Time of upheaval

Postponed is not cancelled: the change to ISO 20022-compliant data formats in payments is coming – albeit a year later. And it brings with it further changes, not least for SWIFT. The planned transaction management platform (TMP) is intended to make international payment flows more transparent and faster. However, are these central systems secure enough? And are there alternatives? 

Central data platform as a development goal

Payment systems are at the heart of the financial infrastructure. A breakdown like the one that occurred for TARGET2 last year weighs heavily and understandably caused backlash. The postponement of the change to ISO 20022-compliant XML data formats in European payments is not related to this, but of course gives the financial institutions time leeway. They may need this time because the format change also set other things in motion. With the TMP, SWIFT has announced the establishment of a central data platform for international payments based on the XML standard. 

By storing all transaction data centrally, all parties involved in the process can access the data at any time. For SWIFT, this is a paradigm shift, away from a mere information broker to a fully-fledged payment logistics provider. The platform solution offers several benefits:

  • Reduction of interfaces
  • No data loss between the individual stations
  • High transparency for all parties involved
  • Higher manipulation security
  • More service offerings

No introduction without risks

However, the introduction of the TMP bears some risks. First, there is a possible breakdown of the SWIFT network. With the central TMP, in extreme cases all orders of a certain time period were lost. Financial institutions' concerns about implementing a single point of failure cannot be completely dismissed. Regarding the confidentiality of the data, it must be taken into account that the United States already demanded direct access rights to the data stock of the SWIFT US data centre. In response, SWIFT set up a location in Switzerland, among other places.

Are there alternatives to SWIFT?

In principle, yes – but the choice is limited: potential candidates are Internet payment networks such as Ripple. The first major financial institutions are already using the system in a test run. Central bank digital currencies are not yet ready for the market, but they will definitely present a possible alternative in the future. The e-renminbi is already in the trial phase in some Chinese provinces and the Swedish e-krona has recently started a test run. The ECB is likely to follow suit with the digital euro.

Cross-border real-time gross settlement systems (RTGS) are also worth considering. However, not many of these exist or, like SEPA, they are fixed on a single currency. Finally, there are special cooperation schemes that are set up as alternatives to SWIFT, such as the Instrument in Support of Trade Exchanges (INSTEX). This European system was created specifically for the trade with Iran. China has taken a similar path with CIPS. Visa B2B Connect works in a completely different way but is in principle also based on the cooperation of the participating financial institutions. In Europe, the service is currently available in selected countries.

Still, even a solution from SWIFT that uses one of the rare alternatives does not exempt financial institutions from the obligation to change to ISO 20022-compliant XML data formats. At the same time, it is advisable for financial institutions to take a close look at and question the changes in cross-border payments that are pending because of TMP. In the roadmap toward ISO 20022, some time has been gained by postponing the go-live date – this time should now be used wisely!

Authors: Sabine Aigner, Thomas Ambühler

Uninterrupted payments – who doesn't want that?

Some software systems are so critical that the absolutely highest demands on their availability must be met. Admittedly, in the financial sector, the matter is not one of life or death. But the requirements for real-time payments or authorisation processes are constantly increasing and maintenance windows in particular are no longer acceptable. And rightly so: if a maintenance window causes you to get the account statement an hour later or the portal is not accessible for an hour, it may be annoying but not too much of a loss. However, if the bank customer suddenly can no longer pay at the point of sale or cannot authorise a payment in real time, the unavailability becomes extremely relevant.

Therefore, after the authorisation process for card payments, the introduction of instant payments in Europe has made real-time credit transfers an application field for interruption-free systems as well.
Let us first discuss freedom from interruptions. Uninterrupted operation is defined by two different characteristics:

  1. Avoidance of planned unavailability
    The system is permanently operational during normal operation. It has no periodic times of limited functionality such as end of day or reorganisation.
    The system is designed so that even release changes can be carried out during operation without causing downtime.
  2. Reduction of unplanned unavailability
    The system is highly available even in error scenarios. The probability of guaranteed operation is therefore high despite failure of individual components. This probability is calculated or measured as the ratio of production time to runtime, i.e. the time including the downtime, for example 99.99 percent.
    Robustness in overload scenarios is of particular interest here. Although every system has its limits, it does make a difference whether everything collapses beyond the load limit or whether only the additional load cannot be processed as per specifications.

The enthusiasm for the topic usually drops considerably when looking at the costs. It is therefore worthwhile to find architectural solutions and not just shift everything onto the infrastructure. However, even the best software will only work if the system environment is available. I won't to go into more detail on high-availability infrastructure, operating systems, database systems and message brokers – all of which are prerequisites for an uninterrupted overall system. Instead I would like to focus on the software architecture. This can enable the targeted implementation of availability requirements while keeping costs under control.

Since high availability is expensive, the critical processes must first be identified. Therefore we must answer the question which processes must really work all the time and which can be made up for later. In real-time payments, for example, bulk processes are less critical than individual payments.

If large components fall under the critical processes, it should be analysed whether they can be bridged. Can an alternate component replace the critical tasks of a large non-highly available component for the downtime period? In payments, for example, the booking system can be such a large, non-highly available system and the online balance check can be the critical process that must be bridged.

Of course, payments processing as a whole does not work without statuses: unfortunately, money can only be spent once, so the account balance is a relevant status and a banking software must of course be able to accurately reflect this. In our case, this always leads to the use of databases and the need for persistence before and after each relevant status change. It is the design of the database model that determines whether or not we achieve our goal. Highly available processes should work with stable and/or migration-free data structures. This is the only way to avoid the need to shut down critical processes to change the database schema.

The remaining topic is robustness. Science also refers to resilience when describing that disruptions or partial failures of technical systems do not lead to complete failure. In payments, such disruptions can be peaks in the load above agreed limits or surrounding systems that do not respond as quickly as agreed. Downtime of business partner systems and missing acknowledgements of large amounts can also cause failures. In reactive programming, we have found a paradigm that allows for the desired robustness through orientation based on data flows. An overload can thus be encapsulated within affected areas and nothing stands in the way of uninterrupted operation for the remaining data – in our case payments.

Author: Thomas Riedel