Will ISO 20022 overcome its delays to unlock huge opportunities?

For decades, financial institutions and corporations have sought an easy and standard method of exchanging electronic financial messages. MT standards, X.25 and all the EDI formats were supposed to solve deficits in the data and finance reporting space. In 2004, when the first publication of ISO 20022 was released, payments practitioners and industry professionals all had the same thought: What a great idea!

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At the time, it made absolute sense to introduce data-rich payments to improve automation, enhance reporting and analytics, improve interoperability and decrease risk through accurate reconciliation and regulatory compliance activities.

By 2018, many wondered why the industry hadn’t widely adopted ISO 20022. Although some countries adopted ISO 20022 for payments systems by 2019, most did not realize the potential of the rich data within streams. That same year, when SWIFT mandated an ISO 20022 rollout for 2021, with richer data than its old MT standard, the industry started investing more heavily in the adoption of ISO 20022. Despite this mandate, the roll-out plan was pushed out to 2022, and again more recently, to the first quarter of 2023.

These delays (and what seems like a reluctance to make ISO 20022 happen in some jurisdictions) led me to wonder, “What’s hindering the global adoption of ISO 20022 and the rich data structures it supports?” The answer may lie in the balance of benefits and costs of adoption.

What is the value of adopting ISO 20022?

Numerous publications on the topic have boasted the benefits of adopting ISO 20022. As a community, payments professionals and practitioners were promised numerous benefits from a processing and payments operations perspective, related to the rich and structured data of ISO 20022:

◉ Ability to transfer more complete and accurate information between banks and other FIs

◉ Higher straight-through processing rates using the rich information

◉ Fewer manual validations from a regulatory compliance perspective

◉ Ability for compliance teams to focus on investigating true hits rather than false positives

◉ No truncated information and no data loss

◉ Little to no limitation on the number of characters travelling with the payment messages

◉ Interoperability between interconnecting core banking systems, market infrastructures and end users

◉ Easier development due to the format’s use of XML, a common language

Theoretically, these ISO 20022 benefits are great. But to understand the big picture, we must address the challenges.

What are the challenges of adopting ISO 20022?

The industry has faced multiple challenges with the adoption of ISO 20022. Timelines are aggressive (though the pressure is largely due to inactivity from an ISO 20022 adoption perspective), and many institutions find themselves with a lack of resources to be able to make the roll-out deadlines. Additionally, ISO 20022 regularly updates its message standard and publishes new versions of message types regularly. How do financial institutions and FinTechs keep up with this fast-paced change? It would benefit adopters to implement a system that can adapt to change easily. FinTechs could develop software that’s made for change to stay ahead of the evolving standard.

Many well-established financial institutions and market infrastructures rely on legacy systems running on an aging infrastructure, which is a challenge the industry needs to overcome. Moreover, these legacy systems speak a language that is not easily compatible with ISO 20022, and the message formats are typically far more stringent than even ISO 20022’s predecessor ISO 15022 (with formats for CHIPS, BACS, CPA005 and ACH, to name a few). These systems were originally developed to process low-value payments at very low cost. Meanwhile adopting ISO 20022 can be very costly for the participants of the payments ecosystem—so how can we argue that the value in adopting ISO 20022 for these systems outweighs the cost?

Key advantages come from business value

With little to no limitation in data and a highly structured format, there is more to ISO 20022 than payments advantages. To have a truly impactful conversation, we must consider the business value that ISO 20022 adoption can provide.

◉ Corporate treasurers receive tools required to enhance cash flow forecasting and improve reconciliation processes with richer, comprehensive data.

◉ With increased automation potential, treasurers benefit from faster payments with less friction, allowing quick decision making while meeting payment cut-off deadlines for sweeping and investing activities.

◉ The payments community could consistently send the same structure in payment messages to multiple, geographically distributed entities without having to develop a bank-specific format.

◉ Data required in one jurisdiction, but optional in another, can consistently travel with the payment message whether required or not.

◉ The payments community gives business users the full set of data that can be contained within purchase orders and invoices, rather than a series of truncated or contracted characters.

