Teams focused on foreign exchange (FX), financial inclusion and machine learning (ML) have won a global hackathon on improving cross-border payments.
A hackathon is an event during which participants, typically coders and developers, gather – in current circumstances remotely – to design and present innovative solutions to a particular challenge.
The Bank for International Settlements (BIS) Innovation Hub and interbank payments network SWIFT co-organised a hackathon that asked teams to create solutions focused on the potential of a new global standard for electronic payments messaging, known as ISO 20022, and Application Programming Interfaces (APIs) to improve cross-border payments.
Migration to ISO 20022 is taking place at varying speeds across different payment schemes, countries and regions worldwide. The standard, which enables the transfer of extended business data alongside payments, has been described by the consultancy Accenture as a ‘seismic shift’ in the payments sector.
The ‘ISO 20022 hackathon’ took place over seven days, with three teams – Atomic Wire, Mojaloop Foundation and a joint-team from Virtusa and AWS – announced as winners during the BIS Innovation Summit.
New standard, new possibilities
The three victorious teams presented solutions, respectively, focused on improving foreign-exchange (FX) payments; cross-border payments in the developing world, for example, remittances and social payments; and overcoming data difficulties through ML.
London-headquartered Atomic Wire presented a stream processing solution performing real-time ‘atomic settlement’ of foreign exchange transactions – an atomic payment is when the transfer of two assets is linked in such a way as to ensure that the transfer of one asset occurs if (and only if) the transfer of the second asset also occurs.
Mojaloop Foundation, a non-profit organisation focused on financial inclusion in the developing world, won for its solution focused on improving cross-border payments to users in emerging market economies who rely on mobile money-transfer systems.
US-headquartered Virtusa and AWS, meanwhile, put ML – the application of artificial intelligence (AI) where systems automatically learn and improve through experience without being explicitly programmed – to use to ensure ‘completeness and correctness’ of data as a basis for smoothing international payments.
The winning trio were chosen from 45 completed proposals by a panel that included experts from the US Federal Reserve System, Bank of England (BoE), European Central Bank and the Committee on Payments and Market Infrastructures, as well as private-sector organisations.
Tackling ‘slow and expensive’ cross-border payments
The BIS Innovation Hub’s Singapore head, Andrew McCormack, announced the winning entries – which each gave a short presentation – and summarised the context of the hackathon by saying that “for many, sending money across borders can be slow and expensive”.
Numerous complications stem from the current prevalence of incompatible data formats in cross-border payment messages, the hackathon’s website explains. This makes it difficult for payment systems and services to ‘talk to’ each other, can cause data loss between systems and requires manual processing. However, ISO 20022 and APIs have the potential to improve and automate these processes.
By 2025 more than 90 per cent of high-value payments systems (HVPS) value worldwide will move on ISO 20022 rails, according to SWIFT. The BoE’s renewed real-time gross settlement (RTGS) system, the Federal Reserve’s FedWire and its under-construction FedNow instant payment services are among those that will use it.
The Innovation Summit also approached the topic of improving cross-border payments from a different perspective by hosting a panel session entitled ‘Fast, cheaper cross-border payments: is wholesale CBDC [central bank digital currency] the answer?’. SWIFT’s chief executive, Javier Perez-Tasso, was among the speakers.
The Financial Stability Board’s ‘Enhancing Cross-Border Payments’ roadmap, presented to the G20 last October, is among the significant publications on the topic.
BIS INNOVATION SUMMIT: FURTHER READING
Global Government Fintech’s news report from the ‘Navigating the uncharted waters of retail CBDC’ session, which featured speakers including Mu Changchun, director-general of the Digital Currency Institute of the People’s Bank of China
Global Government Fintech’s news report from the ‘Fast, cheaper cross-border payments: is wholesale CBDC the answer?’ session, which featured speakers including SWIFT chief executive Javier Perez-Tasso
Global Government Fintech’s news report from the ‘How can central banks innovate in the digital age?’ session, which featured US Federal Reserve chairman Jerome Powell, Deutsche Bundesbank president Jens Weidmann and BIS’s own general manager, Agustín Carstens