Do you really understand the Banking Products or Services (BPoS) you acquired? You may think this is an ignorant or even ridiculous question to ask when you first hear of it. However, if you think about it carefully, you might find that one's understanding of BPoS is neither sufficient nor comprehensive or accurate enough. Why would this be the case? This essay tries to discuss this issue on the basis of the development history of BPoS, and gives an approach by implementing ISO 21586 which has been published in September 2020, to help understand BPoS you acquired or to intend to acquire.
1 Why is this matter raised until now?
Banking is an ancient industry. Until the middle of the last century, most banking services had been simple and could be easily understood by us. Services provided by different banks were similar and did not require any specific explanation. When a BPoS is mentioned, anyone, including the bank staff and customers, might consider the same in every aspect of a BPoS.
This situation gradually changed with the introduction of information technology into the banking industry and the faster adoption of financial innovation. Since the beginning of this century, especially when Fintech started to play a more important role in the banking industry, the situation has changed dramatically. On one hand, traditional banking services are becoming more integrated through productization since the functions and behavior of services are determined before they are provided to customers. The establishment of product management functions in many banks can be deemed circumstantial evidence of this development. On the other hand, the way banking products or services (BPoS) is operated has become so complex that even the practitioner of its issuer cannot always explain it thoroughly and unambiguously. Moreover, a growing number of institutions other than traditional financial institutions are selling BPoS or providing relevant services around the world. In some cases, these institutions are not even supervised by financial regulators.
In order to improve the customers to understand the BPoS, what aspects of a BPoS need to be explained, and how to explain has become more important. Under the persistent effort by ISO/TC68/SC8, an international standard, ISO 21586, is aimed to resolve this matter by giving standardizing requirements.
2 How to prepare a BPoS description?
Writing the description for BPoS is a complex job for which only a small number of experienced staff meet the requirements. However, underpinned by ISO 21586, writing a description of a BPoS might become easier. The threshold of doing this job is reduced so that more staff can undertake this job.
Different BPoS have different characteristics. Similar BPoS issued by different BPoS Providers (BPoSP, usually a bank) may have different aspects to be described primarily. Thus, six conformity degrees are given in ISO 21586, please see figure 1. Writers of a BPoS description just need to choose one of them and follow it. Each substantive element that needs to be described is mapped to a sub-clause in which the content, purpose, and suggestion of description are depicted.
3 How to read a BPoS description?
As an ordinary customer of a BPoS, everyone might have read a lot of advertisements, brochures, contracts, or even descriptions. However, many of those materials are aimed to offer information that the BPoS provider wants its customers to know and to omit other information. In most cases, the omission is well-meant in order to save the customers' time and to help them focus on material matters. However, it is very important for customers to understand comprehensively the BPoS that they hold or want to acquire. In some cases, the comparison between different BPoS, especially issued by different BPoS providers, is valuable for customers.
ISO 21586 is aimed to offer customers four types of information, i.e., how to identify a BPoS, how to identify the issuer of a BPoS, what the credentials of a BPoS are, and What the fundamental financial characteristics of a BPoS are, please see figure 2. The meanings of the three circles will be explained in point 4.
The sufficiency of the description of a BPoS will be dependent on the conformity degree which is chosen by the writer of the BPoS provider. The meaning of the conformity degree might easily be recognized in figure 1. As the more information is offered, the higher the conformity is met, and the understanding of the BPoS will be more accurate.
4 How to use the specification for BPoS description to support innovation?
Innovation in the banking industry is typically embodied in every aspect of substantive elements and the combination of such elements. Based on the substantive elements given in ISO 21586 and description of all BPoS in a certain business field, one might be able to list typical values, which may not just be a numeric or a classification code but may include sentences and paragraphs. Adding a new value to a current BPoS, or integrating some values of some elements which never be integrated previously, might create a new BPoS.
Moreover, the mechanism of the voluntary element provides an approach to create brand new BPoS. A voluntary element is an element that is not mentioned in ISO 21586. Thus, it might be a special element that is not expressed in any other BPoS. This element might become a selling point of the BPoS.
No matter what role you play in the banking business, ISO 21586 will help you achieve your goal. The best way to understand ISO 21586 is to read the full text of the standard. The documents attached might give you some idea. Please read them by just click the link address: https://www.iso.org/standard/71158.html?browse=tc.