◉ Individuals could simply click on their payroll deposit in their bank account to see their full paystub, rather than having to get the details from another system.

Perhaps ISO 20022 shouldn’t be perceived as today’s biggest value driver, but rather as the catalyst for innovation that will accelerate value-driven growth tomorrow. In a way, ISO 20022 adoption is paving the way for the next generations of payments professionals to create opportunities for the development of the industry. It allows more players in the FinTech space to collaborate with financial institutions to innovate the payments landscapes and to co-create in a climate of competition.

70 countries have already successfully modernized payments infrastructure and implemented faster payments schemes powered by ISO 20022. Forward-thinking institutions in these countries can start developing value-added services and features like automated receivables tracking and reconciliation, real-time cash balances and forecasting, real-time multibank dashboards and more.

Should institutions and companies wait until there is a more immediate return on investment to adopt ISO 20022?

Ask yourself, “Do I want to wait until I lose a client to someone who can offer services on a real-time basis?” I believe that cross-border payments globalization will remain one of the trends that drives payments modernization. Standardization, consistency and rich data are key elements of this globalization initiative. Similarly to the telecommunications industry implementing the 5G network despite no obvious immediate business value or widespread end-user use cases, achieving complete interoperability in payments may take longer than we initially anticipated. However, as a part of the payments community, I challenge us to invest in a vision that goes beyond an imminent ROI and see the potential of data-rich, structured payments to create an inclusive, collaborative future for the payments industry. Let’s give ourselves the opportunity to accelerate payments innovation and make ISO 20022 table stakes.

Source: ibm.com

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How can we learn from Mother Nature?

Nothing in nature operates individually. Nature works in a connected, circular ecosystem where everything is leveraged, shared and repurposed. Did you know that a grain of sand from the Saharan desert affects the fertility of the Amazon Forest? Or that seaweed in the ocean can produce around 70% of the oxygen in the atmosphere?

In nature, everything is perfectly orchestrated in harmony. Why can’t our future economy be the same? Specifically, how can we enhance our banking and payments ecosystem to make it thrive?

As we contemplate nature’s ecosystem, we realize that a good foundation is vital for survival. Just as a sterile flower won’t attract a bee, we cannot operate in an ecosystem if the foundation has defects. The base element must be functional and productive before enhancing the following operation chain.

As the base element of our economy, our existing banking and payment applications must undergo an in-depth review to see if they must be recreated before they can be part of the future economy fabric. This transformation would include the entire framework of people skills, operational processes and technology infrastructure, in addition to the core functions of the product.

Target three key areas to mimic nature

First, we must align and reinforce our banking and payment platforms on a global level. The base element must be fully functional and productive.

Some examples to enhance the functionalities and achieve higher productivity:

◉ Provide timely visibility into all global transactions.

◉ Eliminate time-consuming manual payment generation.

◉ Protect against fraud.

◉ Keep pace with industry changes (formats and technologies, particularly in the payment process).

◉ Start to adopt digital banking and provide a seamless wireless experience for both employees and customers.

◉ Embed advanced security, like Security Service Edge (SSE) and Zero Trust.

Second, we must optimize the load to share and leverage our base elements. This is how we create a common infrastructure for our resources to work together.

Some examples to achieve such optimization:

◉ Adopt a flexible cloud strategy.

◉ Optimize infrastructure load across the cloud. This helps to distribute server workloads more efficiently, speeding up application performance and reducing latency.

◉ Share cloud standard services, like security framework, certificate management, identity management, licensing services, metering and monitoring services.

Third, we must interconnect and open our systems, which is how we bring life to the entire ecosystem and make it function as one body.

Some examples to achieve such interaction:

◉ Leverage cloud interconnectivity and adopt a hybrid cloud strategy.

◉ Adopt an API and microservices strategy.

Share multiple resources for a richer ecosystem

As a banking and payment industry leader, IBM can help ignite banking and payments businesses in every country to enhance performance. Aside from technological shifts, IBM identifies the core business needs and what’s expected from those systems, applying the latest industry standards both from a business and technologies standpoint and reimagining and rearchitecting those systems to withstand the viral shifts in business requirements and technology.

