Innovation at the heart of SWIFT’s strategy

SWIFT in the era of open banking and innovative technologies, APIs,

DLT & Artificial Intelligence

Innovation at the heart of SWIFT’s strategy

Mickael THOMASHead of Corporate Business MEA

Onur OzanHead of MENAT

Knowledge

Methodology People

How to innovate

HACKATHON

SWIFT

One Team - Many ways to think innovation

1

2 3 4 5 6

R&D

Steerco

R&D

Steerco

Maybe, more

investigation ...

Maybe, more

R&D required ...

Initial idea

selectionDevelop and

mature ideaImplementation

and funding

No, because ... No, because ...

Innovation process at SWIFT

Research & Development

R&D

Innolab • SWIFTLab • Cyberlab • UX

The SWIFT Institute • Innotribe

Communications • External PartnersEn

ab

lers

Innovation and R&D at SWIFT

Artificial Intelligence

• revamped in 2016

• 40+ initiatives went through R&D since then

• 3 industry challenges organized with 15+

fintechs

Manage innovation

across SWIFT to support the company objectives:

1. Pipeline of ideas covering all SWIFT business

2. On-going support

3. Bring ideas to life

SWIFTgpi

Distributed Ledger Technology

API

Cyber

…

Innovation @SWIFT

with a focus today on …

gpi Link

Proof of Concept

Huny CARGHead of Trade

gpi Link Proof of Concept - Do not disclose to third parties without SWIFT's prior consent 8

Business context

Supply chain

ecosystem on

blockchain XYZ

Trade Finance

ecosystem on

blockchain 123

Insurance

ecosystem on

platform ABC

B2B ecosystems are flourishing… …but settlement within the ecosystem

remains a challenge…

tra

nsa

ctio

n

Settlement ?

Little appetite for settlement in crypto

currencies

Global bank adoption hard to achieve

(multiple integrations)

Automated payment confirmation is

often key to B2B ecosystems

Pressing need for fast, transparent,

global and secure settlement in fiat

currencies initiated from the

ecosystem


The gpi Link - How does it work?

Trade

platform

Company B

Trade ecosystem

gpi payments tracker

2. Payment

Initiation

10. Payment Confirmation

API with UETR1. T

rad

e t

ran

sa

ctio

n

5. MT 101 + UETR,

pain.001 + UETR(s)

6. MT 103 + UETR &

STI:0016. MT 103 + UETR &

STI:001

7. Payment

Confirmation8. Payment

Confirmation

9. MT 199 + UETR

& STI TBD

pain.002 + UETR(s)

11. Payment

Confirmation

11

. P

aym

en

t

Con

firm

atio

nCompany A

4. API link to MT or

ISO XML message

10. MT or ISO XML

message link to API

3. Payment Initiation API

+ UETR

gpi

Link MT

/MX

AP

I


Benefits for the community

Seamless

integration

Re-intermediation

into the payment

value chain

Increased

customer

satisfaction

New opportunities

in the digital

economy

gpi Link

Leverages SWIFT

integration to build

additional value

Capture payments

that may otherwise

be settled via

alternative channels

Meet customers’

needs by optimizing

their business

processes

Access to existing

and future business

ecosystems through

the gpi Link


SWIFT

gpi

gpi

Link

SWIFT collaborating with R3 on gpi Link Proof of Concept

Proof of Concept with R3-Corda

The gpi Link will allow gpi payment

capabilities to be embedded directly into

R3’s DLT platform

Corporate to corporate payment

Bank to bank payment

Fully scalable to other use cases

SWIFT may include other DLT or non-DLT

business ecosystems, DLT providers, e-

commerce players, payment service

providers etc.

