B2B Payments

SWIFT Stands Behind Its Global Payments Innovation Initiative

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SWIFT’s year has been filled with controversy, the apex of which occurred when reports surfaced that cyberthieves infiltrated Bangladesh Bank via the SWIFT messaging system in February, resulting in $81 million stolen from the bank’s account at the New York Federal Reserve. Since, SWIFT has reported three new cyberbreaches that occurred over the summer.

All of this has occurred as the company has continued to expand the pilot phase of its global payments innovation (gpi) initiative, thus far signing on dozens of major financial institutions to an effort aimed at streamlining cross-border payments. But gpi has faced its own controversies, most notably when Ripple, a FinTech startup working on its own cross-border payments solution, began challenging SWIFT’s gpi and questioning its progressiveness; in a statement, Ripple called gpi “an iteration of exactly what SWIFT provides today with a marginal increase in speed for availability of funds.”

When PYMNTS spoke to SWIFT about some of the criticism it’s faced over gpi, Head of Payments Initiatives for the Americas and U.K. Region Stacy Rosenthal didn’t speak directly of Ripple’s swipes. Rather, she pointed to the competitive spirit of FinTech and argued that SWIFT is focusing on improving the infrastructure that corporates and FIs need to improve global payments — not on what she described as the FinTech hype sweeping the market.

“There are different perspectives when it comes to gpi,” she said. “And at the end of the day, there will always be competitors and new market entrants.”

The FinTech boom is loud and growing louder. FinTech — and the emerging RegTech trend — made a splash at SWIFT’s Sibos event this year, Rosenthal noted. But FinTech innovators can’t always deliver what’s needed in payments, especially when it comes to complying with regulations across borders.

“The competitive landscape is important to shape the way of the future,” she continued. “I think it’s all about how you look at the benefits from the corporate practitioner perspective: They want certainty that the payment is going to get there, they want confirmation, they want to know what their payment is for, they want to know where they have tracked cash.”

In a blog post, Ripple targeted gpi as an initiative that fails to truly deliver the level of innovation it argued is necessary for industry stakeholders today. Among its criticisms was a lack of speed.

“GPII [Global Payments Innovation Initiative] boasts settlement within a signal day,” Ripple wrote. “Same-day is an improvement, but we don’t believe it will keep up with consumers’ and businesses’ expectations for on-demand payments.”

But according to Rosenthal, speed isn’t at the top of corporates’ priority lists in their global payments needs.

“I hear so much excitement around the tracking capability and less around the speed,” she said. “We’re also improving the speed, and tech can move things like speed, but [innovators] still need to go through the framework and the foundation that exists, and banks still have to have an account with one another — they still have to have screening in place.”

In other words, new innovations and new market entrants still have to play by the rules.

“What we’re trying to do is improve what we have today and lay on top of it new technology to improve the client experience, lower the total cost of ownership or be a more efficient way of doing things,” the executive said.

SWIFT’s gpi uses the interbanking system to move money across borders, a process that itself has been the target of some criticism for being cumbersome, forcing payers to simply wait and see whether their money ends up where it’s supposed to, often not having any idea which banks touch the funds in the process. Rosenthal said these are the types of issues that corporate payers are most interested in and where gpi focuses its efforts.

“Today, [interbanking] is the most safe and sound way to move money efficiently and effectively around the world,” she stated, citing the global requirements of financial institutions to remain compliant with regulations, like KYC and risk mitigation efforts. “What the new market entrants are doing is, they may be offering a new user interface, but they’re still going over the traditional cross-border rails,” she continued. “That’s something I think is very important to know.”

In the spirit of competition, Ripple’s blog posts tackle all of these issues — speed, risk, compliance and payment transparency — to argue its own cross-border payments solution is superior to SWIFT’s. Rosenthal said, however, that corporates have expressed interest and excitement in SWIFT”s solution and the way it addresses all of these points of friction. Currently, 88 banks are signed onto gpi (Ripple recently announced 15 global banks are now on board with its initiative, as well as its latest funding round of $55 million).

SWIFT’s initiative is currently in pilot phase but is slated to see a full rollout next year, the company said. As it does, the company, like any, is sure to face new competition and criticism. Rosenthal said that it’s all part of the market and, in many ways, can be helpful to the industry overall.

“It’s adding energy to the collaborative nature of the community,” she said, “to bring innovation into corresponding banks and to continue to reshape the future of corresponding banking.”

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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