Our banking, payments, business process workflows, development, infrastructure, architecture and security experts can reimagine and design systems to address future ecosystem challenges. Leveraging more than 100 years of experience, we are paving the way for the world’s future business and technology demands. This new era will change the face of this industry in terms of speed, agility, interoperability and performance.

Nature cannot depend on a single resource; nor can our financial systems. For example, enterprises face pressure and challenges to move beyond a single cloud provider. The hybrid cloud tackles those challenges by connecting and sharing multiple resources to produce an effective ecosystem with improved performance. The hybrid cloud can connect systems around the world with speed and efficiency, allowing the use of widely spread infrastructure to accelerate offerings worldwide.

That’s what the IBM Payments Center™ (IPC) is doing with the IBM Service Bureau for SWIFT as we leverage IBM financial cloud offerings with on-prem and other public cloud offerings. We set the stage to deliver a SWIFT solution that fits any client’s need in terms of cost, speed, regulations and cloud performance, without the need to tie to one provider or a single technology. Our vision for our clients allows them to consume SWIFT as a service regardless of where the platform runs.

In addition, a hybrid cloud brings many additional benefits, including the following:

◉ Modernizing at a pace that makes sense for the business

◉ Maintaining regulatory compliance as many industries require systems (or data) to sit in a specific location (such as SWIFT data)

◉ Running applications at a remote edge location, as some industries require edge hybrid computing for low latency and better user experience.

COVID has forced the acceleration of digital transformation in banking and payments. We offer contactless experiences for clients and automate more processes. Very few applications today can accomplish goals on their own without connecting to other systems within the technology stack to share data. For this reason, developers must build “open” systems with connectivity to other systems in mind. APIs can bring that fabric to life; open APIs can accelerate growth and allow the application to communicate at its core. APIs enable integration with emerging technologies at scale, exchanging information, leveraging existing systems to produce a scalable business model and allowing integration of new financial technologies.

As a leader in emerging technologies and payment solutions, IPC has adopted a strategy to mimic a natural flow. As we reinforce the fabric of payments worldwide, design future-proof solutions, adopt in-depth hybrid cloud offerings and open API to interconnect our solutions around the globe, we are creating a living financial system.

Source: ibm.com

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Don’t rebuild your SWIFT connectivity on cloud

Banks and businesses worldwide have embarked on a modernization journey, trying to re-imagine their systems and get ready for the world of tomorrow. While each institution faces different challenges, all are seeking common goals: new and improved channel experiences, integrated new technologies, cost management and cost takeout, improved risk management and security, reduced down-time, and operational efficiency. These goals are aimed to set the foundation for growth and agility and ultimately a better client experience.

To support this journey, most banks and businesses have announced a cloud adoption strategy. They see that the success of their transformation strategies is inextricably linked to moving to a cloud model for the flexibility, agility, resilience and time-to-market acceleration it offers. As the race to cloud adoption continues, now is the time to stop and evaluate the many options available to achieve your goals. Can you securely interoperate with ecosystem partners and networks? Can you automate to mitigate compliance risk? Are your systems designed with zero trust in mind? Are your in-house resources optimized for high-value work or burdened by increasing operational demands?

Cloud adoption has become mainstream. With its proven benefits, executives in every industry are investing and demanding that their physical infrastructure is moved to cloud, pressuring their teams to deliver mass migration to cloud while losing sight of their real objectives. Increasingly, we see businesses “lift and shift” their systems, recreating the same issues in a new environment and gaining nothing but the bragging rights of a “cloud infrastructure.”

Cloud adoption is a tool to achieve your goals, it should never be the goal. 

Should you rebuild your SWIFT connectivity on public cloud?

