Did you stream any movies or TV shows last weekend? If so, you benefited from an international standard for video file compression that makes streaming feasible. The International Organization for Standardization (ISO) shared an Emmy
for this engineering feat in 2008.
All kinds of ISO standards, based on input from experts around the world, simplify our lives at home and at work. Standards cover risk management, information security, electronic communications, data exchange, quality management, and weights and measures, among many topics.
In the payments industry, for example, ISO 4217 establishes internationally recognized codes for currency, like USD for the US dollar, EGP for the Egyptian pound, and THB for the Thai baht. ISO 20022, first recognized by the standards organization in 2004, enables the structured exchange of data between financial institutions, with the capability to exchange hundreds of data elements that provide detail about a payment. This international standard has been activated within RTP from the Clearing House and within the FedNow Service, instant payment systems that operate among financial institutions.
ISO 20022 has yet to be implemented in the myriad accounts payable and accounts receivable systems that US businesses use today. And that, as I described in my October 2 post, contributes to the Tower of Babel problem in business payments. To simplify implementation of ISO 20022, the Business Payments Coalition (BPC), comprised of some 500 entities working to promote greater adoption of electronic business-to-business (B2B) payments, remittance data, and invoices, has identified the 50 data elements that are most important.
In addition, the BPC has proposed that two standards be adopted to streamline and automate information exchange along with the exchange of a payment:
- Business buyers and sellers could agree to adopt ISO 15000 (ebMS3 and AS4), a communication standards for messaging electronic documents such as invoices and remittance information. If they did, wide acceptance of the standard would encourage accounting software providers to adjust their systems accordingly.
- Buyers and sellers could join an open, nonproprietary virtual network that would enable them to exchange information electronically. Using service providers, a business could exchange invoice and remittance data with anyone participating in the standard, regardless of the idiosyncrasies of its accounting systems. Think of this virtual network as similar to the network used to exchange emails among multiple providers.
ISO standards for communications, security, and data exchange have helped the payments system evolve from paper-based payments to electronic payments. Now, instant payments supporting ISO 20022 create new opportunities for B2B updating.
Read more on the Federal Reserve FedPayments Improvement website.
By Claire Greene, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed