A second big reason is the fact that Web-based ISO XML offers real-time communication. In cases of discrepancies, the timely nature of the data allows for online dialog about transactions between systems and people, hopefully facilitating their resolution much earlier in the process.

But finally, ISO XML has its own secret weapon–a feature that enabled Davis to log such a remarkable auto-match rate from the beginning. That tool is known as a unique remittance identifier, or URI–a reference tag that accompanies information relating to a payment that comes from the bank or from the buyer to the seller and is used for matching receivables. What makes URI so advanced is a design that allows the reference number required for automated receivables matching to go from buyer to seller, via all of the banks and various global payments systems in between, and still arrive in one piece, regardless of the number of intermediaries. It is also compatible with the major electronic data interchange (EDI) formats, including EDIFACT, SWIFT Fin and ANSI X12. According to Arthur Brieske, the U.S. head of accounts payable and receivable at Deutsche Bank's global transaction banking division, it is the versatility of the URI that makes ISO XML a global standard with universal applicability in domestic and cross-border markets.

ISO XML's universality wasn't achieved by chance. In an effort to move beyond the issue of proprietary interfaces and compete on service, global presence and other value-added differentiators, the major cash management banks deserve the credit for the standard's most outstanding benefit–its universality. While the corporate community had frequently requested this kind of versatile standard, it was the emergence of XML as a programming language that allowed the banks to provide it. Under the earlier EDI payment solutions, banks became the central collection point for remittance information. That role ended up costing banks more than they bargained for as they found themselves forced to create standards for varying industry requirements and ultimately expensive interfaces with their various clients worldwide. And in the end, everyone seemed to be out to shoot the messenger–especially when messages arrived late or dollars short.

HARMONIZING THE HIGH TECH SECTOR

As industry groups–such as RosettaNet, a consortium of more than 500 high tech companies, like Intel, Cisco and National Semiconductor–began to work up XML-based industry standards for the high tech sector, banks were eager to provide the payments piece of the puzzle. In this standards-setting exercise, the banks played a leading role on the International Standards Harmonization Team (ISHT), which developed the ISO XML payments standard. Among the banks on the ISHT were JPMorgan Chase, Deutsche Bank, Bank of America, ABN Amro, Citibank, Nordea and HSBC. Their goal was simple: to design a truly universal global messaging standard for payments that did not require constant customization and which enabled remittance information to flow separately from the payment, taking the pass-through responsibility for data away from the banks.

To that end, nothing contributed more than the development of the URI. To ensure that the URI's design (e.g., character length) would enable it to pass intact within the payment message through nearly all structures, the ISHT's development team canvassed 73 payment clearing systems worldwide.

A LITTLE HELP FROM YOUR BANKER

By choosing the high road for a universal standard, Robert Blair, an ISHT member and vice president for industry issues in JPMorgan's treasury services group, says that banks now can provide the open standard with the URI as the payments component of broader XML-based STP initiatives by different corporate communities. Now, as industry groups create XML standards, banks can offer a cheap and easy-to-implement payments piece to them.

Among the most active industry groups when it has come to introducing XML standards to supply chain automation has been RosettaNet, which was organized in 1998. Deutsche Bank's Brieske, yet another member of the ISHT group, notes that close-knit sectors, such as high tech, with relatively limited circles of supply chain partners are obvious potential early adopters. But more industries need to see the benefits before broader adoption can take place, he adds.

JPMorgan's Blair cites the paper-and-pulp and chemicals industries as other examples of communities that should consider early adoption, because they are experiencing great change and seek a homogeneous means of communication within the community. ISO XML is also proving attractive to companies doing substantial business in Asia and Europe, where EDI standards have not been widely adopted and trading partners are seeking an STP solution that covers the 20% of the supply chain volume from small to midsize companies that is more labor-intensive, Brieske notes.

