Focusing heavily on the future to ensure an inclusive global economy

Through David watson, Strategy Director, SWIFT

After the COVID-19 pandemic, we have seen very clearly the power of the digital world to keep us connected. We have all gone digital in significant ways in our day-to-day lives when we switched to remote working and turned to a whole range of apps for grocery shopping, ordering take out and communicating with family and the friends.

The pace of digitization has accelerated considerably in all sectors. A recent global survey of executives by McKinsey1 found that the COVID-19 pandemic has stepped up the digitization of interactions with customers three-year-olds around the world. And the financial sector was no exception. Banks have massively accelerated their digital strategies as their customers shifted to online transactions.

At the recent Sibos conference of SWIFT (Society for Worldwide Interbank Financial Telecommunication’s) (a global financial services networking event hosted by SWIFT), Noel Quinn, CEO of HSBC, said in his opening speech that the bank had brought digital services to market in a week that would typically take three or four months. “It opened people’s eyes to see the art of the possible,” he said.

And there is no going back. Customer expectations have been strongly reset, and banks will need to relentlessly innovate at every point of contact with their customers, both consumers and businesses, to deliver ever faster and better services in order to stay competitive. To facilitate this, 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, providing the foundation that enables innovation in the financial community. SWIFT connects four billion accounts at more than 11,000 institutions in 200 countries to move value securely and confidently around the world. It’s on its own transformational path to help the banking community shift all forms of value from fiat currencies to CBDC (central bank digital currencies)2 and cryptoassets, and to take advantage of new payment methods and features, such as bank as a service (BaaS) and buy now, pay later (BNPL).

There is no doubt that we are at an inflection point in financial services, challenging companies to go above and beyond to find new ways of doing what they do best. Every business is an integral part of the journey. This article will focus on some of SWIFT’s recent advancements to fulfill its unique role of helping financial institutions deliver the instant and seamless transactions that customers demand today.

The new API-compatible transaction management platform enables financial institutions to grow.

In September 2020, SWIFT announced a strategy to facilitate instant and frictionless cross-border transactions anywhere in the world. At the heart of this vision is a new API-enabled transaction management platform that leverages the benefits of rich data ISO 20022 (International Organization for Standardization 20022). The platform will provide comprehensive transaction management services and pave the way for financial institutions, independently or in collaboration with others, to innovatively create new services to support their business growth.

Thanks to this platform, financial institutions will be able to significantly extend their offerings to businesses and consumers, thereby improving the end-customer experience. In securities, financial institutions should benefit from improved asset reconciliation, reporting and management processes as well as end-to-end visibility of transactions to reduce settlement defaults and fines. The platform will orchestrate interactions between financial institutions and other participants to minimize friction, optimize speed, and provide full transparency and predictability across accounts virtually anywhere in the world. .

SWIFT gpi has improved cross-border payments.

SWIFT has a strong track record of transforming at the pace of the market. SWIFT gpi3, for example, was developed to meet industry needs for speed, traceability and transparency, providing the ability to process cross-border payments in seconds at competitive prices, with end-to-end tracking for maximum visibility. SWIFT gpi has dramatically improved cross-border payments on the correspondent banking network and almost 80% of cross-border traffic sent using SWIFT is carried out using SWIFT gpi. Payments made through SWIFT gpi travel along nearly 2,900 national corridors, supporting international trade and capital flows between 209 countries. On average, over 57% of SWIFT gpi payments are credited to end beneficiaries within 30 minutes and almost 100% within 24 hours. Fast payments are the foundation of SWIFT’s strategy, and its enhanced platform will build on the high-speed rails of SWIFT gpi.

The payment pre-validation service and SWIFT Go make transactions safer and faster.

