The future of payments - correspondent banking fights back

By Sido Bestani, Head of Middle East, Turkey & Africa, SWIFT

RELATED ARTICLES BY SWIFT  

We are living in a time of great change. A wave of money is flowing into financial technology on a global level as a result of increased customer service expectations. Disruptive Fintech companies have identified opportunities and are challenging existing banking models. However, banks are fighting back. They are harnessing the full potential of existing technologies and exploring how new, disruptive technologies can support their businesses.

The shift towards real time payments is a global phenomenon, changing the shape of payment systems around the world. At the same time, financial institutions are under increasing pressure to meet financial crime compliance obligations which requires close monitoring of all transactions.

FinTech start-ups the world over are trying to identify gaps in the market and huge investment is taking place in the payments space. Globally, more than GBP4 billion of investments were made in financial technology between July 2015 and January 2016 alone, much of that targeting the payments business. In Africa, the financial technology sector accounted for 29.6% of the total funds raised for start-ups in 2015.

Correspondent banking serves as the backbone of the finance industry facilitating millions of secure cross-border payments every day. However, both retail and corporate customers are becoming increasingly demanding in terms of the services that they receive. They want transparency and speed.

Many banks have made headway in expanding their services and are exploring how disruptive and existing technologies can better support their businesses. To really step this up, the industry is now working together in unprecedented ways to improve the cross-border payments experience and reduce costs for end-customers.

One such initiative is the SWIFT global payments innovation (gpi) initiative. Announced in December 2015, this initiative, led by SWIFT and the world’s largest transaction banks, is designed to provide faster, same-day transactions and increase transparency and traceability of cross-border transactions.

So far, almost 100 leading banks have signed up to the initiative and 12 are already actively using the service. Several African banks are taking part in the pilot programme including some of the region’s biggest banks, Standard Bank, Ecobank, FirstRand, ABSA Bank and Nedbank. Participation enables banks to actively contribute to the creation of rulebooks which will form the basis of the cross-border payments service and begin building products and services around these rulebooks.

The initial service from the gpi initiative targets business-to-business payments. Designed to help corporates grow their international businesses, improve supplier relationships, and achieve greater treasury efficiencies, the SWIFT gpi service will enable banks to deliver an enhanced payments service directly to their corporate customers. It includes several key features such as same day use of funds within the time zone of the recipient, transparency of fees, end-to-end payments tracking, and remittance information transferred without alteration.

To enable transparency and end-to-end tracking, SWIFT is developing a payments Tracker ‘in the cloud’ hosted at SWIFT. The tracker will provide transparency on fees as well as visibility on the status of a payment transaction, from the moment it is sent until it is confirmed - similar to the tracking services provided by international shipping companies.

The solution has been designed to enable banks to dramatically improve the cross-border payments experience of their corporate customers. Because of the advantages offered by SWIFT’s global community combined with the application of its proven technology, banks are continuing to join the initiative around the world, and strongly believe that it will help to reinvigorate the correspondent banking landscape.

Looking ahead, SWIFT aims to incorporate further new services and harness new technologies through the gpi initiative. SWIFT is working together with the bank and corporate communities to define additional service level agreements that will cater for corporate and other client groups, further reducing the costs and frictions arising from compliance, streamlining liquidity management and increasing the processing efficiency involved in cross-border payments.

As part of the initiative, SWIFT continues to further engage with the FinTech community, by partnering with Innotribe, SWIFT’s innovation arm, and to explore the application of new technologies such as distributed ledger technology. It will also work together with FinTech hubs around the world such as those in Nigeria, South Africa and Kenya, to support new entrants and collaborate to provide creative solutions that best serve the customer.

The SWIFT gpi initiative is a significant step forward in cross-border payments innovation, helping banks to provide a faster, more information-rich and more transparent payments service. Together, the banks that have already signed up account for 75% of all cross-border payments on the SWIFT network. More are joining every day. Such strong participation from major global banks illustrates the importance of this initiative and the industry’s commitment to offering greater speed, transparency and traceability in cross-border payments.

To find out more about the future of payments in Africa from industry experts and learn more about SWIFT gpi, join representatives from across the banking sector at the SWIFT African Regional Conference in Abidjan, Ivory Coast, on 16-18 May 2017 or visit www.swift.com/gpi

Testimonials from corporates can also be found on the SWIFT gpi App available from the Apple App store.