ABN Amro's Schwartz, also a standards development participant, has a slightly different take on what will hasten ISO XML adoption. He believes that the success of ISO XML will not boil down to either industry cohesion or geography: "ISO XML will be embraced," he contends, "as companies adopt management strategies that value the kind of far-reaching benefits of automation and STP that ISO XML affords."

Certainly, that defines the attitude at Cisco Systems Inc., long a champion of XML-based automation and now of ISO XML. Another RosettaNet member and also an ISO XML pilot participant, Cisco views the standard as a pivotal part of its overall strategy to make Cisco "the easiest company to do integrated business with," says Greg Herbert, the company's senior IT manager for e-business-to-business operations and operational excellence. Cisco offers XML as one part of an aggregate strategy that also must include EDI. "[The] goal is to offer trading partners a portfolio of connectivity options," Herbert says.

What would convince companies where EDI is entrenched to switch to ISO XML for payments? In the U.S., Davis is participating in discussions with NACHA aimed at driving XML acceptance for Automated Clearing House (ACH) payments by the end of 2005. If the ACH CTX message type can carry XML data, Davis says it will pave the way for Intel to use ISO XML with its small to midsize customers.

In Europe, on the other hand, companies are not particularly anxious to work on yet another payment solution, given the number of systems with which they must interface. Take National Semiconductor, a participant on the receivables side in the ISO XML pilot in Europe. It had already gone through the "pain" of developing interfaces with various customers, says Bruno Voll, National Semi's information services business consultant for finance and marketing, based in Fuerstenfeldbruck, Germany. "Common payment standards would be beneficial in the long term to National Semiconductor," Voll concludes, "but not in the short term."

Another obstacle: As an early adopter of ISO XML, National Semiconductor was forced to build its own ERP interface for ISO XML payments and data. But HSBC's Sutton and JPMorgan's Blair–both active members of the ISHT–point out that ERP and treasury workstation providers recognize the momentum and are watching this space to determine when to come to market with solutions. These won't help National Semi recoup its investment on the receivables side, but they could save money for others moving to XML or even National Semi if it expands its use.

Despite its hesitation to move forward, events may force National Semiconductor to reevaluate its decision. According to Chantal Van Es, SWIFT's business manager for standards, European adoption is likely to be driven by initiatives underway for European payments harmonization. When Europe harmonizes its payments systems and standards, then companies would probably be forced to rethink the country-based interfaces that they have set up with clearing systems within the European payment area.

To expedite adoption, Olli Kahkonen, Nordea Bank's Finland-based representative on the standards development team, suggests that banks could provide additional value-added services to give companies an incentive, citing the ability to more quickly provide open-account financing on receivables as an example of such an enticement. Solutions like this, says Kahkonen, are currently under discussion by some bankers and organizations.

Intel's Davis notes that the boost ISO XML can provide in terms of Sarbanes-Oxley compliance is another aspect that might prompt companies to move to XML-based automation. "We 'print' and archive reports online so we can see precisely the invoices that auto-cleared by audit trail," he says. "By automating cash application, we have less risk of fraud…and multiple audit checks." Davis advises executives to focus on the revenue opportunities when building a business case for using ISO XML messages. Show decision-makers that "you can apply cash all day long, [even] on weekends and holidays," he says. "We applied $13 [million] in cash after everyone left at year-end on December 24."

IT'S GOT THE MOMENTUM

ISO XML has already been endorsed by all the major standards setting groups, including SWIFT; the International Financial eXchange Forum (IFX); the Transaction Workflow Innovation Standards Team (TWIST); and the Open Applications Group (OAGi). The ISHT working group has already published the standard for the credit payment and status message and it has been included in ISO 20022 as the first instance of the standards family. The ISHT group and the four standards bodies now are working on the advice and bank statement standard. Once the content standards are complete, there is interest in addressing communications and security standards as well. "It's tough to implement globally a solution that isn't mature yet," admits Deutsche Bank's Brieske. "[We] first must finalize and refine message structures, so global adoption is probably four to five years away."