After the COVID-19 pandemic hit, we saw very clearly the power of the digital world to keep us connected. We all went digital in a big way in our daily lives as we moved to remote working and turned to a whole range of apps to buy groceries, order takeout and connect with family and friends.
The pace of digitization has accelerated greatly in every industry. A recent global survey of executives by McKinsey1 found that the COVID-19 pandemic escalated the digitization of customer interactions by three years globally. And the financial industry has been no exception. Banks have massively accelerated their digital strategies as their customers have shifted to transacting online.
At SWIFT’s (Society for Worldwide Interbank Financial Telecommunication’s) recent Sibos conference (a global financial-services networking event organized by SWIFT), Noel Quinn, the chief executive officer of HSBC, said in his opening speech that the bank had brought to market digital services in a week that generally would take three or four months. “It’s opened people’s eyes to see the art of the possible,” he pointed out.
And there’s no going back. Customer expectations have been sharply reset, and banks will need to relentlessly innovate at every touchpoint with their customers—both consumers and businesses—to provide ever faster and better services to stay competitive. To facilitate that, they need a safe, secure and compliant back-end to support digital financial interactions instantly and without friction.
That’s where SWIFT, the world’s leading provider of secure financial messaging services, comes in by providing the foundation that enables innovation in the financial community. SWIFT connects four billion accounts across more than 11,000 institutions in 200 countries to securely and confidently move value around the world. It is on its own transformation journey to support the banking community in moving all forms of value, from fiat currencies to CBDCs (central bank digital currencies)2 and crypto-assets, and to leverage new settlement methods and features, such as banking as a service (BaaS) and buy now, pay later (BNPL).
There’s no doubt that we are at an inflection point in financial services, challenging companies to stretch themselves to discover new ways of doing what they do better. Each company is an integral part of the journey. This article will focus on some of the recent strides SWIFT has made to fulfill its unique role to assist financial institutions in providing the instant and frictionless transactions that customers demand today.
The new API-enabled transaction-management platform enables financial institutions to expand.
In September 2020, SWIFT announced a strategy to facilitate instant, frictionless cross-border transactions anywhere in the world. At the core of this vision is a new API-enabled transaction-management platform that leverages the benefits of rich ISO 20022 (International Organization for Standardization 20022) data. The platform will provide comprehensive transaction-management services and pave the way for financial institutions—independently or collaboratively with others—to innovatively create new services to support their business growth.
Through this platform, financial institutions will be able to greatly expand their offerings to businesses and consumers, enhancing the end-customer experience. In securities, financial institutions should benefit from improved reconciliation, reporting and asset-servicing processes as well as end-to-end visibility of transactions to reduce settlement fails and fines. The platform will orchestrate interactions between financial institutions and other participants to minimize friction, optimize speed and provide complete transparency and predictability from one account to another, virtually anywhere in the world.
SWIFT gpi has improved cross-border payments.
SWIFT has a strong track record in transforming at pace with the market. SWIFT gpi3, for instance, was developed in response to the industry’s need for speed, traceability and transparency, providing the ability to process cross-border payments in a matter of seconds at competitive prices, with end-to-end tracking for maximum visibility. SWIFT gpi has dramatically improved cross-border payments across the correspondent-banking network—and almost 80 percent of cross-border traffic sent using SWIFT is done using SWIFT gpi. Payments made through SWIFT gpi travel along nearly 2,900 country corridors, supporting international trade and capital flows between 209 countries. On average, more than 57 percent of SWIFT gpi payments are credited to end beneficiaries within 30 minutes and almost 100 percent within 24 hours. Swift payments form the bedrock of SWIFT’s strategy, and its enhanced platform will build upon the high-speed rails of SWIFT gpi.
Payment Pre-validation service and SWIFT Go make transactions safer and faster.
