Payments: Looking to the future
In June 2019, SWIFT published a vision paper, ‘Payments: Looking to the future’, setting out a vision for the future of how value will be exchanged by financial institutions around the world.
SWIFT’s vision is simple: to make cross-border payments as seamless and convenient as domestic ones: instant, accessible and ubiquitous. Denis Kruger, head of Sub-Sahara Africa at SWIFT, looks at the evolving payments landscape and how SWIFT is working with the global financial services community to build the financial industry of the future.
The evolving payments landscape
Remaining competitive in the payments business is no mean feat. It requires huge proprietary investments and it relies on and reaps collective rewards. Failing to keep up with changing demands can very quickly erode market share.
We have seen major developments in domestic retail payments in recent years, driving unimaginable improvements. Entire domestic markets are completely transforming the way they shift value.
Payments mechanisms and conventions can change rapidly. Take for example the rise of mobile payments in Africa. In 2007 with the launch of Mpesa, the payments landscape transformed. From the simple texting of payments between users, today services include insurance, loans and health provision. Mpesa has more than 30 million users in East Africa alone. African customers now expect easy, fast and accessible payments.
Adapting to changing customer needs and payment conventions is key to surviving in the payments business. A bank that refuses to interoperate with mobile providers in Kenya or Ghana, for example, may soon be out of the payments business. That is today. Tomorrow the habits and preferences of African consumers and retailers may be vastly different.
As domestic habits and demands change, as real-time domestic payments systems are rolled out, and as local Real Time Gross Settlement systems move to 24/7 settlement, banks know they cannot stand still. They need to adapt their own systems to support them.
The cross-border challenge
Cross-border payments are inherently more challenging than domestic ones because they involve bridging different currency systems. The complexities presented by the world’s 180 currencies and many more regulatory jurisdictions will slow down the movement of value, not speed it up – at precisely the time when technology affords progress, and economics demands it.
With goods and services moving more quickly and across greater distances than ever before, value needs to shift further, faster. From account to account, in an instant. Value transfers must be friction-free. They must also be safe, secure and compliant.
While banks sit at the centre of this, the core architecture is key. It must be open and trusted, innovative and resilient; its reach must be ubiquitous and its operations robust. It must enable smart, embedded, instant payments, 24/7 from every account to every account, everywhere.
Cooperation by all players in the community will be important – SWIFT, market infrastructures, banks and fintechs – because the openness and universality of the envisioned system are unique. Our ambition is to improve the payments experience for everyone – securities, foreign exchange players, those engaged in the trade area, and corporates and their clients
And the elements are already in place. The technology is available, and the banking industry, together with SWIFT, is progressing towards it. A coalition of the willing is forging ahead with change.
Instant payments with ubiquitous reach
In 2017, SWIFT and its community introduced SWIFT’s global payments innovation (gpi) service, the new standard for cross-border payments, providing speed, transparency and traceability to the cross-border payments process.
SWIFT gpi has been widely embraced by the community as the new standard for cross-border payments, with more than 55% of all payments on SWIFT now carried via the service with most payments being made within minutes, and practically all in less than 24 hours.
Within two years, every cross-border payment will be a gpi payment.
Thanks to the combination of a shared purpose, a common language (ISO 20022), and cloud and API technology, global virtual connectivity is growing. As we extend and embed payments further up and deeper into commerce, into third-party trade, e-commerce and securities platforms, connectivity will continue to extend exponentially to provide an even smoother payments experience, beneficiary to beneficiary.
That said, while higher payment volumes going ever-faster is becoming the norm, the maxims ‘’safety first” and “trust is key” remain paramount. As payments move faster, fraudulent pay-outs can be made sooner. The industry must remain vigilant in protecting against fraud – most particularly by ensuring endpoint security.
Working together to realise this vision
The foundations are laid. The building blocks are already constructing this new future. Key participants are working with us to deliver the future of payments.
We’re in this together, revolutionising an industry and a service to deliver value today and tomorrow.