SWIFT Claims THE Cross-Border Payments Mantle

On June 28, SWIFT issued a press release and announced that “SWIFT’s global payments innovation initiative will transform cross-border payments.” This initiative could be a big game changer in B2B payments. I think SWIFT has found a winner with this project, and it looks like one that won’t languish waiting for participants to sign up and use it.

SWIFT has 73 banks committed to the initiative. It enlisted the largest and most global banks as well as many other large banks and has a good spread of countries represented. Both of those circumstances bode well for the initiative.

This latest press release from SWIFT regarding the global payments innovation initiative really doesn’t do full justice to this initiative. It fails to list the premier banks involved in the initiative and doesn’t emphasize the benefits of the program and the 21 banks piloting the service with a go-live date for all participating banks in 2017.

A more informative press release issued on April 5, 2016 provides more detail:

In response to requests from the banks, SWIFT is offering an on-boarding process in parallel to the pilot, to ensure that all banks signed up for the initiative can prepare for live operations.

In its first phase, the new service will focus on business-to-business payments. Designed to help corporates grow their international business, improve supplier relationships, and achieve greater treasury efficiencies; the initiative will enable corporates to receive an enhanced payments service directly from their banks, with the following key features:

  • Same day use of funds
  • Transparency and predictability of fees
  • End-to-end payments tracking
  • Transfer of rich payment information.

Assuming this collaboration successfully provides the four features identified above, it will truly transform cross-border payments. The transparency and predictability of fees and end-to-end payments tracking were both part of the original requirements of the Dodd-Frank Act Section 1073 on remittances, much of which ended up being diluted because of banks’ inability to provide that information under the correspondent banking model.

If the transfer of rich payment information is sufficient to allow banks to provide fully automated, straight-through receivables and cash application processing, one of the most significant problems for corporations’ finance areas will be solved. Finally, while I still view having same-day use of funds as less important to businesses than to consumers, payments are headed in a same-day (if not near-real-time) direction. By including that capability in the initiative, SWIFT ensures its offering not only meets today’s requirements but tomorrow’s as well.

The one drawback I perceive is that there has been no mention of having corporations, the key constituent, involved in the initiative to date. Since this offering is initially focused on B2B transactions, I think corporate viewpoints should be heard and included. Corporations are on both ends of the process being supported by the initiative; they initiate and receive the payments, and they are the clients the banks are serving. By not including them in the early stages, SWIFT and its bank participants are potentially creating a suboptimal solution reminiscent of the barring of corporations from the SWIFT network. It took until 2007 for SWIFT to implement the Standardized CORporate Environment (SCORE) model, which still restricts corporate access to SWIFT because companies must be sponsored by banks. This is a real drawback, but regardless, SWIFT should prevail. ​

Congratulations to SWIFT on the initiative! It puts SWIFT squarely where it wants to be: THE platform for cross-border payments. Banks that don’t participate will find their international payments options greatly restricted.

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