Voice of the Industry

End-to-end visibility takes centre stage for banks – top takeaways from Sibos 2023

Tuesday 3 October 2023 10:07 CET | Editor: Oana Ifrim | Voice of the industry

Edward Ireland from Bottomline emphasises the importance of pre-validation, ISO 20022, case management, Swift GPI, and data accuracy for attaining end-to-end payment visibility, paving the path for streamlined global payments.

Sibos 2023 is in the books. Kudos to event host, Swift, for assembling a four-day agenda packed with relevant panels ranging from the next steps on ISO 20022 to the usage of AI, to longer-term issues like CBDCs. You’ve undoubtedly read more than a few event summaries, many of which I found quite insightful. However, before you write this entry off as yet another event recap, I invite you to indulge me for a few paragraphs. For me, Sibos provided a roadmap for the present and near-term future of the global payments business. I’d encapsulate it in the trend toward end-to-end visibility of global payments.  

Of course, this theme has been sounded before in different pieces. Every bank aspires to transparent payments, from simple consumer transactions to real-time, cross-border business payments. But end-to-end visibility requires a more inclusive and holistic approach to this process. End-to-end visibility, especially in the context of cross-border payments, was the dominant theme at Sibos. It refers to the ability of all parties involved in a transaction to track and monitor the payment's entire journey, from the moment it is initiated until it reaches its final destination. This visibility ensures that data covering the transaction's status, details, fees, intermediate entities involved, and potential delays are all transparent to both the sender and the recipient. This concept is crucial for navigating the current world of global payments.

One of the key takeaways from the event was the new importance placed on pre-validation of payments. That’s where end-to-end visibility begins. It seems like a simple concept, and to some extent it is. I like to use the analogy of using an overnight delivery service. Before you spend the money to send an overnight package, you should double-check that you’re sending it to the right address. But when we look at cross-border payments – or any digital payment for that matter – this simple step is not covered in many cases. When you drill down into why certain payments fail, it’s due to bad data at the beginning. Pre-validation becomes critical in cross-border payments. In this process, before sending a payment, banks can check the validity of the beneficiary account by comparing it against a library of transaction data. In Swift’s case, that means over 9 billion payments travelling between 4 billion accounts every single year. 

Pre-validation is also a driving factor in making cross-border payments more efficient. It was one of the challenges identified in our recent 2023 Business Payments Barometer research, which showed that half of the businesses in Great Britain and two-thirds in the US listed too little control over payment processing and a lack of payment visibility as the top challenges in executing cross-border payments. It’s also a factor in the drive toward digital payments transformation. As J.P. Morgan said in its official show wrap, “It doesn’t matter if the bank is fully digital if the client is only manual. While a lot has happened in the industry over the past few years – APIs, instant payments, Swift GPI, bank account pre-validation - having the right information at the right time to make decisions is still key. And ultimately, all the ecosystem needs to move at the same pace if we want to switch to a true real-time environment.” 

Agreed. And that brings me to another end-to-end visibility issue at the event and that’s the next step for ISO 20022. The event reinforced something I’ve been saying since the mandates in March: ISO 20022 is not done; it has only just started. Only 16% of ISO 20022 traffic has been mitigated so far. However, according to Vixio’s most recent study 50% of BICs are receiving ISO 20022 and only 10% are sending – suggesting that in-flow translation is being heavily utilised. Most of the attention at Sibos focused on data to cull from ISO 20022 messaging. There are two varieties of that data: structured and enhanced. 

Structured data refers to information that is organised into a defined structure of data types.  For example, within ISO 20022 messaging, an instruction to transfer money might have fields for the sender's account, the receiver's account, the amount, currency, date, and so forth. All these fields are predefined in the schema and ensure consistency across messages. Enhanced data pertains to the more detailed information that the standard allows compared to its predecessors. A good example here would be a payment message that might include not just the structured data, but also more detailed information like the purpose of the payment, related invoices, or even tax details. This additional data gives banks a clearer picture of the transaction's context and adds to the end-to-end visibility concept. 

I also heard a lot about case management at Sibos, which lends validity to end-to-end visibility. Case management is about being prepared for breaks in the cross-border payment path. As Swift describes it, case management is made up of two services. For example, if a payment needs to be stopped due to bad data or changes in payment terms, the Swift service called Stop and Recall will automate that process. Or if a payment needs to be amended due to incorrect or missing information, Case Resolution can resolve the situation. The reason why these breaks in the chain are so challenging within cross-border payments is that payments often cross institutions that might have bilateral agreements with each other but are unlikely to have agreements with all parties in the chain. So, when you need to initiate investigations on a payment, it's difficult to engage with the relevant party in the chain because you might not know who they are or have a relationship with them to find out where it's stuck. Case management is where Swift plays an important role because they are the common denominator for all parties in the chain. If that chain breaks, end-to-end visibility is impossible to achieve. But with case management, it can be fixed. 

End-to-end visibility has ramifications for how banks approach their payments roadmap and the partners they pick to help them navigate it. One of the impressions I came away with from Sibos was that banks are having difficulty managing so many initiatives that might seem easy on the surface but are tough to handle in aggregate. What’s more, although their current and potential partners are at various stages of readiness, they're finding that they can't rely on one vendor to provide them with all the solutions that they need. So, it’s not just a single payment system they need, but for that system to connect to several providers offering specific functionality. 

In closing, I’d say that pre-validation, ISO 20022, Swift GPI, and case management form the intersection of issues covered at Sibos and the drive toward end-to-end payment visibility. They were certainly not the only such issues at the event. For example, I haven’t even covered instant payments, which will require this end-to-end ecosystem to work efficiently. But these are the fundamentals - get the data right, and end-to-end visibility is a realistic goal. Finding the right partner can turn that goal into a short-term reality. 

To find out more key statistics and solutions to the most pressing pain points, read our report, The Future of Competitive Advantage in Banking and Payments

About Edward Ireland

Edward Ireland is Head of Commercial Product Strategy – Financial Messaging at Bottomline. Edward 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. Edward has a global remit for existing customers and new logo with areas of specialisation including operational resilience, security, compliance, and regulatory change.


About Bottomline

Bottomline makes business payments simple, smart and secure for businesses and financial institutions, of all sizes, all over the world. More than 10,000 corporate customers, 1,400 commercial and business banks, including 15 of the top 25 global banks, rely on our industry-recognised payment and software platforms to accelerate digital transformation in a complex world of business payments and financial management. Bottomline solutions touch customers and payments in 92 countries across six continents. Our teams serve the world from primary locations in the US, the UK, Switzerland, Israel, India, Australia and Singapore. Bottomline is a portfolio company of Thoma Bravo, a highly respected software-centric private equity firm with USD 120 billion in assets under management. Bottomline financial technology helps banks and non-bank financial institutions transform for future needs, and those of their business customers, across the business payments and cash lifecycle through key capabilities including:

Financial Messaging:Securely communicate, reconcile, and manage the data in financial transactions within, and between banks and non-bank financial institutions, both locally and internationally.

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Keywords: cross-border payments, banking, ISO 20022, payments
Categories: Payments & Commerce
Companies: Bottomline
Countries: World
This article is part of category

Payments & Commerce


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