Global financial transaction messaging network SWIFT has published a new API standard for the pre-authorisation of funds.

The new standard is expected to accelerate “further innovation in financial services enabled by open banking.”

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.

The new standard enables a payer’s bank to earmark funds for a purchase in advance, guaranteeing that the future payment will be honoured. 

It arrives as the second version 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. 

“In the Nordics we know the benefits of collaboration in the standards space. We have built the world’s leading BankID service and the Swish payment method,” explained Kirstine Nilsson, Head of Business Infrastructure, Consumer Payments & Cash Management, Swedbank.

“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.”

SWIFT acknowledged the importance of API standards as it supports banks when launching new services.

For example, if each bank were to present a unique API, merchants and fintechs will then have to adapt to individual data structures, workflows and security considerations.

Having a direct standard for reference removes any extra complexity, cost and time for implementation; the new pre-authorisation standard is now available for developers of APIs to use. 

Hiroshi Kawagoe, general manager, Transaction Business Planning Department, Sumitomo Mitsui Banking Corporation added: “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.”