The silent standards revolution

The world has come a long way since the pioneering days of digital banking in the 70s, when banks and building societies of all sizes were reaping the benefits of these fantastically arcane calculators to revolutionise the way that they provided services to their customers. It was a time of CRT monitors and green displays; mainframes the size of small rooms and magnetic tapes being sent in the post.

We live now in a world of smartphones, always-on connectivity and emojis - a world far removed from the sheer scale of computing devices forty years ago, the horrors of dial-up and limited character sets. Technology has moved on, and so have the financial institutions that use it.  Slick apps offer 24/7 access to funds and allow consumers to easily manage their finances, whenever they see fit - no longer limited by going to their closest branch and bringing with them whatever credentials are needed to manage their accounts.

Of course, with all this innovation, there are some elements of financial services that have not yet received the transforming touch of modern technical standards; one of those areas is how we make digital payments. But all that is set to change.

Bacs and Faster Payments, alongside the newly built Image Clearing System, are the primary ways that UK consumers can make national bank transfers. For international payments, most are fulfilled via the Single Euro Payments Area (SEPA) or the SWIFT network. For large UK payments, the sort you might need to pay for a house; these are made via the Bank of England's CHAPS system. All of these payment rails are investigating plans to move across, or have already transitioned, to implementations based on an international standard known as ISO 20022.

There are some important implications arising from this move. Firstly, the standard uses a modern character set (UTF-8) which allows for the encoding of non-Latin characters (Gaelic speakers rejoice!) and could even pave the way for emojis to be transferred as part of a payment message.

Secondly, the higher bandwidth of this modern age is maximised by the standard permitting a far higher data capacity than previously used for these payment systems - if implemented end-to-end, the days of being limited to a paltry 18 characters of reference information should be over. Links to online services could be enabled or, similar to the Image Clearing System that now processes UK cheques, images and other files could also be transferred.

Thirdly, the ease with which international payments are made could be significantly improved. As these vital payment systems move onto common standards, national and international payments should feel more similar, with more consistency on the information that is required to make a payment.

All of which returns to the growing ease by which consumers in the UK, and across the globe, can access payment services and other financial services. These fundamental changes to the technology behind how payments are made look to open up the possibility of new and better products to the consumer.

Next week we?ll be looking at how the adoption of this standard by the Bank of England's Real Time Gross Settlement is a key goal of the Bank's Renewal programme.

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Digital Innovation Summit: NI - Belfast, 30 April 2019

Our Digital Innovation Summit: Northern Ireland conference will consider the latest developments in technology, digital innovation and data security. The event will feature international experts and renowned industry speakers who will debate the biggest digital topics facing member firms, including digital identity, data ethics, open banking, and cross-sector collaboration against cyber crime.

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