Key driver will be a common interest in

enabling settlement capability for trade

transactions

Other

ecosystem


R3/Corda/CorDapp/Corda Settler

R3 is the company

R3 is an enterprise blockchain software firm working with an ecosystem of more than 300 members and partners

across multiple industries from both the private and public sectors

Corda is the blockchain platform

Corda is R3’s open source blockchain platform, also distributed in an enterprise version enabling institutions to

transact directly using smart contracts, while ensuring privacy and security. The Corda platform is used in

industries from financial services to healthcare, shipping, insurance…

A CorDapp is an application running on the Corda platform

CorDapps (Corda Distributed Applications) are distributed applications that run on the Corda platform. The goal of

a CorDapp is to allow nodes to reach agreement on updates to the ledger

The Corda Settler is a settlement CorDapp

The Corda Settler is an open-source CorDapp that allows Corda users to settle using any payment method.

Settlement can be achieved with a transfer of funds on Corda, on a non-blockchain rail (like SWIFT gpi when

enabled by the gpi Link), or in crypto currency.

Transfer of funds on Corda

SWIFT gpi

Crypto currency


Settlement on Corda

Company A

Company B

1.

Transaction2. Need for settlement

Corda

Settler gpi

Link

DLT Proof of Concept

Charifa EL OTMANIHead of SWIFTgpi

15

A DLT PoC to answer the

following question:

“Can DLT finally pave the way for

real-time Nostro reconciliation

and liquidity optimisation?”

Strong governance

Data controls

Compliance with regulatory requirements

Standardisation

Identity framework

Security & cyber defence

Reliability

Scalability

Technology Objectives

16

Business Objectives

Overhead

Network

management

FX costs

Compliance

Claims and treasury

operations

Nostro-Vostro

liquidity

Payment operations

2%

USD 25-35

3%

34%

9%

27%

13%

15%

SOURCE: McKinsey Global Payments Map 2016

Cost per international payment transaction (2016)

© S.W.I.F.T. SCRL. Do not disclose to third parties without SWIFT's prior written consent

Business and technical objectives


A few statistics

17

34Participating

banks

528Channel

Network

Largest Fabric

Network outside

of IBMPoC

implementation

4,722Transactions

during testing

© S.W.I.F.T. SCRL. Do not disclose to third parties without SWIFT's prior written consent 18

Liquidity and reconciliation qualitative feedbackResults based on qualitative questionnaire completed by 17 participant banks

Highest value related to liquidity process

and efficiency gains for exceptions management and

customer support

The PoC demonstrated the following benefits…

Reducing gap between the expected and available

balance

Identifying systematically unexpected entries and

exceptions

Reducing exceptions & achieving shorter resolution

time

Providing systematic timed data at entry level

Providing a full audit trail with real-time entry status

On the impact’s side, there is a need for...

Internal development and integration

Real-time processing

Extended settlement windows across payments

systems and 24 hours banks operations

Adoption of a common ISO 20022 standard

Conclusions

1. The developed DLT application together with the underlying ISO 20022 data

model meets the functional requirements and allows for improved

reconciliation and improved liquidity visibility

2. The PoC demonstrated significant technology progress towards maturity

although it is not considered mature enough for a many-to-many mission

critical financial service. There is no doubts that the technology will get there

3. However, to get the business benefits, there are a number of pre-requisites

which need to be met. SWIFT and the community will first work towards

ensuring the pre-requisites are met before looking at any potential products in

this area

4. And while we do that, DLT remains strategic for SWIFT in that we have

concrete plans to progress towards SWIFT vision around DLT

Pre-requisites to capture benefits

Migration towards real-time liquidity reporting and processing

Today, only 44 % of traffic generates real-time confirmation 1

Significant investment required for back office integration

Migration to ISO 20022 could lower the cost2

There must be a value proposition for each segment

Value differs significantly between participants. Additional intelligence and

integration needs to be considered to increase value

3

Unique identification (UETR) must be extended

Otherwise, some entries resulting from FX or securities deal won’t be

identifiable

4

© S.W.I.F.T. SCRL. Do not disclose to third parties without SWIFT's prior written consent 20

Without those 4 pre-requisites being met, the solution won’t deliver


Published in March on

swift.com

Can Distributed Ledger

Technology (DLT) help financial

institutions optimise the liquidity

of their Nostro accounts and

reduce the significant operational

costs associated with

reconciliation?

www.swift.com

21

Nostro Reconciliation report available on swift.com

Report

http://www.swift.com/

Artificial Intelligence & Data One of the strong streams that we are working on


Artificial Intelligence ( AI )

AI is driving the

development of

machines capable of

simulating cognitive

abilities

Data is at the core of

Artifical Intelligence

and Machine

Learning

Learning

Improvement

Reasoning

From provided information, the machine is able to create

its own rules and logic.

