What trends are you currently seeing in the cross-border payments industry?
Our clients and their customers rightly raise their expectations given the rapid evolution of technology, and they often notice inconsistencies in the application or effects of technology in different spaces. For example, there has been significant and growing demand for faster, more transparent and more convenient payments across borders, especially in relation to the speed of domestic payments. Corporate treasurers are also demanding more transparency, both in the visibility of where in a payment chain a transaction is at any given moment and wherein this process fees are extracted by various institutions and at what level.
What challenges do you think the cross-border payments industry is currently facing?
With the high levels of interest and appetite around alternative payment solutions, there is an increasing call for reform in cross-border payments to bring them in line with the market’s expectations. Managing these expectations is key: rather than wait at least three to five years before an alternative technological solution is available on a global scale, it is better to implement new solutions that have been thoroughly tested and are ready to be brought to scale from day one.
One of the key challenges is to ensure that any significant reform can interact and be incorporated into any existing messaging standards and back-office practices: asking our more than 11,000 clients to all radically overhaul their systems overnight is not realistic.
This is why we have carefully built our global payments innovation (gpi) suite of tools to be compatible with the solutions used by our large and diverse pool of users today. For example, SWIFT gpi leverages our bank clients’ existing back-office payment processing systems, compliance infrastructures and FX processes to ensure as smooth a transition as possible to our technical offering.
How is technology changing the payment industry?
It’s making a higher level of detail possible in the tracking of an individual transaction, allowing more data to be extracted and acted upon. This can range from tracking a transaction’s progress to the acquisition of better business intelligence—data is one of the core commodities of the digitised economy. This will transform the relationship between banks and their customers and facilitate the development of innovative financial products.
How is SWIFT working with the fintech space?
From the outset, gpi created an inclusive community, involving banks, corporates and fintechs working together. SWIFT’s gpi has been developed in close collaboration with many financial institutions. Currently, over 30 percent of our cross-border traffic is now conducted with the service, via more than 600 country corridors and denominated in more than a hundred currencies. Efficiency savings have been significant—our bank clients report a 50 to 60 percent fall in payment investigations after adopting gpi. These healthy statistics speak to both the volume and quality of our collaboration with various stakeholders. In addition, we are already working with leading fintechs in the UK and Australia.
Do you think collaboration with smaller financial technology firms is the answer to innovation around technology in the industry?
Yes. Collaboration with fintechs is key to our strategy as they bring new ideas and perspectives, as well as open our teams up to new communities from which they can glean new insights. At our annual conference Sibos, there will be 40 fintechs exhibiting, providing a great platform for collaboration and innovation.
SWIFT extended its cross-border payment tracker at the beginning of this year. What does the extension provide clients? And what feedback have you received from clients?
Our cross-border payment tracker offers a similar experience as, for example, a tracker for a parcel delivery. It is a cloud-based tool that is securely hosted at SWIFT that gives end-to-end visibility on a payment’s status from inception to completion in real time.
All parties in the payment chain are now connected, which means operational efficiencies and improvements in client service.
Having launched this in May this year, feedback from clients has been very positive, as the gpi tracker allows them to gain autonomy and more quickly respond to investigations and enquiries.
This increases operational efficiency and presents cost-saving opportunities. We are now extending this across our network for all payment instructions to give our gpi customers the fullest benefits possible. The gpi tracker has been deliberately designed to be iterative and dynamic, and development is ongoing.
Are you planning to release any further updates at the end of this year or the start of next? If so, how will these improve clients cross-border payments experience?
We have several new features in gpi coming online this November, and many others in the pipeline. Our strategic roadmap of enhancements and additional services has been developed in conjunction with the gpi member community.
Services scheduled before the end of 2018 include:
gpi Stop and Recall, which allows for a quicker response to suspected fraud or errors and the ability to immediately stop or recall a sent payment.
