Semantic Ontologies: Be the Shepherd, Not the Sheep

Posted February 5, 2018 | Leadership | Technology | Amplify


Dean Crowley and Oliver Browne stress the importance of the adoption of an industry-wide ontological standard within the financial industry. They believe this will prove useful for streamlining the reporting process and enabling an improved customer experience. The authors also feel that those organizations using an ontology will secure a competitive advantage over those who choose not to adopt one.

The technology associated with semantic ontologies has been in existence for quite some time but is not yet adopted as an industry-wide standard within the financial industry. There are some ontologies currently in use, such as the Financial Industry Business Ontology (FIBO), the Financial Industry Regulatory Ontology (FIRO), and the Financial Industry Ontologies for Risk and Regulation Data (FIORD), but there is no single solution that all organizations can use as the one common standard. I believe this will change in the coming year, and there will be a significant shift toward a single standard within the industry.

Organizations can use ontologies with Hadoop and data lake systems when they are evaluating the underlying systems themselves, their documentation, and respective data dictionaries. In an ideal world, a single standard like an ontology is used from day one. This has not been the case, however, so an ontology must be applied retrospectively, increasing the diffi­culty in layering over the different systems used within different organizations across the industry.

Unfortunately, before an organization can reap the rewards from ontology adoption, they must break through a significant challenge: high-level, key decision-making employees often do not understand how an ontology will benefit the business. They tend to view ontologies solely as an administrative or technical function, not as an immediate need. Thus, they make them low priority. Only after key employees view the benefits of ontology adoption as advantageous can there be a significant commitment by their respective organizations to their creation and adoption.

From a regulatory point of view, an industry-wide standard will prove very useful for reporting. Because all data will be uniform with an industry standard, there will be very little need to change data for reports within financial institutions; and for regulators, reports will be very easy to interpret. This will save time and money for all parties.

It is only a matter of time until regulators encourage reports in a FIBO-friendly format, thus driving wide-scale recognition of FIBO as the universal standard. For example, if the US Commodity Futures Trading Commission accepts reports in a FIBO format in 2018, that decision will force organizations to consider using it in their day-to-day operations.

Within the financial industry, there is a hesitancy among organizations to adopt or implement signif­icant industry-wide changes. This holds true with the serious overhaul that ontology creation and adoption would entail as well. While ontologies will benefit areas like data lake creation or system migration, organizations seem to be content to operate as they are, rather than incurring costs that may be viewed as unnecessary in trying to change processes that are already operating at a satisfactory level. Many organizations would prefer to let someone else take the plunge and wait to see if any of the observed benefits could be applicable to them.

There are several benefits to organizations that take the lead in the industry in standard creation. Leaders will have the opportunity to work with others and align the ontology closely to their own systems while minimizing the need for change within their own organizations. After the initial creation, organizations that follow suit will have to adhere to the standards outlined by the industry leaders, which will result in some disruption and bigger changes within their own organizations than if they had been involved from the beginning.

I predict that the successful adoption of an ontological standard, such as FIBO, within the financial industry will lead to a massive change in customer experience by eliminating lengthy and costly processes involved in transferring a customer’s business from one orga­nization to another. Because of this new open market, organizations will have to ensure their customers are provided with the best possible services. If they are not, customers will quickly take their business to a competitor. In the current market, this process is quite awkward and lengthy, as funds must be transferred and trans­lated between organizations to take those customers from one system and input them into another. This difficulty effectively disappears with a semantic ontology adopted as a standard within the industry.

I believe that, in 2018, the financial industry, organizations, and consumers alike will become more aware of the improved data standardization offerings associated with semantic ontologies. Organizations that don’t recognize this will be left behind as the rest of the industry leads the way forward with ontology creation and adoption. While there have been largely inde­pendent movements by organizations like Bloomberg, Deutsche Bank, Wells Fargo, State Street, and many others in the direction of semantic ontologies, only when there is a significant commitment by multiple entities to a universal standard will progress be made toward an industry-wide ontology. It is in an organization’s best interest to ensure it is up to speed when the market becomes more open for customers who want to change institutions. Failure to do so may result in disaster, as the gap between organizations using an ontology and those that are not will widen further, leading to some organizations being outstripped by the competition.

Over the past number of years, there has been a constant increase in the uptake of work on semantic ontologies within the financial industry, including increased progress by way of proof of concept (POC) and use cases within organizations. Organizations using these POCs will be the industry leaders moving toward a universal standard because they (1) recognize the benefits available to them and (2) are already work­ing with semantic ontologies internally. These leaders are also going to be the beneficiaries of the more open market that will come with a universal standard, and will therefore be shepherds, not sheep.

About The Author
Dean Crowley
Dean Crowley is pursuing an MSc in research in financial technology with the University College Cork (UCC)/State Street Advanced Technology Centre, focusing on semantic ontology adoption. His research investigates the barriers of adoption of semantic ontologies within the financial industry. Mr. Crowley has a BSc degree in business information systems from UCC. He can be reached at
Oliver Browne
Oliver Browne is a Researcher/Lecturer with the University College Cork (UCC), where he is currently pursuing a PhD in accounting, focusing on regulatory and risk reporting in the area of semantics. He has worked in the banking sector for Bank of Ireland, Group Treasury, in the preparation and submission of regulatory reporting and financial statements and in the management of liquidity in group deposits. Mr. Browne has also worked for Allied… Read More