The global cross-border payments system Swift has launched an advanced tool for handling payment inquiries, intending to drastically cut down the duration needed to settle delayed transactions. This initiative primarily depends on ISO 20022 standards.
Yearly, financial institutions incur over $1.6 billion in expenses related to detailed investigations into delayed payments. According to Swift, this new product could save over $600 million annually and decrease the resolution time by as much as 80%.
Although cross-border transactions processed through Swift are now typically routed within an hour, a missing piece of critical information can prolong resolution times up to five to ten business days. The typical total duration required for resolving investigations has not changed over the past five years and stands at 200 hours.
Implementing New Standards
Swift’s new system streamlines investigation procedures by integrating ISO 20022 data, thereby boosting transparency and interoperability within payment networks. Messages adhering to ISO 20022 carry detailed structured information which is easily comprehensible across all parties involved.
The protocol can be used not only for transactions via the Swift network but also where UETR, a unique end-to-end transaction identifier, is employed. UETR ensures that payments are traceable and visible at each stage of their journey.
A Case for ISO 20022
As of November, Swift mandates the use of ISO 20022 for all transactions on its network. This standard offers a unified messaging framework designed to enhance communication and interoperability among financial institutions, market infrastructures, and end-users.
Although ISO 20022 is anticipated to boost error-free transactions, one hurdle slowing down its global implementation is that many financial institutions have yet to appreciate the benefits.
“A significant number of financial institutions might perceive ISO 20022 as irrelevant,” stated James Wester, Co-Head of Payments at Javelin Strategy & Research. “However, this approach could ultimately increase their costs in the long term.”