Key players in the financial services area have launched an International Standards Team Harmonization (ISTH) Initiative to develop and promote a "single 'Core Payment XML Kernel' that can be used globally by any corporate, irrespective of size and sector and by any servicing bank, regardless of location."

Details of the ISTH project are summarized in an agreement between IFX, OAGi, SWIFT, and TWIST; this MOU sets out "the framework of cooperation and coordination in the area of the content and use of a core payment kernel XML transaction." Several banks support the initiative, including ABN AMRO, Bank of America, Citibank, Deutsche Bank AG, HSBC, JPMorgan Chase, Nordea, Standard Chartered, and Wells Fargo. A pilot version of XML schemas and basic documentation was completed in August 2003; a handbook and final versions of XML schemas to be available in Q2 of 2004, while interim deliverables will be made available for public review.

The Core Payment XML Kernel "provides the definition of an XML message that will be used for making a payment or direct debit as indicated in three message types: Payment Initiation; Status and Advice; Reconciliation. Direct Debit and Bank Statement will be addressed in future phases of work, while other types are currently out of scope (Extended Remittance Advice; Working Capital Management and Card Payments). Participating members will "identify and resolve content differences between the messages so a single set of content can be used, recommending a common core payment that can be accepted for use by each of the standards bodies. They will establish a method of interoperability that allows the Core Payment XML Kernel to have extended or related messages packaged with it. The goals are to support straight through processing, to provide reconciliation for corporates, to enhance the transparency of payments, and reduce the costs of a host-to-host file delivery implementation."

International Standards Team Harmonization (ISTH) Initiative Overview

The IST Harmonization Team is made up of members from four leading industry standards organizations, with additional support provided by DISA:

• IFX, creating and maintaining standards for financial business processes and services globally, including the corporate market [Susan Colles, Frank Eaton, Wim Guerden, Mike Haehn, Len Schwartz, Sid Sidner]
• OAGi, a leading standards development in the ERP marketplace [David Connelly, Garret Minakawa, Mike Rowell]
• SWIFT, aleading financial services standards and network, used to facilitate transaction delivery across financial providers globally [Jean-Marie Eloy, Carlo Palmers, Chantal Van Es]
• TWIST, a global treasury management and commercial payments standard [Bob Blair, Steven Hartjes, Len Schwartz, Jacques Urlus]

Objectives of the IST Harmonization Team:

• Adopt a business model
• Resolve content differences between messages
  • Identify content of components that fall within the Core Payment XML Kernel
  • Compare these components to each group's existing payment message
  • Agree on content to be contained
• Standardize the representation of the content (Tags, schema structure, etc; issue of ISO 15022 compliance is noted)
• Establish a method of interoperability to have extended or related message packaging
• Recommend a common core payment that can be accepted into each of the XML standards bodies

Each group will be responsible for obtaining approval within its standard's organization for the incorporation of the kernel. SWIFT Standards will extend its Business Validation Group, adding representation from the IFX, TWIST, OAGi, UN/CEFACT and RosettaNet to validate the work over the broad banking and corporate community.

Publication into each standard, based on the agreement targeted for January 2004, will occur at the earliest appropriate time for that standard. Therefore there will be agreement and then each standard will publish, separately, the Kernel into its body of standards.

General Benefits to all Communities:

• Set clear direction for one single standard for core payment functionality
• Reduce operational cost by increasing the level of Straight Through Processing (STP)
• Improve interoperability between market participants
• Promote universal applicability

Specific Benefits to the Corporate Community:

• Facilitate straight through processing
  • Acknowledgement of Receipt of Payment Instruction
  • Debit Advice in respect of Payment
  • Credit Advice to Beneficiary and Reconciliation of Account Receivables
• Improve payments process
  • Full Remittance Advice linked to Payment
  • Counterparty data
• Reduce costs of a host-to-host file delivery implementation
  • Open, harmonized XML message standards
  • Flexible standard that can be used by any corporate irrespective of size with any bank
  • Interoperability with other industry verticals
  • Potential for off-the-shelf solutions from system vendors
  • Leverage ERP investment to automate

Specific Benefits to the Bank Community:

• Respond to corporate demand
• Minimize number of standards to be developed and maintained
  • Focus effort on XML standards development
  • Lower development and testing expense
  • Reduced resources required to participate in multiple standards forums
• Universal applicability of standards
• Reduce costs of a host-to-host file delivery implementation
• Reduce costs and improve customer service through better STP

Specific Benefits to the Software Community:

• Respond to corporate demand
• Minimize number of standards to be developed and maintained
  • Focus effort on XML standards development
  • Lower development and testing expense
  • Reduced resources required to participate in multiple standards forums
• Standard development tools can be used, reducing required investments
• Universal applicability increasing customer value of payment related utilities [adapted from the Core Bank Group/IST Harmonisation Team presentation and Backgrounder]

From the IFX Forum Announcement

The Interactive Financial eXchange (IFX) Forum expects to be a key player in the International Standards Team Harmonization (ISTH) initiative that was announced on Friday by Gartner, Inc. The IFX Forum, comprised of representatives of leaders in the financial services industry, has a strong track record in XML development and has already delivered robust, extensible financial messaging standards that are rich in payment content and designed for interoperability.

The Gartner-moderated meeting included representatives of banks, technology vendors and the standards organizations IFX Forum, OAGi (Open Applications Group), SWIFT (Society for Worldwide Interbank Financial Telecommunication) and TWIST (Treasury Workstation Integration Standards Team).

The meeting's purpose was to announce the formation of the ISTH group, with its goal to create a single Core Payment XML "Kernel" that can be used globally by any corporation and any servicing bank, and the signing of a Memorandum of Understanding by the four standards groups to cooperate and coordinate their message standards' content and use of a core payment kernel XML transaction. RosettaNet has also endorsed the ISTH's direction.

"The ISTH initiative is a superb opportunity for the IFX Forum to contribute our skills and experience toward the worthy goal of furthering globally interoperable financial messaging," said Richard P. Urban, IFX Forum president. "Because the Forum has already been down some of the paths ISTH will travel, we can help the team avoid resource-wasting detours and pitfalls, enhancing overall team effectiveness. We also bring an extensive background in meeting the challenges of interoperability, and especially with payments, using XML."