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Swift to test real-time cross border payments in Europe

Banks from France, Germany, Italy, Luxembourg, Russia and Spain have joined with Swift to test real-time gpi cross-border payments through the Eurosystem’s Target Instant Payment Settlement (Tips).

While payment messages cross the Swift network in real-time, the settlement and receipt of funds in the beneficiary account can lag by several days when entering national domestic clearing system.

With the advent of real-time, 24/7 payment systems and longer ‘credit windows’ enabled by the continuous availability of central bank money settlement, such as that offered by Tips, these frictions can be removed, ensuring that payments can be credited in seconds.

Institutions participating in the pilot include Banque Internationale à Luxembourg, BBVA, Deutsche Bank, Natixis, Santander, Sberbank and UniCredit.

Alain Raes, chief executive Emea and Asia Pacific at Swift, says: “By linking Swift gpi and Tips, our customers will be able to leverage their existing investments to deliver a superior service to their clients. The support we have from major European banks demonstrates their commitment to partnering with Swift to deliver a fast, secure and seamless cross-border real-time payment service that scales globally.

A similar arrangement was successfully trialed by Swift in 2018 with Australia’s domestic instant payment system, the New Payments Platform (NPP), and a group of banks from Australia, China, Singapore and Thailand.

Related Companies

Swift European Central Bank (ECB)

Channels

Sibos Payments Wholesale banking

Keywords

Post-trade & ops Transaction banking

Editorial | what does this mean?

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

Comments: (1)

Jeremy Light - pingNpay - London 23 May, 2019, 10:55

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I am curious how banks can use TIPS for global cross-border payments unless they break their SCT adherence agreements with the EPC.

TIPS uses the SCT Inst scheme, and SCT/SCT Inst rules only allow payments which originate from a payment account in the EU.

There was a request last year to the EPC to allow payments originating outside the EU to be forwarded as SCTs within the EU, but this was rejected in their change request consultation.

Typically, a payment sent to a EU beneficiary from outside the EU is sent to a correspondent bank in the EU which then routes it to its final destination through Target2 or perhaps through a bilateral with the beneficiary bank if ones exists. The Target2 RTGS is expensive compared to TIPS and other clearers of SCT Inst (e.g. EBA's RT1) and is not 24/7 or guaranteed real-time.

However, the big issue is that banks typically do not screen intra-EU ("domestic") SCT payments - if the beneficiary bank is unaware a SCT Inst/SCT originated outside the EU, the payment will not be screened as it should be as an international payment creating a financial crime risk.

It requires a rule in the SCT Inst/SCT scheme to identify a SCT as originating outside the EU and mandating the originator data that needs to be included at the right detail in the SCT for beneficiary banks to screen. Beneficiary banks would also need to modify their processing to screen SCT Inst/SCTs that originate outside the EU.

One for the EPC to reconsider?