In my last post, I discussed the EBICS standard which is being widely adopted in the German and French banking system.   The name EBICS stands for Electronic Banking Internet Communications Standard (EBICS).  EBICS is a replacement for two legacy standards, BCS (Germany) and ETEBAC (France) which are being decommissioned in the next year.  The EBICS migration is proof that new B2B standards continue to emerge and in many cases to compete with long-established alternatives.

New Standards Continue to Emerge

The pace of new standards introduction has certainly slowed down since the dot com era, which brought us ebXML, RosettaNet, SPEC 2000, CIDX, PIDX and a number of other XML and IP-based schemas.  Nonetheless new standards continue to emerge.  In the banking sector, the UNIFI (ISO 20022 XML) standard is relatively new with a number of new messaging types being introduced globally to the cards, trade, payments and securities sector throughout 2010.  Regional standards continue to flourish as well.  A new version of the US bank statement reporting standard BAI is expected in the near future (version 3).  But the financial services industry is not the only one creating new standards.  The new phenomenon exists in many other industries as well.  For example, AS4, which is a SOAP-based protocol being adopted in the European aerospace sector.   IETF recently announced its plans to develop AS2 Restart which promises to solve large file transfer challenges in the US retail market.

What effectively occurred during the Dot Com Era was a democratization of standards.  The power to create B2B e-Commerce standards migrated from a few centralized, government and non-profit organizations such as the United Nations, American National Standards Institute and European Article Numbering Association to the industry itself.  There were two key enabling technologies that democratized the process.  First, the advent of more flexible XML-based message schemas freed industries from the limitations of EDI.  Second, the ubiquitous availability of the Internet enabled the transmission of messages over Internet-based protocols.   As a result, groups began to form to create their own XML and IP-based standards to meet the needs of specific industries, geographies or business processes.  Today, there are over 100 major B2B e-Commerce standards in use today with more such as EBICS being introduced every year.   You can read more about the proliferation of Internet-based standards in my many posts about the Long Tail of B2B e-Commerce.

ISO 20022 XML – Promises to bring harmony to the Galaxy of Electronic Banking Standards

Standards Will Always Compete

“The great thing about standards is that there are so many to choose from.”  I’ve never been able to determine who originally made that statement, but it sums up the B2B e-Commerce market quite nicely.  There was a great article in IBS Journal last September entitled “EBICS Sends SWIFT a Message,” which discussed the potential threat to SWIFT.  The IBS Journal article identified a few key areas of overlap between SWIFT and EBICS:

  • The German financial services industry uses EBICS not only for corporate-to-bank communications, but also for bank-to-bank messages as well.  Bank-to-bank has historically been the exclusive purview of SWIFT’s large commercial network.
  • There are rumors of other EuroZone countries such as Austria, Italy or Spain adopting the EBICS standard.  Any one of these three countries embracing EBICS could provide critical mass for a broader deployment.

Advocates of EBICS argue that the communications protocol offers a less complex and less expensive solution than SWIFT with “good enough” levels of security to satisfy most routine transaction types.

Will EBICS become an alternative to SWIFT that threatens the cooperative’s initiatives in the corporate-to-bank sector?  If you have experience in the B2B standards arena then the answer should be obvious.  Neither standard will dominate, but rather both will be used by different segments of the market to appeal to different preferences for price, complexity and reach.

SWIFT Corporate Access Growth 2006-2009

Given the level investment in SWIFT by financial institutions since the 1970s, I believe it is highly improbable that there will be any mass migration away from SWIFT to an EBICS.  One of the greatest advantages SWIFT offers is the “network effect” participants gain when they use SWIFTNet.   By connecting to SWIFT a corporate or financial institution can rapidly gain access to over 8,000 financial institutions worldwide all using a common set of standards.  Furthermore, SWIFT is well aware of the issues raised by its critics.  Consequently, major initiatives are already underway by SWIFT to become easier to do business with as well as to reduce its cost structure.

If I had to predict how the market develops I would bet EBICS gains widespread adoption with German and French smaller and mid-market corporations due to its simplicity and cost. However, large multi-corporations that have cash management operations outside of France and Germany (Latin America, Asia Pacific, North America) will choose SWIFT (or their own bespoke connectivity approaches).  A third option, which warrants a mention is that small companies may not use host-to-host communications at all.  There will be a significant percentage of the small corporations which will be leveraging web-based portals as a direct channel to the financial institutions.

Some Old Standards Do Die

Perhaps, most interesting to me is the ability of the French and German banking sectors to decommission the legacy protocols.  BCS is scheduled for phase-out by the end of 2010 and ETEBAC will be discontinued in 2011.  I find it interesting to contrast the rapid migration to EBICS in Europe to the seemingly never-ending extension of dial-up protocols in the US.   There are still tens of thousands of companies in the US retail and manufacturing sectors relying upon communications protocols such as LU 6.2, SNA, asynchronous and bisynchronous dial-up for the exchange of mission-critical commercial documents.  The French and German governments, no doubt, accelerated the migration, which makes we wonder why a similar approach by the US FCC to eliminate bisync would not be appropriate.

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