Over the past year, SWIFT has made great progress building on its strong foundation to bring to life its strategy for instant and frictionless transactions. For payments to be made as fast as possible, the right data is needed—and it must be right the first time. The best way to achieve this is to validate data at the point of creation. Many of the errors that impact the smooth payment flow from debtor to creditor result from simple errors, such as an incorrect beneficiary name or account number, for example. SWIFT has introduced a suite of pre-validation services to ensure that the data captured is valid and correct. In July 2021, it announced the launch of its Payment Pre-validation service4. This enables originating banks to check payment details, including the eligibility of beneficiary accounts, before submitting a transaction for processing, removing a key point of friction in cross-border transactions. SWIFT developed the service in close cooperation with financial institutions, with major global banks such as HSBC and Wells Fargo committing to the service from its launch.
SWIFT has also launched SWIFT Go5, a new service targeting consumer and SME (small and medium-sized enterprise) payments, emphasizing up-front fee transparency and fast settlement. SWIFT Go seeks to build on the high-speed rails of SWIFT gpi and further strengthen the capabilities of banks to serve their customers in the high-growth small-business and consumer-payments segments. Using tighter service-level agreements between institutions and pre-validation of data, SWIFT Go enables banks to provide consumers with fast and predictable payments experiences with upfront visibility on processing times and costs. The rapid take-up of the service has been incredible. Only three months after the service launched, more than 100 banks signed up, with 10 already live.
Other initiatives have greatly improved transactions processing.
Linking market infrastructures and financial institutions is another fundamental pillar to enabling instant and frictionless transactions around the world and one of the key building blocks of the Committee on Payments and Market Infrastructures’ (CPMI’s) global roadmap on enhancing cross-border payments. As a neutral party with a worldwide reach that works with players from across the financial ecosystem, SWIFT is uniquely placed to support market-infrastructure interlinking. In October, it announced a proof of concept6 between EBA CLEARING, SWIFT and The Clearing House (TCH)—and seven participating banks—demonstrating the feasibility of synchronizing settlements across existing instant payment systems.
SWIFT is also exploring how it can support the future of money—in all its forms. As a key example of this, it has undertaken a deeper dive into central bank digital currencies (CBDCs) to look at potential roles it could play in orchestrating CBDC payments in an international setting. SWIFT’s recent paper7 on CBDCs, published in collaboration with Accenture, found that interoperability between different payment systems is the key to success. Here, too, SWIFT’s transaction-management vision can play a role, as the fundamental premise of the platform is that it enables interoperability between different standards, channels, protocols and across currencies whilst embedding adjacent value-added services.
SWIFT, maintaining its relentless focus on resilience and security—which are even more critical as digitization increases, is in a strong position to enable the financial industry to be successful in the future and continues to seek new avenues to raise the bar. The Customer Security Programme (CSP)8 has delivered significant results in driving industry-wide collaboration to reduce the risk of cyber-attacks across the institutional financial-services ecosystem, advance cyber-security hygiene through the provision of security controls and minimize the impact of fraudulent transactions. It has a proven track record of effectiveness against cyber-attacks targeted towards SWIFT customers.
This is what it means to innovate responsibly—to lean in hard on the future while maintaining due care on the operational excellence that is fundamental in our industry. The revolution in cross-border payments is accelerating, and the need for instant and frictionless transactions from one account to another anywhere in the world is greater than ever. SWIFT and its community partners cooperatively deliver this together, powering a more inclusive global economy that works better for everyone.
1 McKinsey & Company: “How COVID-19 has pushed companies over the technology tipping point—and transformed business forever,” October 5, 2020.
2 The Paypers: “Will CBDC gain popularity across the globe?” Claudia Pincovski, September 20, 2021.
3 SWIFT: “SWIFT gpi: Driving a payments revolution,” October 7, 2020.
4 SWIFT: “Payment Pre-validation: Eliminate frictions in international payments by upfront verification of account details in real time.”
5 SWIFT: “SWIFT Go: Predictable, fast and easy low-value cross-border payments.”
6 CISION: PR Newswire: “EBA CLEARING, SWIFT and The Clearing House join forces to speed up and enhance cross-border payments,” October 11, 2021.
7 SWIFT: “Exploring central bank digital currencies: SWIFT and Accenture publish joint paper,” May 11, 2021.
8 SWIFT: “Customer Security Programme (CSP): Helping customers strengthen their cyber defences.”