A version of XML aimed at replacing paper-based financial reports is gaining some ground in the financial services industry, but the effort needs greater backing from major software vendors, said industry observers.
The XBRL (eXtensible Business Reporting Language) is intended to eliminate the tedious manual tasks of inputting financial data from such documents as proxies and quarterly statements, according to XBRL.org officials. A consortium of approximately 140 major banks and software and services vendors in the financial services industry recently announced the general availability of the specification.
The current version of XBRL promises "a significant, exponential reduction" in the cost of gathering financial information by making it widely available to software packages as well as over the Internet, said Mike Willis, co-chairman of the XBRL.org's steering committee.
And yet the XBRL effort is "definitely stalled," said Dushyant Shahrawat, a senior analyst at the Tower Group, a research firm based in Needham, Mass. "People are taking a step back ... and thinking about what products can be created to use it," Shahrawat said.
The XBRL effort, like similar ones in financial services, is long-term and not expected to yield results for two to four years, Shahrawat said. The industry, because of the recession, is more focused on tactical offerings now, which explains why major vendors "are dragging their feet on this," he added. "You need a leading proponent to drive this forward."
Countering Shahrawat, Sarah Ablett, an analyst at Meridien Research in Newton, Mass., said the initiative is still in its early stages, and it's too soon to declare the effort as stalled.
"I don't think the vendors will stop innovating," Ablett said. "To do so would cause them to stumble 12 to 18 months down the road when customers will be looking for these things." She said she expects XBRL-enabled products to start becoming available at that time.
The lack of a competing standard and the use of XBRL by Reuters for its third-quarter results bode well for the standard's future as well as Bank of America's current pilot project, Ablett said. "The support is there and it's a matter of time," she said.
In the meantime, Bank of America at its Charlotte, N.C., branch recently launched a pilot project for the use of XBRL to collect data from its customers who are required to provide financial statements on a regular basis for lending and credit analysis purposes.
The bank's goal is to provide more efficient loan processing and credit review processes. "The use of XBRL will reduce large amounts of manual processing and re-keying of data from all players involved in the financial information supply chain," said Brian Staples, vice president of IT at Bank of America, in a statement.
A software provider to Bank of America, Moody's Risk Management Services is XBRL-enabling it its credit analysis software, said Brad Saegesser, consulting services manager for the division of the New York-based Moody's Investor Services. The updated software offerings will become available during the first half of this year, Saegesser said.
Saegesser said that the next phase for XBRL is to get major banks to push the use of XBRL among their partners, and for software vendors such as Microsoft Great Plains and SAP to XBRL-enable their software offerings. "None of [the vendors] has the ability yet to get an XBRL financial statement," he said. "That's the major stumbling block for Bank of America and my other customers."