Global cross-border payments system Swift is introducing an enhanced solution for managing payment investigations, aiming to significantly reduce the time needed to resolve delayed payments. Relying heavily on ISO 20022, the solution could serve as a key use case for broader adoption of the new messaging protocol.
Delayed payments cost financial institutions more than $1.6 billion annually due to labor-intensive investigations. Swift claims the new solution could cut these costs by more than $600 million per year and reduce case resolution times by up to 80%.
The speed of cross-border payments has improved in recent years, with 90% of transactions over Swift reaching the destination bank within an hour. However, when a payment instruction is missing key information, it can take five to ten working days for financial institutions to resolve these issues. The average end-to-end time to complete a single investigation has remained unchanged over the past five years, at 200 hours.
Using the New Standards
Swift’s new solution standardizes the investigation process by leveraging ISO 20022 data to enhance transparency and interoperability across networks. ISO 20022 compliant messages deliver richer structured data and are universally understood by all parties to the transaction.
In addition to payments made on the Swift network, the protocol can also be applied to any payments that use UETR, or a unique end-to-end transaction reference. The UETR standard provides visibility into a payment’s status and location at every stage of the transaction.
A Use Case for ISO 20022
Starting November, Swift will require institutions to use the ISO 20022 protocol for payments on its network. ISO 20022 offers a single standardized messaging framework designed to improve communication interoperability among financial institutions, their market infrastructures, and end users.
While ISO 20022 is expected to lead to more error-free transactions, one challenge slowing the global adoption of ISO 20022 is that many financial institutions have yet to fully recognize these benefits.
“There will probably be plenty of financial institutions that look at ISO 20022 and say, ‘Oh, it’s not something that applies to us,’” said James Wester, Co-Head of Payments at Javelin Strategy & Research. “But that just means that further down the line, they or one of their partners is going to have to bear higher costs.”
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