Four issues to watch as Sibos 2023 kicks off in Toronto

Banking And Financial Messaging

Ed Ireland

Edward Ireland

Sep 13, 2023

As Sibos 2023 kicks off in Toronto next week, it’s tempting to join the event host SWIFT in gazing into the next three years of international finance. That future contains real-time changes to an organisations’ securities settlement platform, upgrades to its transaction manager solution and, of course, the potential development of CBDCs. But at its core, SWIFT is about facilitating cross-border payments, and that issue is set squarely in the present geopolitical and economic situation. Hence the theme “collaborative finance in a fragmented world.” 

While the future of money may get a big push from SWIFT at the conference, I expect to see attention focused on some of the more current issues as well. Among them: 

Instant Payments: In one of its collateral pieces before the conference, SWIFT posed the rhetorical question: “Your payments are fast. But are they G20 fast?” The question refers to the G20’s target of 75% of cross-border payments reaching the end beneficiary in under an hour by 2027. SWIFT claims to have hit the goal already via its gpi initiative. In a statement released just three weeks before the conference opened the organisation reported on its progress so far. It said 89% of cross-border payments are processed over SWIFT’s payment rails within an hour, placing its transaction speed ahead of the G20’s target. SWIFT data shows that 84% of all payments on the network are conducted directly or with a single intermediary. “While in-flight processing between originating and beneficiary banks has significantly accelerated, there is still more to be done at an industry level to fully achieve the bar set by the G20,” according to SWIFT. “At present, only 60% of wholesale payments reach customer accounts in that timeframe due to delays at the beneficiary leg caused by issues including regulatory controls, batch processing and opening hours of market infrastructures.”

ISO 20022 Messaging: When the 2022 Sibos wrapped, the focus was on ISO 20022 mandates in several geographies, including the UK. Now, the focus is on making the data facilitated by ISO actionable. Or you could look at it as the time to claim an ROI for ISO. Since last year’s events, the UK has had a successful migration at a technical level. I expect the attendees and the community to be generally satisfied now that the instant payment rails are in place. We’ve been able, as an industry, to push about 15% of all transactions onto ISO 20022 in the UK, and I think the conversation this year will be all about moving the remaining 85% of the traffic. As the conference opens, it’s helpful to understand that the initial stages of ISO 20022 messaging only scratch the surface of receiving data. Next up is the market-ready phase, which is characterised by the completion of upgraded infrastructure (phase one) to the point where it does not affect daily operations. Some gaps that need addressing in this phase include introducing new network providers, new API options, new payment rails like instant payments and overlay services like Request to Pay and Pre-validation.

Cloud migration and payments aggregation: It’s important to remember that SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It’s about communication between banks, and cloud computing facilitates this communication. The cloud fosters interoperability between various systems and solutions. This interoperability means smoother transactions between banks and other financial institutions, regardless of their underlying systems. Banks need to be able to make those connections to compete on top of meeting market and regulation requirements. The stressful geopolitical environment and fragmentation has accelerated these conditions. SaaS models help banks go faster, ticking the boxes of both regulatory and market needs, bringing new services to market more quickly using external technical expertise and infrastructures. Using SaaS models with access to additional capabilities and services extends the breadth of banks’ offerings, positioning them more competitively. Many FIs face the challenge of multiple products and different interfaces for accessing different payment networks. We expect the ability for a cloud-based service that aggregates those different networks into a single platform and user interface to be a hot topic at Sibos.

Pre-validation: Expect to hear a lot about pre-validation both during and after Sibos. It is part of SWIFT’s effort to make sure security is in the cross-border mix along with speed. Prevalidation, in the context of cross-border payments, acts to ensure the completeness, accuracy, and compatibility of the payment details with the receiving bank's specifications and regulations. By conducting pre-validation checks, financial institutions can minimise transactional errors, reduce payment rejections or delays and enhance the overall efficiency of cross-border payment operations. As part of its gpi initiative, SWIFT sees prevalidation as a natural progression in its development, ensuring that payment details are correct right at the onset, which complements the gpi's aim of providing faster, more transparent and traceable cross-border payments.

In the intricate world of international banking, cross-border payments stand as one of its most crucial threads, weaving economies and financial institutions across the globe. As the volume and velocity of these payments surge, so does the need for efficiency, accuracy and reliability. Expect that mix of present needs and future preferences to fill the agenda at Sibos. 

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Ed Ireland

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Edward Ireland

Ed has more than 15 years of experience in payments and financial technology. His current role is to drive thought-leadership and solution development for ISO 20022 and the larger product set of Payments Transformation as a Service. Ed has a global remit for existing customers and new logo with areas of specialisation including operational resilience, security, compliance and regulatory change.
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