“APIs are new from a technological standpoint, but also what SWIFT has played for since inception,” said the company's head of standards, Stephen Lindsay, on the sidelines at Sibos 2018 in Sydney last week.
Application programming interfaces (APIs) are currently being rolled out across financial services to allow collaboration at a seamless data level.
But financial services have been slow on the uptake compared to other industries when it comes to the technology, said Lindsay.
Lindsay said SWIFT is keen to play a more central role in the next revolution of API connectivity.
“While we don’t see ourselves as the only actor, we do see ourselves playing a bigger role than we do today,” said Lindsay, “and filling the gap between local standards groups, such as the Open Banking Initiative in the UK.
“Part of our appeal is that we can work on standards at a global level,” he said. “It’s always been part of the mission to improve automation and STP for the banking community. This is really a continuation of the technological means with what we’ve always done,” he said.
Lindsay was quick to offer suggestions as to why the API culture hadn’t taken off before.
“There hasn’t been any discipline in the way that APIs have been rolled out at an industry level,” said Lindsay. “There’s been more discipline where they’ve been required by regulation such as PSD2 and Open Banking, but there’s also been fragmentation in the way it was implemented; some banks have done it differently to others which has led to problems of interoperability and friction which is avoidable,” he said.
And Lindsay suggests that the pressure is on Swift to come up with the answers as FIN traffic grew by 10.7% between 2017 and 2018.
“On the one hand you have the regulator driving the growth in transactions but you also have a new customer expectation. Both combined are adding new players to the value chains.
“Instead of simply having a buyer and seller on either end, you might now have as many as six or seven third party providers sitting between transactions. The interaction between those may be conventional messaging currently, or they might be APIs or distributed ledger technology in the future.
"Knowing what we’ve been able to achieve with the level of standardisation we’ve taken for granted in international payments over years now. We have 10,000 banks effectively able to pass payments amongst themselves reasonably freely because everyone conforms to the same standards. Can we do the equivalent with APIs?," said Lindsay.
It is a challenge Lindsay in his role as head of standards is eager to undertake, though he admits that no one knows the true impact the API economy will have on financial services and SWIFT.
"We would be foolish to assume we know how we’re going to get to the end and how transformational it’s going to be to the SWIFT business model and industry. We do anticipate there being changes and we’re working towards understanding it. It’s about learning as you go. We’re not just learning about API technology but about the culture that goes around it," said Lindsay.