Can payments really work in ISOlation?
The deadline for financial institutions’ adoption of ISO20022 is now only months away. It’s no longer an issue to deal with “next year”. Progress has unquestionably been made - SWIFT processes more than a million ISO20022 messages a day - but three quarters of banks are still to make the switch. In the US, Fedwire-connected banks need to be ready by March.
But not all banks are connected either to SWIFT or to Fedwire. And that goes for a considerably higher proportion of NBFIs. Bearing in mind that fintechs are leading the charge towards real-time payment, what provisions are under consideration to provide them with a corresponding depth of information?
It’s common for international transactions to include a mix of banks and NBFIs, so the information flow may need to span SWIFT, Fedwire and any number of proprietary systems. For payments to happen at the desired speed, there has to be a platform-agnostic means of joining the dots.
Another issue that seems to have been overlooked by advocates of ISO20022 is that it’s a text-only medium. While it can provide detailed information about a transaction and its associated parties, it can’t provide sight of any documentation. As RFIs - requests for information - are one of the principal causes of delay, a radical review of how the full compliance stack can be communicated would be appropriate.
Our eKeyiD concept was originally conceived as a way of conveying unlimited information within the SWIFT MT103 message and, by extension, a Fedwire payment instruction. We intended it as a communication medium to allow inter-bank communication without the need to adopt new technology. It performs that function well- a short code points to a highly secured chunk of data within our immutable federated ledger. Any suitably authorised recipient of the key can view full documentation for the transaction, associated companies and the identities of their officers. But we’d missed an important point.
It was only as we began to connect live clients that we fully understood* just how many financial institutions aren’t members of SWIFT or connected to Fedwire. The beauty of the eKeyiD is that it can be exchanged by any means. The development of a flexible API suite, a secure web portal and a Salesforce plugin allowed us to embed them into a single, unified network that spans any exchange medium, be it SWIFT, Fedwire or any proprietary or one-off method.
This isn’t in any way intended as a criticism of ISO20022. The incoming standard is a great step forward in speeding transactions through improving transparency. In fact an ISO20022-compliant abstract of the transaction detail can be embedded within the eKeyiD data stack, allowing any organisation to benefit from the extra detail. Our contention is that, to deliver full benefit, the data has to be made fully available, not isolated within systems that are available only to certain platform members. And, to minimise delays due to RFIs, it should be extended to allow visibility of all supporting documentation.
As the urgency of transitioning to ISO20022 compliance steepens, there’s a simpler way to climb the slope.
* Like the five-cushion shot that wins the snooker game, allow us to look a little smug as we pretend we planned it all along