Of the critical components in banking and payments infrastructure, SWIFT provides the key core network for domestic and international financial messaging. It is the backbone on which the global economy is built. Maintaining connectivity to SWIFT is critical and any unplanned downtime of exclusion from the network harsh economic impacts. Recently, SWIFT has broadened access to its 11,000 member bank and corporate network with public cloud connectivity provided they comply with SWIFT Customer Security Program (CSP) requirements and abide by the application installation and configuration guidelines. SWIFT hardware components need to continue to be deployed on-premises or in colocation facilities to establish and maintain connectivity.

Modernize your payments with the IBM Payments Center

This sure smells like a “rebuild your SWIFT connectivity ’as-is’ on public cloud.” So what do you gain? You still have to build and configure your infrastructure. You’re still responsible to maintain the infrastructure and apply upgrades. You still have a physical footprint to manage. You still have to build or retain the skills and resources to support a SWIFT infrastructure and the responsibility to comply with mandatory controls. This is not cheaper, better or faster. Instead, consider shifting from a “build and maintain” model to a “subscribe and accelerate” model that integrates a value-added, SWIFT-certified service bureau and a purpose-built cloud for financial services.

Imagine a model where your SWIFT infrastructure is hosted on a public cloud specifically designed to comply with financial services standards, fully maintained and managed by a team of SWIFT experts you can leverage at any time. You could connect to a worldwide network of fully redundant SWIFT gateways, guaranteeing the availability of your connectivity while completely eliminating the hassle of managing it. Sound too good to be true? This is achievable, but it requires a partner with the end-to-end capabilities and expertise to meet the complexities of the challenge.

So what’s the primary consideration if you are moving your SWIFT infrastructure to cloud? It all boils down to one question: “What value am I looking to gain from this initiative?”

The reality of a SWIFT infrastructure is that it requires a physical footprint to host hardware components. A migration to cloud will likely require you to maintain some components on premises or deploy them in a new colocation facility, thereby increasing operational complexity. Leveraging managed services, at least for key components of the infrastructure, will drastically reduce cost and risk.

Furthermore, although hyperscalers have accelerators and tools to help build the infrastructure, you are still responsible to deploy, configure, integrate, maintain and update your infrastructure. This requires you to develop and maintain highly sought-after skills and resources. Finding the right partner who can manage your SWIFT infrastructure will allow you to leverage a pool of specialized resources available on demand. These resources will support you through the implementation and run phases of your deployment. This team will also be available to recommend innovations and support you in future initiatives to adopt new SWIFT capabilities (gpi features, APIs, other messaging options, etc.) or to comply with future mandates.

Finally, complying with SWIFT Customer Security Program (CSP) controls is mandatory, and SWIFT’s multiple architecture models provide you options and flexibility to minimize the number and complexity of in-scope components. Leveraging API integrations or outsourcing certain components to a SWIFT Certified Service Bureau will enable you to simplify your annual assessment and transfer much of the responsibility to your partner.

Selecting the right cloud provider should enable you to go beyond the SWIFT mandates. When a cloud is designed for financial services, it addresses the complex operational, cyber, regulatory and technical risks that are unique to the industry. Only a cloud that addresses these risks can truly meet the needs for cyber resiliency, operational resiliency and operational efficiency.

For a cloud provider to stay abreast of complex regulations governing financial services industry adoption of cloud, it must join forces with leading financial institutions and industry regulatory partners to define and establish a security controls framework. It must then integrate these controls comprehensively into its IaaS and PaaS services and offer industry leading security capabilities and best-in-class encryptions to protect the most sensitive financial data. Such a cloud dedicated for financial services is designed to accelerate migration of most sensitive workloads in a highly regulated industry while reducing the risk, cost and time required for such transformation.

The migration of your SWIFT infrastructure to cloud may seem like a complex program to undertake. Fortunately, it doesn’t have to be an all-or-nothing approach. There are great gains to be made through a phased and strategic approach.

Think of the options that allow you to address your biggest pain points while minimizing the amount of investment: You can simply migrate your DR and keep your production environments intact. You can keep your messaging interface on prem while outsourcing your gateways and connectivity. You can maintain your environment as-is but deploy a third redundancy site on cloud. There are many other options you can consider that will drive value without a large cloud migration.

