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Government and finance industry urge caution on XML

The XML world received a double-dose of sobering news, as reports from both the U.S. General Accounting Office and NACHA, an electronic payments organization, urged their constituents to move cautiously on any commitment to XML. Both reports cite XML's bright promise but express concerns about its stability. Nonetheless, recent events suggest the industry has begun to get the message and started addressing these concerns.

Market Analysis
Page Four: Government and finance industry urge caution on XML

The Council did not find any threats to the current system.

Using this same analytical technique on the projected use of XML for remittance data (the information now sent with EDI), the Internet Council makes the following evaluation:

Strengths –The network could technically support the use of XML for remittance data, when sent through the network along with the payment instructions. Also, service providers could offer a range of payment or remittance services using XML to generate revenue.

Weaknesses –While XML may have potential, its current level of use for remittances is low and the demand from end-users is negligible. XML file sizes tend to be larger than those for EDI (often much larger), which can affect storage needs and network throughput. Most companies, particularly smaller businesses, do not have integrated systems that would make full use of XML, and the need to support both EDI and XML would drive up costs during the migration period. Finally, no national XML standards exist for payments and remittances.

Opportunities –Implementations of XML payments and remittances may cost less than comparable implementations for EDI, and XML vendors are developing a range of solutions, some low in cost. These factors could encourage smaller enterprises to use e-business, thus expanding the market for electronic payment and remittance services. As more and more larger companies commit to the use of XML, it will encourage their supply chain partners to follow suit, and encourage a shift to electronic payments as well.

Threats –The Council questioned the potential of XML-enabled exchange services to compete with the ACH network ("intervene in the current ACH processing and revenue models"). The report also questioned if the XML option alone would be sufficient reason for check writers to begin using electronic payments.

When the Council tried to apply the SWOT technique to the future of Internet-based business-to-business payments and remittances, it found it did not have enough information to do a thorough analysis, but it lists a few issues that need to be addressed to conduct this analysis: (1) requirements and operational models for Internet-based business-to-business payments and remittances, (2) the future model's impact on the current ACH revenue model, and new revenue opportunities created for financial institutions, and (3) projected usage and anticipated costs for supporting the future model.

Triggering a re-evaluation
Because of the mixed verdict on XML and the sizable blanks remaining on the future of business payments over the Internet, NACHA's Internet Council says it could not provide a definitive answer to the question of whether XML should enable the transfer of remittance data over the ACH network and recommends tabling the issue for the time being. However, the report lists several indicators of change in the marketplace, what it called triggers, that could change the environment for XML:

    1. Competition –other networks begin using XML for remittance data

  • Customer requests –large-volume financial service providers request XML capabilities

  • Government or regulatory demands –legal requirements to implement XML for remittance data

  • Legal/risk assessments –if current participants in ACH networks face some risk or liability for not providing XML

  • Related developments in the industry –if the financial services industry settles on a particular XML standard for payments

The Council says it remains interested in XML, and a change in any of these conditions could reopen the question.

Sending a message of stability While the two reports look at different industries and each takes a different focus, they both came to similar conclusions about the state of standards, namely that a single set of business standards needs to emerge to provide businesses with a sense of stability that will encourage investment in the technology.

While this conclusion may be accurate in some respects, it does not tell the whole story. The XML standards bodies have recognized for some time the need for stability and interoperability in the business standards as evidenced in initiatives such as:

    1. Meetings directly addressing interoperability and convergence, hosted by several groups including OMG and OASIS, as well as ASC X12. Each of these meetings generated follow-up actions, including work on registries initiated by OASIS and formation of an outreach and convergence work group by ASC X12.

  • Formation of the Web Services Interoperability Organization to develop profiles and eventually compliance tools Inside the government, the XML Working Group released in January 2002 its draft XML guidelines, which came after the GAO completed its investigation, but before the publication of the report. The GAO report notes the guidelines were a work in progress at the time, but the guidelines emphasize the need for a government-wide registry to help encourage reuse of existing XML resources, a point also emphasized by GAO.

EDI plays a role in both reports, although in different ways. The GAO suggests that federal agencies coordinate their standards requirements in much the same way as done now with EDI, even recommending that the current process for EDI be extended to include XML. For electronic payments, EDI is the dominant exchange technology, and its use is growing. For XML to be considered as a complement or alternative to EDI, it needs to meet the same levels of performance, service, and security being provided by EDI to meet the high volumes of sensitive data being exchanged.

In some respects, these reports are looking at the world of business XML through rear view mirrors. But it will still take more effort on the part of the XML practitioners themselves to bring the kind of stability to XML that these high-performance end-users are seeking.

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Copyright 2002, reprinted with permission. Alan Kotok is a Washington, DC-based reporter and writer on technology, business, and public policy, editor of "E-Business Standards Today" and Chief Editorial Officer of "Technology News and Literature." This article originally appeared on

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