By James Karat– Inventor of S.T.P
I think it is important to start by saying what Straight Through Processing (STP) is not. STP is not an off-the-shelf program such as Word or Excel. STP is unique in that it is a one-of-a-kind process. Its invention is akin to the internet or the wheel in that it feels as though it has always been with us, and we take it for granted. We all use STP in our daily lives and never really give much thought to its origins or how it actually works. In its simplest form, STP is the engine that allows people anywhere in the world to transmit information/data instantly simply.
STP has its origins back in the early 1990’s. I was a seventeen-year-old “runner” for an investment bank in London. My role in the operation was simple, I had to “run” into an office, grab a trading ticket (blue for purchase and red for sale) that was handwritten, and “run” it to the trading floor for it to be executed. The main objective was speed, as the timing was critical as the price of the instrument could invariably move from the time it was requested to the time it was executed, and this could be to the detriment of the bank or the client. Once it was executed, I had to type the order up and send it out to the mail to the client.
The issue with this process was that you had many participants in the chain; you had the client, the salesperson, the trader, myself, and the mail delivery person. If any of us made an error, the transaction would “fail,” thus causing a loss to the client or the bank. As you can imagine, as the process was so antiquated, there was always an issue, either the salesperson wrote the order down wrong, or the trader executed it incorrectly, or I mistyped the contract note up, or the contract never actually reached the client because it was “lost” in the mail, there were always issues. In addition to this, we were experiencing much fraudulent activity, which I will cover in a later blog. As the junior, I would always get the blame, you would never blame the client for obvious reasons; the salesperson was immune as they had the client contract, and the trader made millions for the bank, so why would you blame them? No, it was always me that got the blame and somewhat unfairly, as all I was doing was replicating the information given to me on a piece of paper.
The issue got increasingly worse for me, and it got to the point where I was apologizing on a daily basis and having to buy drinks for my colleagues as “punishment” after work. I was spending more money on the drinks than I was earning, and I knew something had to change. Computers were just beginning to be used in the industry at this point; previously, we used Telex machines and faxes. I concluded that in order for me to stop getting the blame, I needed a process where each participant in the chain could be held accountable for any mistakes, and I would stop getting the blame. The process I had was simple, we would have the salesperson enter the trade into a computer, and they would send the order directly to the trader, who would see it pop up on a screen and execute it. They would enter the trade details on the order (e.g. price) and send it to me, and I would then check it and send it directly to the client instantly. The order was not touched at any point other than when the trader added the price to the trade.
The benefit of this process was that if the salesperson entered the order details incorrectly, they would get the blame, and if the trader executed incorrectly, they would get the blame. I would never get the blame again. This process of confirmation, where the client confirms they have received the transaction, affirmation, the client affirms that the details are correct and allocation where the transaction is settled (funds are exchanged) are all part of Straight Through Processing. I put the proposal to the chairman of the bank, who instantly liked the idea and asked me to work with the London Stock Exchange, which also wanted to use the concept to build the system.
I built the system in a few weeks, and we created a new form of messaging called ISO 15022 which is still used to this day. This messaging is the core process for all STP in payments and any other STP related messaging. STP is now part of our daily lives; whenever anyone in the world pays for anything using their credit or debit card, they are using STP. I never received anything for the invention, it was never patented, and I never really appreciated the enormity of what I was creating at the time, perhaps because I was so young. Still, the impact of the invention has been profound.
In my next blog, I will explore how STP is used to improve patient care.
To learn more about how Royal uses Straight Through Processing in healthcare to enable every part of the customer journey with real-time, self-service automation, click here to download our white paper.
