SWIFT has published a new API standard for the Pre-authorisation of funds, which allows the payer’s bank to earmark funds for a purchase in advance, guaranteeing that the future payment will be honoured.
This is the second of SWIFT’s Open Banking Extensions API standards, and is the latest addition to a global library of APIs that SWIFT is building in collaboration with banks, merchants and fintechs. SWIFT published a Pay Later API standard earlier this year.
API standards play an important role in open banking because they help speed the rollout of new services while reducing incremental investment. If each bank offers a distinct API, merchants and fintechs have to adapt to different data structures, workflows and security considerations for each one – adding complexity, cost and time for implementation. SWIFT has long been at the forefront of banking standardisation and is well suited to lend its expertise and experience to this work in APIs.
The new Pre-authorisation standard is now available for developers of APIs to adopt and use.
Stephen Lindsay, Head of Standards at SWIFT, said: “SWIFT is uniquely positioned to tackle the problem of fragmentation in standards globally and we are pleased to expand our current role to include the global standardisation of open banking APIs. Our work on the pre-authorisation of funds API is another example of the central part we are playing in ensuring the industry can make the most of the new open banking landscape.”
Kirstine Nilsson, Head of Business Infrastructure, Consumer Payments & Cash Management, Swedbank said: “In the Nordics we know the benefits of collaboration in the standards space. We have built the world-leading BankID service and the Swish payment method. We are now collaborating on the P27 pan-Nordic clearing system. The banking industry must come together for the benefit of the digital economy to standardise retail and wholesale banking APIs. Developers these days don’t want to do host connections or SFTP connections – APIs are the way forward and SWIFT is the perfect body to deliver global consistency.”
Hiroshi Kawagoe, General Manager, Transaction Business Planning Department, Sumitomo Mitsui Banking Corporation said: “Every country is following the developments of ‘Open Banking’ with great interest, beginning with a regulatory regime designed to catalyse developments. We can already see that each country is developing their own formats and that sometimes individual banks are developing their own formats. This kind of fragmentation may not be ideal as the banking industry progressively opens up more advanced services through API. Therefore, there is a need to discuss standards, just as we have achieved with the Legal Entity Identifier (LEI) and in many other areas.”
Tony McLaughlin, Managing Director, Treasury and Trade Solutions, Citi said: “The SWIFT Pre-Authorization API is further validation that banks, Fintechs and merchants can collaborate to build Open Banking APIs that go beyond the regulatory minimums to support vitally important use-cases. The global banking community must come together to provide the full suite of retail and wholesale banking APIs so that we can provide the financial layer of the digital economy. The world of platforms provides unlimited new opportunities for banks if they adopt an ‘API first’ mindset.”