Home Banking & Finance The Progress of Payments Processing

The Progress of Payments Processing

Talking with MEA Finance, Onur Ozan, Regional Head, Middle East, North Africa & Turkiye at Swift highlights the progress made in bringing about faster, friction free payments across borders and between businesses, and the benefits that the efforts to make this a reality will bring to people and to economies.

It is important for all parties in the cross-border payments ecosystem to evolve together to create seamless payments that meet changing expectations says Onur Ozan, Regional Head, Middle East, North Africa & Turkiye at Swift

What are the key components in collectively improving the cross-border payments experience for customers?

In 2020, the G20 made improving the cross-border movement of value a key priority. The importance of delivering on this has only been made clearer by the G20’s roadmap to enhance cross-border transfers. Speed, lower costs, transparency and accessibility – four ingredients to give SMEs, consumers, corporates and banks a better cross-border experience.

Working with our global community of financial institutions, we’ve made huge strides to enable instant and frictionless cross-border transactions for wholesale payments and have also provided other easy-to-implement solutions that address various friction points in the payment chain. These include correcting avoidable errors upstream that could lead to future delays, streamlining operational queries in the event of a problem and ensuring that compliance processes can accommodate today’s faster payments.

Small businesses and individuals are among the fastest growing segments of the cross-border payments industry and need access to faster and more cost-effective payments. To address this challenge, we introduced Swift Go, a service that enables financial institutions to offer their customers predictable, fast, highly secure and competitively priced payments anywhere in the world directly from their bank accounts. With a rapidly growing community of over 600 banks around the world and many more to come, Swift Go rivals the offerings of other players in the cross-border low-value payments space and is fast becoming the new global standard for international low value payments.

Ensuring rich and standardised data in the ecosystem is another critical component. The global adoption of ISO 20022 will enable the use of consistent, rich and structured data both for cross-border payments and domestic payments, increasing efficiency and improving interoperability. Furthermore, the transaction management capabilities in Swift’s enhanced platform, characterised by transaction integrity, data enrichment and centrally held data, will assist in the application of best practices for the community.

Are there any elements in the numerous payments processes that cannot be made quicker or smoother? 

Today, 50% of all Swift gpi payments are completed in less than five minutes and two-thirds in less than an hour, bringing us closer to the G20 ambition of having 75% of cross-border transactions completed in less than an hour. Our data shows that it is mainly at the point of receipt of an international payment that delays can occur, with the main factors being capital controls and associated compliance checks, local opening hours, incorrect data and the use of batch systems.

With multiple participants involved in payments transactions, each institution in the payments chain needs to be set up for effective processing and to be able to handle the increased amounts of data brought by the transition to the rich data ISO 20022 messaging format. Making instant and frictionless global payments a reality is a collective effort, involving both collaboration within the private sector and between the private sector and the public sector. It is important for all parties in the cross-border payments ecosystem to evolve together to create seamless payments that meet changing expectations.

Can a faster, more agile and seamless payments environment measurably add to economic growth? 

As set out by the G20, making cross-border payments, including remittances, faster, cheaper, and more transparent and inclusive, while maintaining their safety and security, is expected to have widespread benefits for citizens, businesses, and economies worldwide, supporting economic growth, international trade, global development, and financial inclusion.

In particular, increases in straight-through processing on the operational side, and decreases in false positives on the compliance side, can free up time and resources for individual institutions, enabling them to operate more effectively and grow their business, with a corresponding positive impact on economic growth. Also, when end customers have the assurance of a payments experience free from friction and pain points, there will be increased confidence in making payments, also helping to drive growth.

ISO 20022, the new global standard for communicating financial information, goes live from 20 March this year. Do you expect to see immediate impacts or a gradual change in conditions as a result? 

We expect a gradual change. Go-live on ISO 20022 for cross-border payments marked the start of the coexistence period between MT and ISO 20022 messaging formats, running until November 2025. While most global transaction banks, and vendors, have adopted the standard, the majority of institutions in the payments community are starting their adoption journey in 2023.

The community is also acting on advice around market best practice. In 2022, the Payments Market Practice Group updated their ISO 20022 Migration and Interoperability Considerations paper. One of the key updates is the recommendation, now being followed by many ISO 20022 adopting communities, to avoid the origination of rich data elements for cross-border payments until November 2023.

Swift advocates for a full and strategic approach to adoption. We’ll be working closely with our community throughout the coexistence period to provide support and resources, also enabling customers to take this journey at their own pace.

What effect, if any, will implementation of ISO 20022 have on existing cross-border payments systems such as Buna? 

As a centralised, multi-currency platform for cross-border payments, Buna stands to benefit greatly from ISO 20022 adoption. Usage of the standard will play a significant role in supporting interoperability and creating greater efficiency in payment flows between institutions.

How can we expect Market Infrastructure interlinkage, including that of instant payment systems, to shape the future payments landscape?

Interconnectivity and interoperability between traditional payment systems, instant payment systems and emerging payment systems will be key to achieving instant and frictionless cross-border payments anytime, anywhere. In recent years, there has been a proliferation of instant payment systems around the world. However, although there is a degree of convergence between instant payments market infrastructures, significant differences remain between systems and jurisdictions.

We believe that different models of interoperability will emerge and co-exist. Within the correspondent banking system, the community has achieved interoperability for non-instantaneous flows. For instant transactions, we have laid the foundations with different modules such as Swift Go or gpi Instant. In line with our strategy to enable instant and frictionless cross-border transactions for the benefit of the community, and in order to ensure interoperability between existing and new infrastructures, we plan to achieve it with instant payment systems by providing a common platform. This will support the processing of instant cross-border payments, agnostic to the underlying model and build on existing capabilities that our customers have already adopted, to maximise their investments.

To guide our solution design, we’ve held consultations with several market infrastructures and major transaction banks in the past months. In line with industry feedback, we’ll evolve our cross-border payments offering to meet these needs. As we do, our priority is to enhance the end-user payment experience, develop solutions that can scale globally, and equip market players with the cost-effective capabilities that allow them to offer competitive solutions for their customers.