Making SWIFT Swifter

SWIFT’s CEO, Gottfried Leibbrandt, is the first one to admit that “instant” payments have been in existence for a long time. “That’s called a credit card,” he explains. “We’ve had access to instant payments long before it became a Silicon Valley buzzword.”

That said, Leibbrandt knows all too well that cards are just one of the many rails that move money around the world between people and businesses. SWIFT’s business is transmitting the information between banks that actually underpin the movement of money. And that, Leibbrandt says, is where the crux of the debate now rests with respect to the need to move money faster.

A mantle that SWIFT has picked up and appears to be running with — but with a twist. SWIFT announced last week its Global Payments Innovation Initiative that will do something that most technologies scorn: make the existing network of correspondent banks more efficient and effective.

“Why build something from scratch when what we have works very well today,” Leibbrandt explains. “We understand the need for improved transparency and speed, and our roadmap provides a framework for banks to do that.”

Some even say it’s an ambitious roadmap. But Wim Raymaekers, who heads the banking markets of SWIFT, says that the initiative is one undertaken with “the corporate treasurer in mind” — a statement that encompasses a range of foci from compliance, to liquidity, to transparency —— and a timetable that will include a rollout in early 2016.

Of course, with any new pilot program — whose members will number, Raymaekers adds, “several banks” and corporates that will be named next month upon launch — speed is key.

Through what Raymaekers terms a series of conversations and continuing dialogue with corporates, the new service that will eventually emerge will address speed, a key concern because settlement can, and does, take days, where it should take much less time. And movement between businesses can be a pain point for companies and their suppliers since money leaving accounts can, and should, only happen once there’s proof that the transfer is complete.

So speed, for SWIFT and for the pilot program, notes Raymaekers, is a key focus moving forward. In addition to speed, there’s the need for accuracy, predictability and compliance in the daily flow of millions of transactions across corporates, correspondent banks and borders. “You want to know that when you expect to see $995 in the account at the end of the day, that there is $995 there and not $993,” with no surprise deductions, say, for fees or currency exchanges. With confirmation to both sellers and buyers across banks, in real time, tracking becomes easier and more transparent. While typically the settlement process can be measured in days across parties, SWIFT now is gunning, through the pilot service, to offer same-day use of funds.

And, of course, with an ever-expanding push to embrace cross-border business, as enterprises of all stripes and sizes do business across time zones and currencies, the inclusion of “business rules” that operate across all participant banks will help address regulatory and compliance issues, which extend to fraud and anti-money laundering mandates.

Raymaekers states that the additional levels of supervision may do much to attract players that are “not just big corporates but also small and mid-sized enterprises,” as they look to expand. Speaking hypothetically, he posited that a company that does business thus far with only a neighboring country or within a certain currency might branch farther afield.

Much has been made of blockchain in the past several months in the financial world, as banks have started to invest in the ledger technology as well. And SWIFT, like others, will be exploring the use of the technology as an arrow in the quiver for transparency. The issues surrounding that application with SWIFT, says Raymaekers, center on the overall managed environment of the system and the fact that “identity is key, and compliance must come alongside liquidity. You can’t just receive funds from anybody you don’t know.” And in layering that nascent technology onto SWIFT’s platform, “we suggest that we start with what we have,” a strategy Leibbrandt sees as prudent “since we know it’s battle-tested and works very well. Eventually, we’ll consider adding to it as the needs and new technology evolves.”

And of SWIFT’s role? Leibbrandt says that it wants to make sure that banks are managing to the SLAs so that the network of banks can deliver the new capabilities that are promised and exploring and vetting new technologies as they become available — not running the system.

At least, not now.