The interoperability revolution

A simple model for the economical trade-off between coexistence and migration is introduced. As previously separated areas and systems become increasingly interconnected, the costs of maintaining multiple standards increase. As existing standards get increasingly 'baked into' business processes and IT applications, the cost of migrating to a common standards keeps rising. With both the cost of coexistence and the cost of the alternative — migrating to a common standard — rising, the need for interoperability is rapidly growing. The paper then describes how a combination of (software) technologies and new approaches to standards is rapidly lowering the cost and increasing the quality of interoperability. A model is introduced to distinguish syntax, information and business models and market practices as separate layers of standardisation in financial services. The paper then describes how new approaches to standardisation decouple these layers and map key elements so that these can be used by new software tools in automated ways. Finally, the paper describes how interoperability is being facilitated by key standards bodies in the payment industry.