SWIFT Exit For Iran As Sanctions Loom?

SWIFT controversy over the messaging system’s place on the world stage continues, and U.S. sanctions toward Iran loom. Elsewhere, digital payments are on the rise, and will keep rising, but infrastructure challenges remain.

It’s no secret that controversy over the SWIFT (Society for Worldwide Interbank Financial Telecommunications) global financial messaging system has been in the spotlight in recent weeks. The Trump administration is readying sanctions on Iran after having pulled out of a nuclear deal struck during the Obama administration. As of yet, noted by The Wall Street Journal (WSJ), it is unresolved as to whether the sanctions will involve SWIFT, which helps facilitate cross-border transactions between banks.

To that end, the Mehr News Agency reported this week that, per “an informed source,” the Central Bank of Iran has been taking steps to leave the SWIFT network. That effort, of course, comes ahead of the Nov. 4 deadline that will reimpose sanctions on the country. The site reported that the central bank will look to replace SWIFT with another messaging system.

As had been reported in August, Europe has been working on a money transfer system. It would be separate from SWIFT.

“That won’t be easy, but we have already started to do that,” said German minister of foreign affairs Heiko Maas at a conference at the time. “We are studying proposals for payment channels and systems, more independent from SWIFT, and for creating a European monetary fund.”

In addition, Maas had said that he wanted the new payment channels to be made autonomous from the United States — a “European Monetary Fund.”

Despite the assertion that an alternative arrangement might be made, the WSJ noted this week that getting around SWIFT  where European and U.S. firms loom large  would be difficult. In recent weeks, various voices from Europe said that there should be (and, in some cases, are) efforts underway to bring new systems to operate in parallel with the 45-year-old SWIFT system. In the meantime, Brussels passed what is known as a “blocking statute” that would make it illegal for banks in Europe to comply with U.S. sanctions.

Looking Toward Digital Payments In Africa … And Beyond

Beyond SWIFT headlines, and delving into individual company initiatives, ACI Worldwide said the Commercial Bank of Ethiopia will use the UP Retail Payments solution to “modernize” that country’s payments infrastructure. The partnership comes as the country embraces cashless goals, eyeing real-time and any-to-any payment capabilities.

Digital payments are, of course, on the upswing, evidenced by the data contained in the World Payments Report that debuted earlier this week from Capgemini and BNP Paribas. The report has forecast that non-cash transactions will grow at a compound annual growth rate (CAGR) of 13 percent through 2021. The growth rate will quicken from the 11 percent CAGR seen during 2015 and 2016, and where the total volume of non-cash transactions was 483 billion.

Developing markets will lead the way with a CAGR of 22 percent, outpacing developed markets at 7 percent. However, challenges come amid the lack of interoperability between payments schemes, as noted by executives surveyed by the firms, and the lack of standardization across data. Digital transaction volume at the end of the period may be as high as 876 billion.

Open Banking

Amid open banking efforts, news came this week that the central bank in Brazil is moving ahead with plans for an open banking model that will boost competition across the financial services landscape. As has been seen elsewhere, the model is one where end consumers and clients would authorize data to be accessed by third parties, such as FinTech firms. The plans for such an open banking model are slated to be finished by December and, per sites such as Valor, the implementation should occur next year.