BPoS stands for Banking Product or Service (BPoS) -- a product or service offered by a bank -- and at first glance appears to be a straightforward. However, in examining the topic more deeply it becomes clear that there are actually many aspects to describing BPoS. This article will try to give more detailed insights to those aspects and the work done in ISO TC68/SC8 to develop ISO 21586 as guide for creating more standardized descriptions of banking services.
What is the purpose of a standard on BPoS?
The history of banking goes back to the 11th century. Until the 1950’s, most banking services provided by banks were similar and were easy to understand. There was no imminent demand for a standardized description of banking services.
With the introduction of computers and information technology BPoS began to change rapidly. Volumes increased, new products were designed and since the beginning of this century Fintechs started to play an essential role in the banking industry.
Several factors contribute to these changes:
- Traditional banking services provide the opportunity for tailoring and innovation of the banking products or processes
- More regulation leads to changes in product structures
- Growing complexity in financial markets drives the development of unique and sometimes very complicated banking products and services
- New market players from around the world – sometimes not even supervised by financial regulators – offering modern, bankinglike services to meet consumer demand.
Commensurate with the increase in complexity, many institutions started to provide descriptions for their BPoS, which are often related to wholesale products. However, those descriptions differ from institution to institution and from banks to non-banks such that market participants can barely perform a proper comparison even for similar products. Market participants needed a solution that provides for standardized descriptions of BPoS.
Given this need, ISO/TC68/SC8 developed a new standard (ISO 21586) to consistently describe the key aspects of BPoS, thereby helping market participants understand banking products and services better. This standard can be used as a template to create detailed, consistent descriptions of banking products and services. Such descriptions can:
- Help customers understand the characteristics of a BPoS and make betterinformed decisions;
- Allow financial institutions – mainly their product managements – to be more efficient in describing, classifying, and communication about BPoS by consistently applying the description elements provided in the standard
- Provide regulators with the tools to more easily detect if information provided for a BPoS fulfils regulatory requirements or allows better transparency
How is the BPoS standard used to create definitions?
The standard starts with defining six levels of conformity to describe the fulfilment of a requirement. These levels are mapped to the key elements of the product (i.e., descriptions of key facets of a BPoS) which are either required, optional or voluntary. The below landscape shows the relationship between the conformity levels and the key elements and it shows that the more information is provided, the higher the conformity is and the better the understanding of the BPoS becomes.
The aim of ISO 21586 on BPoS is to ensure definitions provide market participants with four types of information, i.e. how to identify a BPoS, how to identify the issuer of a BPoS, what the credentials of a BPoS are, and the fundamental financial characteristics of a specific BPoS.
Please refer to the Appendix in the Article Archive on the right side of this "Articles" tab for an example of how the standard is applied in practice.
Looking Forward
Following on the publication of the BPoS standard, a new work item - Technical Specification for Guidance for drawing up an internal BPoS manual - was introduced and is in ballot until 2021-01-23.
The scope of the proposed deliverable is to give guidelines for the contents of drawing up an internal BPoS manual that is oriented to the staff (mainly product management staff) of the BPoS provider (BPoSP), in a manner of coherence with ISO 21586 that is oriented to customers of the BPoSP.
The proposed deliverable aims to be applicable to any BPoSP that issues and operates BPoS, especially the middle and small size BPoSP in developing and underdeveloped countries and districts.