Digital banking
Taking payments to the next level
The biggest take away from Sibos, SWIFT’s global all-digital event held from 11–14 October 2021, is that the fast-growing, hyper-innovative fi ntechs are not going to eat the incumbents’ lunch.
WIFT CEO Javier Perez-Tasso told attendees at Sibos that the narrative of hero fintechs versus the villains – the institutions – is a thing of the past. Incumbent players have revitalised themselves, offering new services with better customer experience, increased speed, and greater transparency. Those services, powered by products and standards like SWIFT Go and ISO 20022, are helping the financial sector deliver on customers wants and expectations, including real-time, cross-border payments. Just as customers have come to expect instant digital services, they’ve also come to demand that their payments and banking services operate in the same real-time way.
S Dig deeper
At the centre of the sector’s digital transformation into real-time, data-rich payments is the evolving SWIFT platform. This evolution is informed by the idea of transaction management integrating payments, securities, trade, and FX into a single solution. As SWIFT’s chief product officer, Stephen Gilderdale, puts it, “We’re building the best back-end rails for cross-border transactions and we can’t wait to see what innovation our users build in their customer channels with SWIFT inside.”
In a SWIFT roundtable, ‘Platform evolution: Enabling Industry Transformation’, Wells Fargo Bank’s head of technical solutions, global payment services, Joanne Strobel, said the platform evolution opens the possibility of moving to a proactive, rather than reactive end-to-end cross border payments system. This shift is underpinned by a move from the current message-based delivery framework to transaction orchestration, which will enable real-time management of an end-to-end payments solution. Strobel said the platform evolution will allow cross- border payments, which are validated up front. “This means the payment will be processed in a frictionless manner in the destination country by the beneficiary’s bank, with up front validation before that payment is delivered to the beneficiary’s bank, minimising the occurrence of costly exceptions.”
40 The rise of ISO 20022
Sibos attendees were also given a look at the industry- wide shift to ISO 20022. With industry migration beginning in twelve months, the standard is set to bring benefits to cross-border payments, but it’s important that the industry has prepared for the shift and is ready to make the change. So, what’s ISO 20022? In essence, it is a common language and model for payments data around the world. It provides higher-quality data than other standards, a move that will lead to higher-quality payments for everyone.
Paula Roels, head of SWIFT and market structures at Deutsche Bank, told the conference ISO 20022 has both long-term potential for the industry and satisfies a current need for a new transaction manager. The transaction manager, she said, is vital for end- to-end transaction orchestration, which will ensure the transparency and immutability of data. “We need the transaction manager to enable interoperability amongst the SWIFT community by bridging the different formats and channels, which are all supported during the coexistence period (namely the MT and ISO 20022 formats),” said Roels. However, the importance of being prepared was emphasised by Nick Soo, director, regional head of payment products, GLCM, HSBC. “It’s really tempting sometimes to treat this as just a regulatory project,” he said. “But that would be a missed opportunity. “We need to be pragmatic in terms of where we prioritise our corridors, and then from day two onwards have a robust prioritisation and delivery framework,” he continued. Ultimately, noted Christian Fraedrich, head of cash business architecture at Deutsche Bank, it’s vital to start testing and preparing for ISO 20022 as early as possible, with all relevant stakeholders so institutions are ready for the November 2022 introduction.
Bring on rapid international payments Low-value cross-border payments have always been challenging. Sometimes fees can be more than the
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