The Machine is able to use his rules/logic in order to

derive some conclusions

Based on Feedback, the machine is capable of correcting

its own set of rules/logic

What is Artificial Intelligence

Main usage of Artificial Intelligence in the Financial Industry

Anomalies

Detection

Process

Automation

Personalized

Customer Service

Risk Scoring Trading Compliance

How SWIFT is using Artificial Intelligence

Reference data

Reference data

Consolidate the data that comes from various sources

Collect data faster and with a better accuracy

Clean data in order to get more value out of it

Standards

Facilitate the migration to ISO20022

Investigation on the logic and the patterns between

different Standards

Validating new Standards

Financial Crime Compliance

Tuning and improvement of Fraud Detection Rules

Identification of uncharacteristic business relationships

Optimisation of effectiveness and false-positive reduction

Business Intelligence

Entity resolution of payment participants

Detection of payment anomalies and outliers

Hidden payment flows and nesting

SWHQBEBB SWIFT No.8, Lvl 8,

UOA Corporate Tower, Lobby B, Avenue

10, Bangsar South City, Jalan Keri

nchi, 59200 KL, Molaisia

Cleaning

Solution

Country

------------------------

Malaisia

RegionIdentification

------------------------------

Bangsar South City

TownName

--------------------------------

KL

PostCodeIdentification

------------------------------------59200

StreetName

--------------------------

Avenue

StreetBuildingIdentification

--------------------------

10

BuildingName

--------------------------

UOA Corporate Tower

Floor

--------------------------

Lvl 8

Bank

--------------------------

SWIFT

DistrictName

--------------------------

Jalan Kerinchi

A Standards Artificial Intelligence initiative : structuring data

Unstructured Data

Deep Learning

Model

Manual

check and

completion

by operators

Algorithmic

Verification

and

Correction


More than 95%


SWIFT

Data

Cleaner

MyStandards

Compliance

analytics

ISO 20022

migration

gpi prevalidation

SWIFTRef


SWIFT APIs strategy

Onur OzanHead of MENAT


What are APIs and why use them?

Interface

Exposes company’s

data and services via

a simple interface

enabling faster

innovation and reach.

Tool

One of the most

important tools in digital

business design and

transformation of

business models.

Leverage

Ability to leverage

complex services

without the need for

extensive development

Opportunity

Opportunity for

driving customer-

centric innovation in

financial services.

API API API

Illustrative example

Enables Uber to focus on their core business, leveraging

best of breed technologies via APIs., creating a seamless

customer experience, connecting riders with drivers.

…

API Spec

Flavor 1API Spec

Flavor 2

API Spec

Flavor N

Regulations

API adoption in Financial Services

Fintechs

Fragmentation Harmonization / StandardisationLocal regulations and Fintech

• Open Banking

• Regional Banks

• Financial Institutions

• Technology

companies

• Corporates

• Industry Associations

Leveraging SWIFTs core competencies

Foster standardization at

industry level reusing the

ISO20022 data dictionary

Offer API connectivity and

developer support for more

value added services

Collaborate with the community

to explore use cases and

expose a global community API

catalogue on the platform

SWIFT APIs enable financial institutions and corporate customers to expose or consume financial

services in a trusted environment using standardised transactions according to the ISO 20022 model.

Standardization of API

specifications

Simplification of access to

SWIFT Shared ServicesCustomer API exposure

A scalable platform based on industry-leading technology

SWIFT content exposed via APIs can be consumed via SWIFTNet

or via the internet (SWIFT Ref and KYC)

36

Our developer portal provides easy access to SWIFT content, along with Sandboxes to test

and experiment

https://developer.swift.com/

https://developer.swift.com/

Questions

…for you

Documents

Innovation at the heart of SWIFT’s strategy