The right partner can help you not only assess options but think through and execute against the right combination of operating model, technology and skills needed to realize results in this dynamic environment.

Source: ibm.com

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Banks are losing money on new payment systems

Payments modernization reminds me of bathing toddlers. It could sometimes be quite a project at our house, when our boys were toddlers, with splashing, shouting, and arguments over bath toys. So why bathe both at once? Because the alternative is even more work, especially if you are the only parent available. The challenge of bathing two toddlers together is nothing next to the challenge of bathing one toddler while chasing the other around the house — twice.

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Many financial institutions (FIs) are in the throes of modernizing their own payments infrastructures individually, and they are each figuring out how to develop and deploy systems that all do essentially the same thing. This is like trying to bathe two children separately, using the same resources each time, and missing the efficiency of accomplishing both jobs at once.

Where banks lose money on payment modernization

In some jurisdictions, FIs have collaborated to establish a common set of standards and processes for payment market infrastructures, such as NPP in Australia, Lynx in Canada, or TCH RTP in the United States, to name a few. Helping establish a new payments market infrastructure is only one aspect. For every new market infrastructure or change in payment message format, each FI still needs to build their own capabilities to connect to those new systems. As the entry points and gatekeepers for their end users into those new market infrastructures, does it really make sense for each FI to tackle the same problem separately in their own shops using essentially the same tools?

More specifically, the challenge is true for the payment technologies each FI uses in their middle and back-end layers for validating, processing, clearing, and settling payments. The costs involved in these developments, for a new rail or even just a new messaging standard such as the SWIFT MX standard, can be quite high. For many there is simply no business case that supports the necessary changes. There is little new, incremental revenue to be gained from developing a new payment system that will simply see existing volumes shift from one rail or format to another. The incentive for most financial institutions is that if they don’t modernize and their competitors do, they may lose customers to the competition, thus losing both fee revenue and the deposit balances that support those customers’ payments. Those deposit balances are what banks chase for their fundamental business of lending.

In some cases, when customers adopt a new payment rail, an FI may see lower revenue from fees than what they earned with an older payment method. Consider a business accepting real-time or near-real-time payments such as Interac e-Transfer, TCH RTP, Zelle, Faster Payments, etc. Those payments may have previously been made by credit card, a more lucrative form of payment for issuing FIs. In many jurisdictions, the FIs have offered these newer payment types for low or no fees, due to competitive pressures. The FI pays a high cost to build and maintain systems just to keep the client business they already have. It may even lose revenue, while tying up resources in the deployment process with essentially no return on the investment. The FI also faces the ongoing cost of maintaining and upgrading those systems over time. To invest in new systems at a high cost while forgoing revenue is a lose-lose proposition.

How banks can save costs and retain customers through payment modernization

The differentiating benefits of modernized payment systems for FIs and their customers are not found in the “back-office” processing, clearing, and settlement systems. They are found in the front-end features and functions provided to the customers, including retail, business and government clients, who initiate and receive payments. Those are what attract and retain customers. It simply makes economic sense to turn to a cloud-based payments-as-a-service, pay-as-you-go model to fulfill an FI’s back-end processing and operational needs, while spending more time and money on the front-end: delivering value-added services to their customers. Since some cloud-based payment services already exist, and are, in some cases, used by more than one FI, what’s left for the FI is the front-end and integration costs for the new system – costs they would have had anyway.

In a recent survey of 300 financial institution IT and operations executives from around the world, 84% said that their IT environment has changed more in the last 12 months than in the company’s lifespan. Moreover, 88% of those surveyed stated that short-term thinking has IT and operations teams choosing options of lower quality, partly hampered by inadequate budgets, resulting in poor system resiliency.

It’s becoming clear that financial institutions need to actively consider new models for payments that don’t extend or exacerbate their existing IT challenges — or introduce new ones — due to short-term thinking. Many other industries have shifted to cloud-based, as-a-service models that have helped them advance their interests and provide better value to their investors and customers. These models are used by multiple organizations, allowing them to share the same resources at a lower cost. It’s time financial institutions did the same with their payment systems.

