In today’s fast-paced global environment, consumers and businesses expect quick and convenient payment systems for both domestic and international transactions.
A number of countries already have real-time payment frameworks, including the UK’s Faster Payments Scheme, Sweden’s Immediate Payments Scheme and Singapore’s G3. Meanwhile, recent analysis from the Bank of Canada revealed a global trend whereby most countries are now introducing new infrastructure to support real-time payments.
Financial messaging platform SWIFT is building on this momentum through the launch of its new Global Payments Innovation Initiative, which promises greater speed and transparency when making cross-border payments.
In June, the organization announced that 73 financial institutions (FIs) had joined the scheme, while two more – India’s ICICI Bank and AXIS Bank – signed up in late July. SWIFT confirmed that, collectively, these FIs perform approximately 75 per cent of the cross-border payments on its network.
Wim Raymaekers, global head of banking markets and project lead for the innovation initiative at SWIFT, said he was encouraged to see so many of the organization’s banks sign up.
“This new payments tracker is a great example of collaborative innovation. For the first time, banks will be able to give their customers precise information about their payments, in real-time, including confirmation of credit to beneficiary’s account,” he explained.
How does it work?
Banks that have signed up to the scheme must follow a stringent set of business rules that SWIFT has outlined in multilateral service level agreements (SLAs).
According to SWIFT, FIs can then provide an optimized payment experience for corporate customers through same day use of funds and end-to-end tracking functionality.
The tracking feature is similar to international shipping services, with each stage of the transaction relayed to customers via a database developed in the cloud. In addition, the initiative aims to offer organizations transparent fees and rich payment information on transactions.
SWIFT launched the scheme last year, and the early results of a pilot test will be presented to delegates at the company’s yearly financial services conference Sibos in September. A full rollout is scheduled for early next year.
While business-to-business cross-border payments appear to be the initial focus, SWIFT confirmed that additional SLAs would be implemented to service other customers in the future.
Sidharth Rath, group executive for corporate and transaction banking at AXIS Bank, said now is a time of innovation and technological progress in finance.
“In this dynamic payment scenario, we need to embrace new technologies and initiatives to constantly align our correspondent banking proposition to cater to the ever increasing needs of our customers,” he stated.
How could banks benefit?
SWIFT said the FIs participating in the Global Payments Innovation Initiative are likely to experience better attraction and retention of new customers, as well as cost savings due to network and claim-management efficiencies.
Organizations could also enjoy better regulatory compliance practices and intraday liquidity flows. A rise in straight-through processing on payments, meaning transactions that don’t require manual intervention, is also expected.
There is a real appetite from consumers and corporates for faster, more reliable and more convenient transactions which, in many places is only provided by Fintechs. Unless the FIs deliver this the Fintech providers will continue to grow and displace the FIs. It remains to be seen whether this move by SWIFT provides a service that can compete with providers like Ripple. Or is this SWIFT responding too late to the real time demand?