Top 10 takeaways from SWIFT at SIBOS 2023

This year Sibos landed in Toronto from September 18-21. And as usual, expert speakers provided real inspiration for delegates to take back home at the end of a busy week. 

In case you missed any of the action, check out these 10 takeaways from Swift at Sibos 2023. 

1.To meet the needs of consumers and SMEs, collaboration is essential

Low-value cross-border payment volumes have taken off, and financial institutions around the world are evolving their offering to provide consumers and SMEs with the best experience possible. “Our customers are demanding the same kind of experience that they get when sending domestic payments,” said Gayathri Vasudev, Global Head of Cross-Currency Payments at J.P. Morgan. 

Key factors for providers to consider include facilitating greater interoperability between instant payment systems, continued technological innovation, decreased costs for end users, and regulatory standardisation. But above all, panellists agreed that working together would likely bring the most progress. 

“Technology is not the challenge,” commented Petra Plompen, Senior Manager at EBA Clearing. “We can make fast payments across the world – very fast. There are differences in market practices and standards, but those can be overcome. What we learn is that we really need to do this together to show that we can meet banks’ needs and the needs of their customers too.”

2. Reducing friction takes an industry

The financial community has come a long way in reducing transaction friction. But small errors – like putting data in the wrong field, a misspelt name or incorrect currency code – do happen and can slow things down.

At Sibos, speakers were optimistic and excited about how ISO 20022’s richer and more structured data could be used to reduce this friction, alongside solutions that can check payments for errors before they’re sent.

“80% of payment queries that we get across 96 payment networks are because of payment status,” said Debopama Sen, Co-Head, Global Payments and Receivables at Citi. “Payment Pre-validation is an extraordinarily useful tool. Since using it, the total number of queries has come down and the ones that remain are no longer caused by the presence of incorrect data.”

Panelists also noted the power of collaboration when it comes to reducing friction. “I’m a strong believer that this should not be a competition,” said Luca Corsini, Head of Group Trade & Correspondent Banking at Unicredit. “We need to work together to solve this problem. The speed at which we succeed will be equal to the slowest bank, and full adoption across our industry is needed in order for this to work.” 

3. Meeting the G20’s goals: “Adopt ISO 20022” 

The G20 has outlined a number of goals to enhance the speed, cost, transparency, choice and access of cross-border payments by 2027. The financial community is making great progress in achieving these already, but there’s still work to do.

“When you look at these goals, they’re generally things that customers are asking for anyway,” said Temi Ofong, Global Head Customer Channels at HSBC. “This leads to a lot of commonality in the way that banks are responding.”

Discussions also highlighted the potential of ISO 20022. Asked which joint initiatives are most valuable, Joanne Strobel, Head of CIB Segment Solutions, Global Treasury Management, Wells Fargo replied: “Adopt ISO 20022. Being able to have that richer, more structured data in the fields and being able to carry that information is such a strength in supporting interoperability between what we’re doing cross-border and what we’re doing domestically. So let’s all adopt and use ISO 20022 in as standard of a way as possible.”

4. Transaction Manager makes exceptions and investigations more efficient

The majority of cross-border payments reach their destination quickly and efficiently. But when exceptions do arise, they can be time consuming and costly to fix. 

“We each individually only think about the cost of exceptions within our own institution, but cross-border payments typically touch at least three banks, sometimes four, sometimes five, so the cost that we see individually is actually only say, 20%, of the total cost,” said Isabel Schmidt, Co-Head of Payment Products at BNY Mellon.   

Panelists noted how Swift’s end-to-end orchestration of a payment’s journey through Transaction Manager could help make investigations more efficient. 

“I’m really excited because I believe that Transaction Manager and its new processes will not only enable us to serve our customers better by giving them pre-notifications on things that might break in the chain, but also to empower them to do their own look ups like we do with Swift GPI,” said Paula Roels, Head of Swift & Market Infrastructures at Deutsche Bank. “There is huge potential here.”

