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On 13 August 2023, the ICC announced release of the first application programming interface (API) industry standards for bank guarantees and standby letters of credit in a joint effort with Swift. The collaborative work involved banks, corporates, fintech platforms, and service providers to create innovative standards to streamline the entire life cycle of financial instruments, including issuance, advising, amendments, cancellations, and claims.
In an interview with DCW, Swift Standards Specialist Mukta Kadam offered additional context regarding this development that seeks to address the urgent need for standardisation in the trade API space.
DCW: What should specialists working with bank guarantees and standby letters of credit on a daily basis know about this development?
MK: The ICC and Swift collaborated to produce API resources for Bank Guarantees and Standbys. This collaboration included banks, corporates customers, and IT platforms. The main goal that ICC and Swift members had in mind was to create resources compatible with today’s Swift MT 798 messages but are also futuristic (by adopting to the ISO 20022 best practices). Back-end trade finance systems/products will not have to undergo too many changes with respect to element length. As part of the broader global trade digitization story, having a globally accepted standard is an essential and this is one of the first steps on that journey.
DCW: The ICC announcement says the APIs provide “a light footprint”. Could you briefly explain what this entails?
MK: A proprietary integration based on various messaging protocol may require specific software and hardware component to meet the protocol and integration need. The demand guarantees API is designed based on Open API standard and HTTP protocol. That provides option to consumer and provider a choice to implement consumer or provider based on the open standard. No additional proprietary software component is required making it zero footprint.
DCW: You mention the demand guarantees API. Would that also encompass standby LCs?
MK: Yes, the scope of the solution is applicable to bank guarantees, standbys, and dependent undertakings.
DCW: In terms of a next step, the ICC release says the API model is “now ready for testing, implementation and adoption by the industry”. What does that mean for banks? Are they the drivers of API use, or are corporates or fintechs driving the initiative?
MK: Indeed, banks, corporates as well as fintechs have actively contributed to the formation of these APIs. Resources are available for the players interested in adopting and implementing these APIs. These are Open APIs so they are available for use by any party in the guarantee lifecycle.
DCW: Can anything be said about how banks may go about testing and how long this phase may take?
MK: Swift is currently in the process of beginning with the pilot. We hope the pilot sets an excellent example and encourages the industry to see real-time benefits. We undertook awareness sessions with the community and a call for banks, corporates, and platforms to participate.