Rising Standards: France Telecom

when it comes to e-banking, it is worth distinguishing between formats and protocols. This is true for both bank-to-corporate and corporate-to-bank flows, whether they be at the domestic or international level. Formats are often defined at the national level, thus France uses French Committee for Banking Organisation and Normalisation (CFONB) standards, Belgium uses Interbank Standard Association Belgium (ISABEL) standards and so on. The reason for that is that about 98% of financial transactions are domestic. This is the case for almost every country in the world. In France, the main formats in use are:

• For domestic credit transfers (customer to bank): AFB160 for commercial banks and AFB240 for the central bank.
• For cross-border credit transfers (customer to bank): AFB320.
• For electronic bank account statements (bank to customer): AFB120.

One could envisage replacing domestic standards with international ones. This would, for example, enable a corporate to carry out its operations exactly the same way regardless of the location of the banks and bank accounts, such as when an international group treasury is centralising group payment operations processing in one location using banks in several countries.

It is possible today to use the Electronic Data Interchange for Finance, Administration, Commerce and Transport (EDIFACT) standards for single credit transfer (Payment Order – PAYORD) or bulk credit transfer (Payment Multiple – PAYMUL) to proceed treasury credit transfers or A/P bulk payments. One could also receive bank account statements using the EDIFACT standard for bank account statements (Financial Statement – FINSTA).

It is not always the case that a bank can handle such an international standard as well as the local domestic standards. There is also a problem of compatibility with the software in use within the company. In an environment where 98% of the operations are domestic, most vendors are only offering domestic standards compatible tools.

At the international level, the main standards in existence are EDIFACT and Society for Worldwide Interbank Financial Telecommunication (SWIFT). They, however, will be replaced by a new family of standards known as the ISO XML 20022 or Universal Standard for Financial Services Messaging (UNIFI).

Historically, international standards have not been suitable for local needs. SWIFT, for example, was designed for the operations banks carried out among themselves, and as the variety of these operations was limited compared to those performed by customers, it proved inadequate.

In 2000, SWIFT migrated its old X25 network to IP, developing its transfer capabilities. That was the basis for opening the SWIFT network to corporate customers through the SWIFTNet initiative. As a result, it was possible for corporate customers to envisage an enlargement of the geographical (SWIFT is now the most universal e-banking network) and operational (it is also suitable for cash management as well as for treasury) coverage of e-banking.

Before SWIFTNet, most corporate customers were developing hybrid solutions using mainly domestic standards (such as CFONB and ISABEL) and filling the gaps using international standards (such as EDIFACT and SWIFT). But the trend is set: as the ISO XML 20022 is completed, it will be increasingly possible to use just this set of standards to perform all cash management and treasury operations.

Europe is to adopt ISO XML 20022, making it a pan-European standard. This will give it the critical mass for a larger adoption, making this standard even more universal than EDIFACT or SWIFT FIN (SWIFT’s store and- forward messaging service).

Obviously, the way forward a corporate customer takes could depend on different factors, such as its size. A big international organisation, for example, with retail operations in many countries and several treasury operations may have a high motivation to use universal standards such as FIN (which is still suitable for treasury operations) and ISO XML 20022 (for cash management).

A small SME with a one-bank approach, however, could continue to use the e-banking proprietary solution of its bank without any problem at all.

The protocols

When it comes to communication protocols, security is one of the main features to be taken into account. In France, beside the bank’s proprietary protocol, there is a generic protocol called Échange Télématique Banque- Clients (ETEBAC), which was defined on X25 and is in use under two versions:

• ETEBAC3: Suitable for exchanging files both ways between banks and corporate customers, but without security (no encryption, no personal signature). It was used to retrieve bank account statements.
• ETEBAC5: Added a security layer to ETEBAC3, sealing off the files (so no-one could modify them), encrypting the files (so no ‘man in the middle’ could read them) and signing the files (so the bank could identify if the person sending the file was really empowered to do so).

Although these protocols are no longer in use given the obsolescence of X25, their collective features are to be maintained in any of the new protocols that will replace them. While a lot is still to be done, this will be the case of the new financial protocols, which include SWIFT, of course, and also Electronic Banking Internet Communication Standard (EBICS). Both are on the verge of becoming the main e-banking protocol standards in the Single Euro Payments Area (SEPA).

Universal versus domestic

Any decentralised financial organisation will generate less control and more costs around its cash management, treasury and payments processes unless it uses a universal set of tools, files and protocols. Internet-based tools, universal standards (ISO 20022) and protocols (SWIFTNet, EBICS etc) are gaining momentum because of that, and are making domestic solutions obsolete.