Commentary: XML in the financial industry

By Mary Knox, Gartner Analyst

"XML" comprises many competing or overlapping standards, and each industry is fighting its own XML standards battle. Financial services offers an example of how difficult the battle can be.

Most financial service providers

	See news story: Star: XML could become new lingua franca

recognize the Extensible Markup Language as an important solution to their emerging data exchange needs. However, vendors and standards bodies promote different XML standards, thereby generating considerable uncertainty and confusion. Accordingly, financial service providers most want to know: "What are the primary XML-based standards, and which ones should we support for third-party information exchange and enabling transactions?"

One of the greatest benefits of XML-based data streams is that they enable the same data to be used by many different constituencies, and therefore for internal as well as external connectivity. Standards based on that language hold their greatest promise--and present their greatest challenge--for connections outside the enterprise.

The reason for the challenging nature of external connectivity using XML is very simple. A financial service provider does not own, and therefore cannot control, both sides of the data exchange, with the result that the provider cannot unilaterally determine the standards to be used.

Gartner believes that over time, the standards required for external connectivity with customers, partners, suppliers, regulators and other key constituencies will also drive the choice of standards for internal connectivity as financial service providers seek to reduce the total number of standards they will be required to support.

Although XML is still immature, XML-based standards are emerging, aligned by industry and industry sector, such as retail banking, insurance and investments, and by application, such as payments, research provision and financial reporting. Some of these emerging standards are redundant or compete with one another and with existing standards; other standards are complementary.

Moreover, as financial service providers continue to converge and reorganize along new business lines, standards will realign and be integrated. This process will also be fueled by providers seeking integration across disparate systems and applications in support of initiatives such as straight-through processing, e-business and customer relationship management. As a result, new conflicts and dependencies will arise, as well as new opportunities and synergies.

In this complex, rapidly evolving and difficult-to-navigate landscape, decision makers at financial service providers are pressed to make decisions now about which XML-based standards, if any, they should adopt and which processes and applications they should for the language.

(For a related commentary on XML in the financial industry, see Gartner.com.)

Entire contents, Copyright © 2001 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.