Licensing Innovation in the Financial Messaging Ecosystem: Business Models and Global Compliance Impact

Abstract

Innovation within the financial messaging ecosys- tem can lead to increased competition and potentially lower transaction costs. Yet investment needed for innovative services may not come from existing players—it often needs to be stimulated by new entrants, possibly in cooperation with third parties. Licensing addresses how intellectual property (IP) is protected and made accessible to others, it can thus influence both collaboration and the threat of entry. Licensing regimes can also have implications beyond their initial intent; they can bear upon KYC/AML costs, offer a strategy for sanctions compliance, and allow privacy regulations to be satisfied. So, understanding messaging protocols from a licensing perspective provides insight into these opportunities and challenges. Licensing-based considerations within the financial messaging ecosystem can also help foster the privacy, data sovereignty, and regulatory compliance required to allow cross-border flows of financial messages. Licensing enables operators to comply with AML/KYC and sanctions requirements, whether through self-protecting controls or real-time decision-making using well- governed third-party solutions. Cross-border consortia, formed to address market conditions, need to be structured to facilitate collaboration across jurisdictional differences. A cross-section of the overall study “Licensing Models for Messaging Technologies” and “Global Compliance and Regulatory Impact” can provide further detail on how innovations in licensing can promote a more interoperable, globally compliant, and competitive financial messaging ecosystem.