Source: ibm.com

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Why ISO modernization is so important for financial institutions

With the migration to ISO 20022 financial messaging standard, the world is moving toward a standardized system of payment messaging. ISO 20022, which SWIFT will enable for cross-border payments beginning August 2022, will significantly benefit financial institutions (FIs). But these institutions’ journey to adoption may prove quite challenging. To successfully implement the new standard, FIs will need a comprehensive solution for translation between legacy message formats and ISO 20022.

Opportunities in ISO 20022 adoption

This transition offers a golden opportunity to enhance how payments operate. In a world of instant payments and escalating payments fraud in the digital payments space, we must take this opportunity to reduce fraud, enhance compliance and build a better, more robust payment infrastructure. Ideally, a solution will offer ongoing interoperability across the different ISO-compliant payment networks.

Since the standard, and its adoption, continues to evolve, the solution must be future-proofed for ISO 20022 changes as they occur. An ISO-native solution will make it easy to adopt new requirements as they are published. Businesses will have the option to integrate payments into their complete order-to-pay business processes, instead of having to use separate business processes to invoice, receive a payment and ultimately reconcile that payment. The integration simplifies the process from start to finish.

ISO-native messages can contain more data than under previous standards. By leveraging this additional data, FIs can reach a higher standard of protection against financial crime, AML and sanctions. Businesses can better manage cash and liquidity risk through faster cash application, and both corporations and FIs can predict cash flows.

With easier access to standardized data sets, FIs can get data analytics faster and use payment stream data to provide business intelligence not previously available in other payment streams.

Developing an ISO API-enabled Transformation layer helps FIs create a business strategy that clearly defines the differentiated experiences and products the firm offers. And with an ongoing focus on the ISO APIs, FIs can connect to their ecosystems to deliver on their differentiated experiences and products.

With an ISO 20022 message-based API transformation layer solution, an FI can transform its legacy payment system messages into an ISO 20022-specific message format for the downstream system. This is almost a prerequisite for many FIs to bridge the gap until they have native ISO 20022 capability in their systems.

Accommodating legacy payment formats

Legacy proprietary formats such as SWIFT MT are already well-known and widely used in the industry, so it will take time to get used to ISO 20022. There is a strategic opportunity to allow for a few years of coexistence between legacy and ISO standards. But it is important to provide end-users with an interface that shows original and converted messages clearly and unambiguously, while providing functionalities that realize the value of ISO’s rich message fields.

A successful adoption of ISO 20022 should meet several objectives: reduce IT complexity, enable agility, enable partners, integrate seamlessly, and comply with regulatory requirements. These objectives may sound familiar: they are objectives for most FI IT systems generally. But they take on heightened importance when prioritizing ISO 20022-enabled systems.

This is especially true for the first objective, reducing IT complexity. Simply adding in an ISO 20022 layer to an existing complex system as a tactic to address the immediate gap may solve the immediate issue, but it does not address the longer term strategic objective of reducing complexity. In fact, as one moves to ISO 20022-native architectures and processing, a tactical solution may be throwaway or even a barrier to meeting that objective.

The future of financial messaging is still being written with respect to ISO 20022. But long-term strategic planning can’t wait. Institutions that adapt now will be better prepared for future changes.

Source: ibm.com

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How is SWIFT still relevant after five decades?

Too many people in the payments industry today hold the misconception that the SWIFT network is only for cross-border payments. This was indeed the case in 1973, when 239 banks from 15 countries joined forces to create an efficient, automated, and secure payments network.

At launch, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) was built on three pillars, a secure and reliable communication protocol, a set of message standards and continuous new services aligning with its members’ needs.

A global network with a global reach

These pillars remain just as relevant 48 years later. So much more than a “cross-border payments network,” SWIFT has grown to serve more than 11,000 members in over 200 countries, providing a wide array of financial messaging services and influencing and innovating payments worldwide.

