatly increases the cost of application deployment, change and maintenance and interface development.
    Second, from the perspective of industry development and management, there is no unified institution or organization for financial message management. The application of most message standards currently centers on individual institutions (such as PBC, Foreign Exchange Trade Center, Gold Exchange Center, etc.) to exchange messages with other domestic or international institutions. There is no unified management body to coordinate, organize, and manage cross-region, cross-industry message exchange between institutions.

4. Suggestions on Development and Application of General Financial Message Standards in China

4.1. Plan as a whole to build up mechanisms for development and use of general financial messages 
    First, to strengthen the tracking study and publicity of ISO 20022. Industry authorities should organize professionals to track and study the development of ISO 20022, so as to adopt the latest version of international standards in a timely manner, study the feasibility of domestic application of relevant messages in the ISO 20022 message depository, and at the same time organize discussion and technical training on the domestic application of ISO 20022 to promote the adoption and application of the standard.
    Second, to establish the general financial message depository in line with national conditions and international standards. To guarantee the implementation of ISO 20022 in China, it is necessary to refer to the ISO 20022 message depository and take the actual requirements of domestic financial business into consideration, organize the development of relevant messages for mature business, plan the message depository framework in accordance with China''s practical application requirements, build the general financial message depository, and ensure such messages are in line with relevant international standards. 
    Third, to mobilize industry strength to participate in the development of general messages. Industry authorities should study and carry out guidance documents to encourage financial institutions to participate in the development and use of general messages, mobilize industry strength to reinforce standard development, and guide the development of financial message exchange with general message standards as the precursor.

4.2. Build up the general message exchange platform, select typical business for pilot implementation
    First, to build the general message exchange platform. The exchange platform enables the separation between business and message processing. As a professional platform for message exchange, it provides every accessing institution with services, such as message access, message standard upgrade, message standard analysis, message standard conversion, etc., so that accessing institutions only need to focus on the change of business requirements, thus to improve responsiveness to business change and reduce the overall cost. 
    Second, to select typical financial business for pilot. In the early period of the general message platform, it is necessary to select typical financial business for pilot operation within a certain range. For instance, solutions to the third-party depository business between banks and securities institutions may be put forward to gradually improve the platform function, so as to form a reasonable and viable operational promotion mode and expand the range of applications on this basis step by step.

4.3. Tackle key technical issues to popularize general message mechanism in the financial industry
    There is a variety of financial business; different information systems involve different interconnected institutions, so there are varied safety and efficiency requirements for message exchange. It is the most difficult technical challenge for the general message platform to meet the actual message exchange needs for various financial businesses. So it is necessary to organize professionals to tackle key technical issues such as mass message processing, efficient message transmission processing, upgrade and change of message standards, security guarantee for message transmission, seamless compatibility of heterogeneous platforms, etc. On the basis of improving the functions and services of the general message platform, it is necessary to gradually expand the business scope of the message platforms, promote the development of general financial messages and improve the efficiency of cross-institution, cross-industry, and cross-region message processing and message exchange, so as to promote the “interconnection” of the financial industry.

                                                                                                         (From China Standardization May/June 2013)

 

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