A legal entity’s cash SSIs (Standing Settlement Instructions) are an indication of which account they want to be paid into, at which bank, for transaction in which market and currency. Hence, they are indispensable to routing payments, especially as often several such SSIs need to be linked to create a complete path from the ordering customer’s bank, to the beneficiary customer’s bank.
Despite their importance, they are not always managed correctly by their owners, leading to confusion and significant costs for institutions every year.
The pressure to improve this situation is increasing. Faster payment times, thanks to new technology and initiatives such as SWIFT gpi, have highlighted the urgency of solving this age-old problem.
Significant efforts from SWIFT are already underway to extend the accuracy and coverage of its current SWIFTRef offering for SSIs, eg through the planned rollout of a validation of SSIs against observed SWIFT payments traffic.
Costly confusion
Missing or inaccurate Standing Settlement Instructions are a major hindrance to true straight-through processing (STP).
Many institutions do not communicate their SSIs in less common currencies and some forget to communicate changes or updates. This leaves counterparties with the cumbersome task of chasing up to get the correct details or, -- worse-- if they use the wrong SSI, spending days or weeks to solve the issue.
The array of channels used by parties to convey their SSIs further adds to this complexity. Firms spend precious time searching different databases for the necessary information, sometimes only to find out later that they are erroneous or out of date.
Combined, wrong and missing SSIs account for a significant amount of all payment failures, making them major source of unnecessary costs.
Changing expectations
The availability of a complete and reliable database of cash SSIs is a prerequisite for a fluid payment or settlement process.
Despite intensified efforts to improve the situation regarding cash SSIs, the technology used to date has struggled to keep up with the transformational advances made elsewhere.
Innovations such as SWIFT gpi, through which financial institutions and corporates can make payments in minutes, even seconds, have increased customer expectations. Having out of date or incorrect data slows down the payments process and so, for many organisations, is no longer excusable.
It’s time for a different approach.
Hope on the horizon
This new approach needs to be collaborative. The increasing urgency to improve cash SSI management has brought several forward-thinking, innovative institutions together, to build an industry-led solution.
SWIFT has set up a working group to design a new, efficient solution for cash SSIs which includes senior experts from six global banks including Barclays, BNY Mellon, JPMorgan and Société Générale. The working group’s scope covers all aspects of cash SSIs, including their syntax, submission, validation, distribution, usage and the requirements for an ideal end-to-end SSI solution.
Following a number of workshops, the group created specifications for two prototypes, developed to facilitate the capturing of customer feedback and to validate the technology SWIFT plans to use to develop the future service.
These prototypes, which will be demoed at Sibos 2019, demonstrate a data governance model built using smart contracts, an evolution of object-oriented programming that has its origins in blockchain technology. The model will enable strict validation of any SSI by all of its stakeholders including the SSI owner, the Nostro bank mentioned in the SSI and SWIFT, which, for example, compares the SSI against observed traffic and RMA (relationship management application) agreements. The data governance model that is implemented in this second prototype is sufficiently abstract to be reused for other types of reference data in the future, and it is patent pending with the US patent authorities.
As data accuracy is one of the most urgent issues regarding SSIs, an initial version of the new solution will focus on the innovative data governance model, and will, most likely, still use a central database. This can make its contents available through the current file transfer and application programming interface (API) mechanisms. However, the usage of smart contracts allows a future combination of the data governance model, with a distribution of SSIs using distributed ledger technology (DLT), for those parties that would prefer that, once that technology is mature enough for this.
With this project, SWIFT and its working group are creating a single point of information for global financial institutions, providing an important component for quality assurance in payment transactions and beyond.
By clearing up the confusion and eliminating the existing operation inefficiencies and the risks, we can reduce costs and enhance the service that banks using SWIFT can deliver to their customers.
We look forward to continuing our collaboration with the banks in the working group, and using advanced technology, as we move closer to solving this issue once and for all.
To find out more about the smart contract-based SSI solution visit Sibos 2019, the world’s premier financial services event, on Tuesday, 24 September. The prototype will be demonstrated on stand 5c in the Discover Zone.
About Jan Dings
Jan Dings is senior product manager at SWIFT. He has worked at the company for 27 years, mostly focusing on the automation of treasury back-office processes.
About SWIFT
SWIFT is a global member owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a platform for messaging and standards for communicating, and we offer products and services to facilitate access and integration, identification, analysis and regulatory compliance. Our messaging platform, products and services connect more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories.
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