SWIFT has reimagined domestic high-value payments. Over 60 market infrastructures, covering 85 countries, rely on the SWIFT network to clear and settle domestic transactions. SWIFT FileAct, a bulk message exchange, allows correspondents to send and receive files mostly used to exchange bank statements or to exchange low-value, high-volume transactions.

SWIFT has extended the network to non-bank financial institutions, allowing the exchange of securities, foreign exchange and all other types of financial messages needed by its members. In fact, today more than 50% of messages on the SWIFT network involve securities trade transactions.

As the network expanded to cover most financial institutions worldwide, SWIFT opened its doors to large corporations such as Microsoft and GE. SWIFT became these companies’ single standardized connection to all their banks, adding efficiency and cost savings to treasuries worldwide.

Message standards and worldwide influence

From its inception, one of the key pillars of the SWIFT network is the message standard, a common language understood and processed by all its members.

The ISO 15022 standard, more commonly known as the SWIFT MT or Message Type standard, was introduced in 1995. It was similar in structure to that of the Telex technology that the network replaced. While it has evolved over the years, the MT standard remains the most used message format on the SWIFT network, and it has made its way to many domestic and private networks worldwide.

In the late 90s, SWIFT realized that the MT standard, although very useful, was restrictive in light of evolving technologies. SWIFT MT would not support the data that will be needed to be processed with each transaction. In 1999, SWIFT decided to adopt XML and develop a message standard that would recognize the richness of the data. ISO 20022 is often referred to as the “new standard.” But it was actually launched in 2004 in collaboration with SWIFT members. The new standard had some issues catching on, since adoption was voluntary and required heavy investment in backend systems,  But on the heels of a 2019 mandate, ISO 20022 is now being deployed in every major network worldwide, and it is the foundation for interoperability.

Security

Given its prominence in finance, SWIFT has become a prime target for hackers. In fact, multiple hacking collectives have targeted the SWIFT network in attempts to divert funds. In 2016, hackers robbed over $80M from a large bank, money that today remains unrecovered. Although the network itself was not breached, SWIFT quickly realized that each of its 11,000 members did not meet industry standard security levels.

To level the playing field, SWIFT launched the Customer Security Program, a set of 27 security controls forcing each member to completely reassess its infrastructure, thereby securing the overall network. Within the first year, 91% of SWIFT members (covering over 99% of volume) had confirmed their compliance with the controls. This shows the influence the SWIFT organization has developed over the years to ensure compliance in a typically slow-paced industry.

Innovation

SWIFT has not rested on its laurels. The network is continuously focused on innovation to improve the member’s experience.

The SWIFT global payment innovation (SWIFT gpi) launched in 2017 with an objective to deliver cross-border payments faster, cheaper and with full transparency and traceability. Following a successful mass adoption of SWIFT gpi, over 90% of wire transactions were credited within 24 hours, including 40% credited within 30 minutes. SWIFT gpi is now extending its capabilities to reduce the number of rejected transactions through pre-validation and to deliver value to corporations looking for transparency of fees and better traceability on inbound and outbound treasury payments. With the launch of SWIFT Go, the foundation piece for real-time cross-border payments, the gpi model is also applied to low-value payments.

In the past 5 years alone, SWIFT has launched several new services and completed multiple proofs-of-concept, ranging from launching the first real-time cross-border payment to assessing the use of blockchain technology as part of the SWIFT network while implementing Financial Crimes and data analytics services.

The future of SWIFT

If you still think SWIFT is “just for cross-border payments” you might need to take a second look. SWIFT is the heart and soul of payments worldwide, and without access to it, any economy could easily collapse.

As a result of recent global events, interest in SWIFT and its functions in financial services has certainly grown. Banks and large corporations have relied on SWIFT for secure messaging since 1973, but it doesn’t often get public visibility. By consistently delivering efficient and secure payments, SWIFT has earned the trust of 11,000+ members. As long as it continues to listen to their needs and collaborate and innovate to provide new value, SWIFT will continue to grow and dominate payments worldwide.

Source: ibm.com

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