Extended tracking of gpi payments to enable gpi banks to track gpi payments along the full payments chain, even if the banks handling the transaction have not yet adopted gpi.
The extended tracking is particularly important. As of November, all payment messages on the SWIFT network will be required to include the gpi unique end-to-end transaction reference. This enables gpi banks to track all their gpi payment instructions at all times, regardless of whether or not other banks in the process are gpi members. By giving gpi members full visibility on all of their payments activity, these banks and their customers benefit from even greater transparency and efficiency gains.
Together with gpi member banks, representatives of their corporate clients, and fintech partners, we are exploring a number of other opportunities to improve the international payments experience. This includes:
A pre-validation service to help make payments error-free at the point of origin and increase straight-through processing
A tracking service for high-value financial institution transfers
Leveraging gpi to facilitate real-time cross-border payments by linking a fast cross-border leg via gpi into domestic instant payments systems
Examining how ISO 20022-based gpi services would operate as part of SWIFT’s wider ISO 20022 migration study
Bringing together banks and two fintech winners of the SWIFT 2017 gpi industry challenge to develop new beneficiary services that focus on accounts receivable forecasting and requests for payment
As part of gpi, we have also organised a pilot programme with a group of 21 leading banks and corporates. The aim is to define and implement gpi standards that corporates using multiple banks can integrate into their treasury processes to increase efficiency.
What challenges are you experiencing around preparations for the implementation Second Payment Services Directive (PSD2)?
By mandating financial institutions to provide dedicated access to core banking services to third-parties, PSD2 can offer significant opportunities for banks to give customers greater speed, control and choice. While banks have long worked with third-parties to enhance their services, PSD2 has prompted institutions to open up their platforms to developers to offer additional application programming interface (API)-based tools, services and functionalities. PSD2 also further opens up the payments marketplace—enabling banks to distribute their products via third-party channels and bundle their products with third-party payment services.
Yet challenges remain for the financial industry in fully implementing PSD2. Open APIs need further standardisation to avoid third-parties having to connect with multiple banks each with a different API standard. And, given the paramount need for security, further work is required on developing a know-your-customer framework which systematically ensures that only trusted third-parties can access the highly sensitive data held by banks. To this end, SWIFT is working with the financial community to apply its expertise to ensure API standardisation and security.
What opportunities will the directive bring?
We anticipate the chief impact of the directive will be the creation of opportunities for innovation. Think back to the early internet, or the arrival of the iPhone—it was clear these technologies would be transformative, but it took time to see which experiments and features would take off.
That’s how we see PSD2: it provides a springboard for banks, fintechs and other participants to innovate under a common payments structure that will ensure that services industry-wise are interoperable, and will protect consumers by ensuring that this new flexibility does not lead to new security vulnerabilities.
Meanwhile, in providing the opportunity for banks to act in practice as third parties in relationships between other companies and consumers, PSD2 creates new chances for these institutions to unlock their own creativity and develop solutions that facilitate connections between other banks and their customers: a potentially radical new way for these institutions to compete.
What are your predictions for the next 18 months in the payments sector? What developments do you think the industry will see?
Open APIs are going to be central to discussions industry-wide over the next 18 months. We’re going to see an explosion in API-enabled services in both the front and back end.
Banks, corporates, vendors all looking at APIs, and SWIFT is no exception. Our gpi initiative places us at the forefront of this process.
What else is SWIFT currently working on?
SWIFT gpi is transforming cross-border payments at the moment and a lot of our effort is focused on improving that offering further. We are also exploring exciting new opportunities through the greater use of secure APIs, predictive analysis and artificial intelligence to bring about new and improved services to our community.
SWIFT is not fixed on any set technology, we will develop and deploy whichever technology brings about the quickest and most impactful change for our customers to improve their payments experience.
← Previous interview
National Settlement Depository
Artem Duvanov
Next interview →
Handelsbanken
Jonas Modigh
Image: Shutterstock 
