Technical Standards in Payments Infographic
The Blueprint of Payments
Understanding Technical Standards
Why Standards Matter
Automation & Consistency
Technical standards provide a common language for financial transactions, reducing ambiguity and enabling systems to process payments automatically and efficiently.
Stability & Risk Reduction
By standardizing formats (like for cheques or electronic payments), the potential for fraud is mitigated and market uncertainty is reduced, fostering trust and stability.
Level Playing Field
Harmonized rules and regulations create a fair environment for both consumers and all payment service providers (PSPs), encouraging healthy competition and innovation.
Who Creates Standards?
International Organization for Standardization (ISO)
A global, not-for-profit federation of national standards bodies. ISO develops standards based on market needs and expert opinion from industry, academia, governments, and consumer groups.
SWIFT
A key player that not only creates its own proprietary messaging standards (MT/MX) but also acts as the Registration Authority for crucial ISO standards like BIC, IBAN, and ISO 20022.
Regional & Industry Bodies
Organizations like the European Payments Council (EPC) develop rulebooks and guide the implementation of standards for specific regions, such as SEPA in Europe.
Regulators & Central Banks
Often prompt changes to standards to create a more uniform and interoperable payments ecosystem, driving innovation and competition (e.g., PSD2 in Europe).
Key Payment Standards Explained
Universal Financial Industry Message Scheme
The new global standard for financial messaging. It uses XML to allow for much richer, more structured data to be included in payment messages, improving analytics, compliance, and automation. SWIFT is migrating all cross-border payments to this standard by 2025.
Financial Transaction Card Originated Messages
A crucial standard for card payments. It defines the message format for transactions between a merchant's terminal, the acquirer, payment schemes (like Visa/Mastercard), and the card issuer. It covers authorizations, clearing, and network management.
The Future: APIs & Open Banking
APIs: The New Standard for Connectivity
Application Programming Interfaces (APIs) are sets of rules that allow different software applications to communicate with each other. They are the backbone of modern fintech and open banking.
Driven by Regulation
Regulations like PSD2 in Europe and Open Banking in the UK mandate that banks must open up customer data (with consent) to licensed third-party providers (TPPs) via secure APIs. This has spurred massive innovation.
Fostering Harmonization
While a single global API standard doesn't exist yet, collaborative groups like The Berlin Group and initiatives by SWIFT are working to create common API blueprints. This will ensure interoperability and drive the development of new, integrated financial services worldwide.
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