Finextra can exclusively reveal that Nick Ogden, creator of fintech heavyweights Worldpay and ClearBank, is spearheading an initiative to improve the speed and performance of international payments. At Sibos in London he is gathering support behind RTGS.global, a new business designed to remedy the problems involved with the invisibility of liquidity between countries.
In conversation with Ogden, he highlights that while each bank is aware of its own liquidity position, in order to judge the credit-worthiness of another bank, indices must be trusted, and that this process is not reliable or transparent as payments are routed, from a correspondent banking perspective.
“Swift have invented and implemented gpi, which is great but there remains a lot of friction in the way that the entire international payments marketplace operates. Our plan was to look at this problem from a liquidity point of view and create a business that understands the known value of liquidity in relation to the banks that are in the chain of every transaction,” Ogden says.
For example, for a transaction between the UK and US, when the payment request instruction comes through, the RTGS.global system will temporarily lock liquidity within the UK bank for the value of the transaction that is proposed, then notifying the US counterparty bank that these funds are reserved for the payment. The US bank also ‘locks’ the same value, to ensure that this is a risk-tree transaction.
After the UK bank accepts the trade and the transaction, Ogden explains that the technology would then create a ‘liquidity block’ which simultaneously releases both liquidity locks for the credit of the appropriate parties. “The dollars become the property of the UK bank and the sterling becomes the property of the US bank, instantly in real-time. It is that simple. With this process, global payments can be completed in seconds anywhere, without risk.”
Ogden claims to have received encouraging support for the initiative from key central banks and regulators, which see benefits in RTGS.global’s approach for strengthening the financial system and utilising bank liquidity more effectively. Getting informal blessing from regulators has allowed Ogden to spend his week at Sibos adding more banks keen to participate in the first stages of the new development.
Ogden is also working with a number of regulators, commercial banks and central banks on a global scale to provide breakdowns of nostro and vostro balances and the amounts due from banks. In the event of a bank resolution this information is currently unavailable or incomplete. “If a bank fails, the central bank has to make a repayment back of the monies due to the other banks to maintain financial stability in the financial market. Our approach can provide them with accurate data of what is due.”
The next steps for RTGS.global include being able to provide audited statements of the amount due in the event of a bank resolution, which further de-risks the global financial system and would relieve the liabilities that would impact the interbank marketplace.
RTGS.global plans to have completed and tested a pilot version of the new system by mid-2020 with commercial rollout following in late 2020/early 2021. The goal is to achieve a customer transaction speed of less than 10 seconds on a 24/7 365 basis.
Ogden concludes: “Having gone through the fun and the enjoyment of setting up ClearBank, where we did all of our regulatory submissions ourselves. And I was lucky enough to work closely with the Financial Conduct Authority and the Prudential Regulation Authority during that process. It struck us that the key thing is, if we can make liquidity visible to a party that can authenticate it, then you de-risk the financial chain. Hence RTGS.global.”