5. To combat the growing fraud threat, we need to work together

Fraud is a growing problem and discussions assessed the potential of a collaborative approach to developing a solution. “In 2022, the Australian scam loss data showed AUD 3.1 billion,” said Susan Yang, General Manager, International Payments & Network Management, Commonwealt

h Bank of Australia. “But when you compare that to 2021, it’s an 80% year-on-year increase. Scammers are not waiting for us to be ready, so we have to come up with something right now to help combat that for our customers.”  

One approach to solving this problem is to pre-validate payments before they’re sent – making sure that the name or account number given match the beneficiary account data. Many banks around the world are already investing in domestic pre-validation schemes, using historical transaction data to confirm a payment’s details. But to truly tackle fraud on a cross-border level, harmonisation between domestic systems is needed.

“I think an aggregator will be required,” continued Yang. “And Swift is one of the parties that can play that role by leveraging its existing connectivity with more than 11,000 financial institutions globally.”

6. Interoperability is an enabler in making tokenisation scalable 

Tokenisation has great potential to bring about new asset classes and assist in the development of new forms of money, such as digital currencies. Standardisation and interoperability will be a crucial enabler in scaling the tokenisation of assets and should be a key focus for the future.

Stephanie Lheureux, Head of Digital Assets Excellence Centre at Euroclear, commented that “We need to progress on standardisation...all the requirements around privacy and identity too...the liability...all these questions are key to progress in the tokenisation space...and interoperability with existing systems is absolutely key as well.”

7. Instant payments have a big impact on people’s lives

Interlinking instant payment systems for cross-border payments can bring big benefits. Panelists discussed the runaway success of Thailand’s system – PromptPay – which has become part of the national lexicon thanks to overlaying services like a QR code for simple, fast payments on tuktuks, subways and motorcycle taxis.

With Europe’s One-Leg-Out scheme set to come into force in November 2023, José Luis Langa, DMD International Institutional and Cash Management at Iberpay, the Spanish instant payment system, stressed just how significant connecting domestic IPS for cross-border payments can be. 

“Let’s use IPS to make a real impact on people’s lives,” he said. “For some, it’s the difference between being able to go and see a doctor or not. We have the tools, and we’re determined to make it happen with the help of our community.”

8. ISO 20022 is opening new possibilities

Many conversations at Sibos centered around the benefits of ISO 20022 for payments. And with rich, structured data combined with Transaction Manager, we’re now experiencing a paradigm shift from point-to-point messaging to end-to-end transaction management.  

Chloe Jenkins, Lead Business Analyst at Barclays, summed it up by saying, “We need to move our payment engines, especially, to be ISO compliant otherwise you will get left behind, and you won’t be able to make use of those new product propositions. And we’re going to see very quick change, post 2025.” 

Sibos brought it home that ISO 20022 is only gaining momentum and bringing the Swift community ever closer to the vision of instant and frictionless payments.

9. There’s huge potential for CBDCs in cross-border settlement 

The excitement around the potential of central bank digital currencies (CBDCs) continued to be a hot topic at Sibos. With various regional and national platforms forming for CBDCs, however, one thing is clear: there will need to be interoperability to ensure we maximise the promise of digital currencies.  

Hariram Chakraborthy Janakiraman, Head of Industry and Innovation at ANZ Bank encapsulated the excitement behind the potential of the technology. “Today, we can move money relatively easily through existing networks. What digital currencies and the technologies that underpin them, such as tokenisation, programmable money, and smart contracts enable you to do is to move value and payment at the same time and settle at the same time. So that is what is really exciting about this technology.” 

The exact role of digital currencies is yet to be seen. But as speakers pointed out, we’re preparing for the future today, and cooperation and interoperability are core to future success.

10. Financial crime is evolving, but so are the solutions to fight it

As approaches to financial crime become ever more sophisticated and complex, our approaches to fighting it must evolve too.  

There’s a need to work together to build processes, share data, and collectively fight against the rise of financial crime. As Nick Maxwell, Head of Research at Future of Financial Intelligence Sharing said, “With the growth of the digital economy and digital finance, it’s clear from a logical perspective but also the evidence emerging from these initiatives that to identify financial crime risk, which is spread across multiple financial institutions and borders, we need to be looking at data in a connected way and conducting collaborative analysis.”

Re-disseminated by The Asian Banker from SWIFT.