Over the past year, SWIFT has made great strides in building on its solid foundation to bring its instant and seamless trading strategy to life. In order for payments to go through as quickly as possible, the right data is needed – and it needs to be right the first time. The best way to do this is to validate the data at the time of creation. Many of the errors that impact the smooth flow of payment from debtor to creditor result from simple mistakes, such as an incorrect payee 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, she announced the launch of her Payment pre-validation service4. This allows originating banks to verify payment details, including beneficiary account eligibility, before submitting a transaction for processing, eliminating a key sticking point in cross-border transactions. SWIFT has developed the service in close cooperation with financial institutions, with major global banks such as HSBC and Wells Fargo committed to the service from its inception.

SWIFT also launched SWIFT Go5, a new service targeting payments to consumers and SMEs (small and medium-sized enterprises), emphasizing transparency of up-front charges and prompt settlement. SWIFT Go seeks to build on the high-speed rails of SWIFT gpi and further strengthen the capacities of banks to serve their customers in the high growth segments of small business and consumer payments. By using tighter service level agreements between institutions and data pre-validation, SWIFT Go enables banks to provide consumers with fast, predictable payment experiences with immediate visibility into processing times and costs. . The rapid uptake of the service has been amazing. Just three months after the service was launched, more than 100 banks have signed up, 10 of which are already active.

Other initiatives have greatly improved the processing of transactions.

Linking market infrastructures and financial institutions is another fundamental pillar to enable instant and frictionless transactions around the world and one of the key elements of the global roadmap of the Committee on Payments and Market Infrastructures ( CPMI) on improving cross-border payments. As a neutral party with a global reach that works with actors from across the financial ecosystem, SWIFT is uniquely positioned to support the interconnection of market infrastructures. In October, he announced a proof of concept6 between EBA CLEARING, SWIFT and The Clearing House (TCH) – and seven participating banks – demonstrating the feasibility of synchronizing payments between existing instant payment systems.

SWIFT is also exploring how it can support the future of money, in all its forms. As a key example, she undertook a deeper dive into Central Bank Digital Currencies (CBDCs) to examine the potential roles she could play in orchestrating CBDC payments in an international setting. Recent SWIFT paperseven on CBDCs, published in conjunction with Accenture, found that interoperability between different payment systems is key to success. Here too, SWIFT’s vision of transaction management can play a role, as the core principle of the platform is that it enables interoperability between different standards, channels, protocols and between currencies while integrating services to adjacent added value.

SWIFT, which continues to relentlessly focus on resilience and security, which are even more critical as digitization increases, is well positioned to enable the financial sector to succeed in the future and continues to seek new avenues to raise the bar. the Customer Safety Program (CSP)8 has achieved significant results in fostering industry-wide collaboration to reduce the risk of cyber attacks in the institutional financial services ecosystem, advance cybersecurity hygiene through the provision of security controls, and minimize the risk of cyber attacks in the institutional financial services ecosystem. impact of fraudulent transactions. It has a proven track record of being effective against cyber attacks targeting SWIFT customers.

Conclusion

This is what it means to innovate in a responsible manner, that is to say to rely strongly on the future while maintaining particular attention to operational excellence which is fundamental in our industry. The cross-border payments revolution is accelerating and the need for instant and frictionless account-to-account transactions anywhere in the world is greater than ever. SWIFT and its community partners deliver this together, fueling a more inclusive global economy that works better for everyone.

The references

1 McKinsey & Company: “How COVID-19 Pushed Businesses Beyond Tech Tipping Point and Transformed Business Forever», October 5, 2020.
2 Payers: “Will the CBDC gain popularity around the world?»Claudia Pincovski, September 20, 2021.
3 FAST: “SWIFT gpi: Driving a payments revolution», October 7, 2020.
4 SWIFT: “Pre-validation of payment: Eliminate friction in international payments with real-time account details due diligence.
5 FAST: “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 accelerate and improve cross-border payments», October 11, 2021.
seven FAST: “Exploring Central Bank Digital Currencies: SWIFT and Accenture Release Joint Document», May 11, 2021.
8 FAST: “Customer Safety Program (CSP): Help clients strengthen their cyber defenses.

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