A robust tech foundation is critical for maximizing SWIFT Essentials
With SWIFT being a vital partner for cross-border payments, banks need the technological capabilities and functional flexibility to support its new Essentials value-added services.
The value of cross-border payments is estimated to soar from almost USD 150 trillion in 2017 to over USD 250 trillion by 2027, driven by the continued integration of economies and societies on a global scale.[1] With such growth, the payments landscape is inevitably evolving, creating opportunities as well as challenges.
For banks, the challenge is addressing the increasing complexities of a rapidly expanding market while remaining innovative and competitive. In most cases, this requires investing in a technology platform that will improve key aspects of processing, including support for real-time services.
In a previous blog, I highlighted the importance of not putting all your eggs in one basket (network service) when expanding your cross-border payments business. Of note was the importance of SWIFT and its inclusion in your growth strategy – particularly the ability to leverage its range of new services, SWIFT Essentials, and specifically those focused on payments processing and cross-border flows.
SWIFT has been modernizing its network with real time and API-based services in recent years. With its Essentials suite, it seeks to propel the cross-border payments industry towards lower-cost solutions, with benefits including improved speed and transparency. Within the Essentials suite, we are seeing the greatest momentum in the market for the following:
Swift GPI
Whereas instant payments are normal domestically, the picture is more complex in cross-border scenarios due to varying time zones, regulations, and banking relationships. Swift GPI focuses on speed, end-to-end traceability, and transparency (in fees and the FX rate) by connecting parties in a payment chain and dictating new rules for communications between them, wherever they are. As a suite of cloud-based tools, it combines SWIFT’s messaging infrastructure with processing innovations to provide faster and trackable cross-border payments – from initiation to settlement. There is a defined maximum period of 24 hours, but in reality this can, and possibly should, be minutes or even seconds.
Case Management
Case Management helps banks manage and resolve cross-border payment issues by accelerating and streamlining the exceptions and investigations process. It’s comprised of new messaging for Stop and Recall which immediately stops a payment that has been made incorrectly or fraudulently, and Case Resolution which investigates missing or incorrect payment information.
Swift Go
International consumer and SME payment volumes have skyrocketed against the backdrop of an increasingly globalized business landscape. To stay competitive in a world where fintech players are simplifying payment processes at low cost, banks cannot rest on their laurels and must continue to evolve their offerings. With Swift Go, banks can now create low-value (up to USD 10,000) cross-border payment services at competitive prices, addressing the SME and retail markets.
Payment Pre-validation
Payment validation errors can lead to significant losses each year and are usually the result of spurious causes, with SWIFT finding that 72% of payment exceptions were the result of formatting errors, account issues and invalid data.[2] Not only can investigations be time consuming and expensive, but they almost always leave customers frustrated. Consequently, successfully verifying payment data prior to initiation can go a long way in avoiding problems further down the line.
Through API technology, SWIFT’s Payment Pre-validation service allows banks to check the authenticity of a beneficiary account by cross-referencing it against SWIFT’s transaction data before sending the final instruction. This helps to validate key information early in the payment process.
SwiftRef
In a typical month, approximately 1,400 BICs undergo one or more changes, some 10,000 national clearing codes are created or removed, and approximately 15,000 SSIs change.[3] Maintaining global reference data is therefore a major headache for all banks, big and small.
With SwiftRef, reference data owners such as banks can publish their data to help other SwiftRef users find the information they need to route payments. The information provided by SwiftRef includes BICs and IBANs – in a range of formats – which helps ensure payments are sent to the correct place.
Laying the technical foundation for Swift Essentials
As we highlighted in the previous blog, many banks need to modernize their operations to support the use of multiple payment networks. The same notion applies when leveraging value-added services such as those under the Swift Essentials umbrella. Enabling the underlying technology to support the necessary building blocks is mission critical, a case in point being Swift AGI which is one of the major technical components that instant payment services require.
And it’s not just the initial support of these components that is important, but also the continued investment in that support to ensure compliance with future updates. Through our cross-border payments solution, we provide banks and other payment players with the technology that allows them to stay abreast of industry developments and adopt the latest innovations by SWIFT as well as those of alternative networks.
[1] https://www.bankofengland.co.uk/payment-and-settlement/cross-border-payments
[2] https://www.swift.com/news-events/news/payment-pre-validation-say-goodbye-unnecessary-errors
[3] https://profix.com.ua/images/files/Swiftref_brochure_new.pdf