Harry Newman, Head of Banking, SWIFT
Domestic payments are getting faster and faster. Real-time and instant are now synonymous with the transfer of value between businesses and consumers. How is this new customer experience translating in wholesale cross-border payments between financial institutions?
It's clear to see that the world of payments is heading in one direction. Technology has enabled us to re-conceptualise the way we transfer value to pay for goods and services, making the payment leg of a transaction commoditised -- to the point it's almost
invisible -- and crucially instant or real-time.
The user experience in the e-commerce and person-to-person space is increasingly this: I pay for something or pay someone, the funds appear in the beneficiary account instantly and appear as debited from my account simultaneously. No ambiguity, irrevocability
and, critically, instantaneous confirmation of credit.
This has been enabled by market infrastructures around the globe and their communities upgrading their domestic rails to support instant payments. The US Federal Reserve's announcement that it plans to move to an instant payments platform ticked off another
major market infrastructure signalling its intention to adopt instant payments.
Solving the challenge
Cross-border payments are inherently more challenging to solve for than domestic ones. This is because they involve bridging the "closed loops" of multiple currency systems, coupled with the complexities presented by the world's many regulatory jurisdictions.
Add in the challenges around bank opening hours and time zones, and the landscape for delivering payments across borders appears significantly more complex.
With goods and services moving more quickly and across greater distances than ever before, however, these challenges must be overcome. Value needs to shift further, faster and from account to account.
A new dawn for international payments
SWIFT and its community have moved to deliver on this, establishing a new cross-border convention under which banks commit to process payments from ordering customer right through to end beneficiary within tight timeframes -- timeframes that are made visible
to their respondents and correspondents.
I'm talking of course about SWIFT gpi. Just two years since launch, gpi is widely embraced by the community and fast-proving to be the catalyst for unprecedented change in cross-border payments.
More than 55% of SWIFT cross-border payments are already being made via gpi, moving more than 40 trillion US dollars worth of payments across borders faster than ever before. Half of them are reaching end beneficiary customers within minutes, and practically
all within 24 hours.
Within two years, every cross-border payment will be a gpi payment.
Making cross-border payments instant
With gpi already past the tipping point in adoption, the urgency of moving to real-time cross-border payments will continue to accelerate, even in markets where there is no domestic imperative to do so.
This is because the gpi Tracker enhances transparency, giving banks insight into how fast their correspondents process transactions. Banks, driven by their own customers, will either pressure them to speed up, or move their business to correspondents with
The domestic systems' moves to 24/7 processing are key facilitators. These systems play a crucial role in carrying the domestic legs of transactions and in ensuring full settlement finality.
That's why we've been working with market infrastructures in Australia, Europe and Asia to link gpi with those domestic systems to deliver truly end-to-end instant cross-border payments, right to the account of the beneficiary.
The results have been extremely encouraging, with settlement times in seconds.
Instant payments powered by SWIFT gpi
We're now bringing that experience to all market infrastructures around the globe.
Through a combination of gpi and domestic real-time payments networks, we're aiming to facilitate instant international payments, with up-front fee and Foreign Exchange transparency for senders, while also ensuring ubiquitous availability of instant cross-border
This will extend the speed and transparency of gpi deeper into domestic markets, enabling banks to leverage their existing investments to deliver a better service to their customers.
The service will be available to all types of banks' end customers, from large multi-nationals to SMEs, and from retail to e-commerce platforms, ensuring they can reap the benefits of speed, clarity on fees and crucially predictability on when an end beneficiary's
account will be credited.
We're now calling on all market infrastructures across the world, whether they are SWIFT-enabled or not, to join us in our mission to make cross-border payments instant and as seamless as domestic ones.