Our Transaction Manager going live marked a key milestone in the ISO 20022 adoption journey and another important step towards enabling instant and frictionless global payments.
To learn more about what this means for the global payments industry, we spoke to Stephen Lindsay, Business Lead and Calogero Farruggia, Transaction Manager Head of Delivery about Transaction Manager’s origin, capabilities, and what we can look forward to.
Firstly, what motivated the development of Transaction Manager? Walk us through the start of the journey, from the pilot, and how we arrived at this pivotal moment.
Stephen Lindsay: Our goal is to enable correspondent banking to deliver instant and frictionless cross-border payments, with accompanying rich, structured data to facilitate end-to-end automation. Today’s messaging approach depends on individual banks capturing and forwarding complete and unaltered data, and integrating this data in various processes, from back office to compliance, and data analytics to customer channels.
In 2019, the Swift community asked us to facilitate a migration from the MT format to ISO 20022. One of the challenges to overcome during the three-year transition period, called coexistence, was that there would be a lag because some banks in the community would implement the richer ISO 20022 standard straightaway, while others continued to use MT, before adopting ISO 20022 later on.
So, the challenge we set ourselves was: how can we enable the early adopters of rich data in our community to move ahead independently and benefit immediately from their investment, and ensure that those benefits improve the overall customer experience of correspondent banking? The answer was Transaction Manager.
Calogero Farruggia: So, what we have now is a new transaction management capability on the Swift platform. What Transaction Manager does is, put the payment transaction – and all of its data – at the centre and allows banks to interact with the payment using their choice of message format.
The great benefit is that banks, and others, can process a payment just as they do today, except that each bank can choose the format and protocol they wish to use. There is no need to worry about the capabilities of the other participants in the business process. And it also means that important business data is protected end-to-end.
Work on the design of Transaction Manager started in 2020. The design was a collaborative effort with business experts from the community. It was important to bring people together to help specify and validate the rules that Transaction Manager will implement. It was very important to ensure the business integrity of transactions, while respecting market practices for cross-border payments.
By 2022 the first complete software was developed and in July of that year, we ran a major pilot with 19 banks. Transaction Manager was activated in production in November 2022 and subject to further rigorous testing orchestrated with the community.
Transaction Manager started processing live messages on 27 May 2023, with a subset of ISO 20022-originated transactions in scope to limit any potential disruption, with all traffic now successfully flowing through Transaction Manager.
The transition to ISO 20022 represents a once-in-a-decade opportunity to improve the cross-border payments experience
How is Transaction Manager helping with global ISO 20022 adoption?
Stephen: Transaction Manager represents a fundamental change to the foundations we provide to support cross-border payments.
It will continue to be enhanced over time, so that it can integrate other networks and shared value-added processing and encompass more of the steps involved in processing payments end-to-end. The first release focuses on accelerating the community benefits of ISO 20022, by guaranteeing that complete rich data is protected and shared end to end.
Without Transaction Manager, omissions, errors, and misuse of messages can be propagated unchecked. The industry has had to invest large sums over many years in automated and manual repair services to compensate and to achieve even today’s rates of Straight-Through Processing (STP).
The transition to ISO 20022 represents a once-in-a-decade opportunity to improve the cross-border payments experience. Transaction Manager’s business rules were defined in collaboration with experts from the community, bringing rigour and predictability to payments processing.
And, as the industry adopts the new standard, it will reduce the need for banks to develop and maintain expensive custom repair logic, while accelerating the community’s goal of instant and frictionless payments.
How does Transaction Manager work?
Calogero: Any transaction originated in ISO 20022 is routed to Transaction Manager. Transaction Manager constructs a complete copy of the transaction data based on the first message.
It then validates that each subsequent message sent in the context of the transaction (which could be ISO 20022 or MT) aligns with rules that ensure the right message type is used at each step and contains data that is consistent with what is already known about the transaction.
Once each message has passed validation, a second set of rules comes into play, which ensures that only elements in the transaction that can be legitimately changed are allowed to update the transaction copy.
Finally, Transaction Manager delivers the complete data in the transaction copy to the next bank as an ISO 20022 message. In-flow translation, built into the messaging service, converts the ISO 20022 message to MT and delivers both side by side, and gives the receiving bank the choice of which format to process. All done instantly and effortlessly by Transaction Manager.
[Ebook] Supercharge your payments business with ISO 20022
Leading financial institutions share insights on the concrete benefits opened up by ISO 20022’s rich, structured data capabilities.
What are the next steps in the journey?
Calogero: We intend to continue evolving Transaction Manager features to serve the community. Now that we’ve ramped up to full traffic, we’re continually monitoring the system to detect when message senders don’t adhere to our community-agreed rules, and are working closely with the community to make continuous improvements.
We will also begin consulting the community about the APIs that we want to offer. Firstly, to allow access to the transaction copy, but ultimately, to allow transaction participants to use APIs as an alternative to messages. Future releases will also allow transactions to be processed using APIs.
Stephen: We’re looking at several exciting areas for future releases moving beyond the original goal of supporting the community through co-existence. One development will bring more automation on the processing of returns. In June 2023, we started a community conversation about how we’ll help banks help their corporate customers, with a particular focus on capturing complete structured data for payments at source. So that’s another major area for development.
We are also looking at connecting Transaction Manager with third-party services in which our community has indicated interest. Because Transaction Manager is connected to all the banks in our community and maintains complete and up-to-date transaction data, it’s an ideal integration point for third-party services too.
Transaction Manager puts the payment transaction – and all of its data – at the centre and allows banks to interact with the payment using their choice of message format.
Learn more about Transaction Manager
With Transaction Manager, we’re completely reimagining how transactions flow around the world, making it possible for banks to seamlessly work together so that every payment can flow faster and further.