This article is the first in a new series dedicated to organizations that are the biggest changemakers in the cross-border payments industry, where consumers have long waited to see cheaper, faster and more transparent transactions. Thanks to a multitude of disruptive FinTech startups, as well as innovation driven by legacy players, those hopes are becoming reality in real time.
Any business that has ever tried to receive a payment from abroad has likely experienced the frustration of a multiday delay for the payment to process, as well as a surprise from a mix of charges and fees that are tacked on as cross-border payments go through a sequence of correspondent banks en route to their final recipient.
More times than not, the Belgium-based cooperative SWIFT (formally known as the Society for Worldwide Interbank Financial Telecommunication) will have been at the center of those transactions, as it has been synonymous with cross-border payments since its founding in 1973.
Today, SWIFT serves as the primary interbank messaging service for financial institutions around the globe and works with 11,000 member institutions worldwide and facilitates $150 trillion in transactions per year.
All of this has been happening at a time when SWIFT — and the entire cross-border payments industry — has been making a steady stream of steps to keep pace with an increasingly digital world that caters to globally minded consumers and businesses that demand cheaper and faster service.
As part one of this series, PYMNTS will outline some of the steps SWIFT has taken to leverage its existing status, while also delving into new ways that it is striving to stay relevant and ahead within a broader process of evolution that started several years ago.
2016: Launch of Global Payments Innovation
It may seem like a long time ago, but to keep up with the demand for faster, frictionless cross-border payment services, SWIFT introduced the Global Payments Innovation (GPI) initiative in 2016 as a way to streamline the international payments process for the clients of SWIFT-chartered institutions and make transactions more transparent.
A number of large financial institutions, such as Bank of America, now offer services that run on SWIFT GPI protocols.
BofA’s corporate clients have been able to access real-time data on their international transactions through the bank’s CashPro integrated platform since its launch in 2020, via a tool that is similar to the way Domino’s Pizza tracks orders, only it updates the transacting parties on where their money is in the process.
2018: Instant Payments in Partnership With TIPS and EBA Clearing
Two years later, SWIFT partnered with the European Central Banking system (Eurosystem) to enable instant cross-border payments in the eurozone. It did so with the launch of SWIFTNET-Instant service, the network service provider for Eurosystem’s TARGET Instant Payment Settlement (TIPS). TIPS in turn allows participating banks in the eurozone to offer customers round-the-clock instant payment.
SWIFT called the collaboration “a pivotal building block for access to the future Eurosystem Single Market Infrastructure Gateway.”
More recently, SWIFT said it was joining forces with the European and U.S. payment service providers EBA Clearing and The Clearing House to allow for “immediate cross-border payments.”
The pilot project has received input from 24 banks in 11 countries, though it will initially support payments only in euros and dollars. But the three partners hope that it will be “extended to other currency channels and payment systems.”
Seven banks were participating in the concept launch at the time of the announcement, including giants like Bank of America and Citi.
2021: The Introduction of SWIFT GO:
Last year, SWIFT launched the SWIFT GO service, making it easier for small and medium-sized enterprises to move money across borders, which according to a blog post, was done through the use of “tighter service level agreements between institutions and pre-validation of data” to enable faster international payments, with upfront fee visibility.
The service targets small businesses and individual P2P senders, as these are the categories of clients that are most often blindsided by surprise fees. They also lack the negotiating power of large enterprises to get a bargain on cross-border payment fees.
SWIFT GO is used by 123 banks that are part of SWIFT’s global network, including Citi and Barclays.
2021: Payment Pre-validation
Another way that SWIFT is leveraging its network is by using it to predict whether a transaction will fail before it even happens.
SWIFT offers its client banks a way to pre-validate international transactions before money begins to change hands. SWIFT introduced the Payment Pre-validation initiative in hopes of eliminating frictions that cost the industry more than $2 billion and affecting over 700 million transactions annually — most of which, SWIFT claims, stem from avoidable errors.
The initiative uses a predictive analytics tool that draws on aggregated and anonymized data from 9 billion transaction messages between 4 billion accounts each year. Banks that sign on to this service can connect to it through an API and offer the customers the opportunity to verify transaction information (such as the receiving account) before it happens.
SWIFT says this will help fight fraud and reduce errors, ultimately making cross-border payments faster and cheaper.
2022: Blockchain and Symbiont Partnership
Most recently, SWIFT began testing the waters of the blockchain world as a way of delivering enhanced services to participating institutions. In fact, just this month SWIFT announced that it is partnering with the blockchain FinTech company Symbiont to facilitate the sharing of information about corporate events among institutions in its network.
SWIFT plans to use Symbiont’s smart contracts to update records of “dividend payments, exchange offers, mergers, Dutch auctions,” a press release said, in a bid to make communication between all the actors in the investment ecosystem more efficient.
This, compared to the current system of transmitting corporate event information to various stakeholders which can be messy and overly reliant on manual labor, and therefore prone to human error, which SWIFT has pledged to reduce, since all transactions will be verified and recorded using Symbiont’s decentralized ledger.
From Back Office to Box Office
Finally, SWIFT also made its video debut this year as part of the Jack Reacher series, when the main protagonist was able to determine the source of transactions made by the villain through his awareness of, and help from, the bad guy’s SWIFT number.
While this digital fingerprint, of sorts, makes for a great cinematic plot twist, it carries real-life consequences, too, especially at a time when the irreversible nature of cryptocurrency transactions is drawing so much attention and concern.