Innovations in domestic retail payments have advanced at a gravity-defying pace in recent years, driving previously unimaginable improvements for consumers. The idea that cross-border payments can be as seamless and convenient as domestic ones is becoming a reality. As payments systems continue to modernise, the customer experience will continue to improve, ushering in a new norm. What will that norm look like?Innovations in domestic retail payments have advanced at a gravity-defying pace in recent years, driving previously unimaginable improvements for consumers. With goods and services moving more quickly and across greater distances than ever before, corporates are now increasingly demanding the same experience for their international payments. Friction-free value transfers are no longer a ‘nice to have’. The world of wholesale cross-border payments is, however, advancing rapidly. The idea that cross-border payments can be as seamless and convenient as domestic ones is becoming a reality. As payments systems continue to modernise, the customer experience will continue to improve, ushering in a new norm. What will that norm look like?
Cross-border payments will be instant
The advent of real-time domestic payments and 24/7 central bank settlement has been a major catalyst in the transformation of cross-border payments. The industry is reconceptualising how quickly cross-border payments can be delivered, using new technology, common standards and improved service level agreements. The speed of transactions will continue to increase as more and more banks move away from batch to real-time processing. Because customers are demanding faster payments, and an increasing number of markets are moving to real-time, banks will have no choice but to start processing their payments this way, or risk being left behind.
The urgency of moving to real-time will continue to accelerate. This is because with enhanced transparency on payments, banks will have greater insight into how fast their correspondents process transactions. Driven by their own customers, banks will either pressure them to speed up, or move their business to correspondents with faster processing capabilities.Moving to real-time is simultaneously driving banks to extend interbank processing hours too; no longer limited to office hours, 24/7 processing is fast becoming the norm.
Cross-border payments will meet the needs for all
The utility of any payment convention depends on the depth and breadth of its adoption. Value needs to be accepted, trusted and exchangeable, and it has to move from every account to every account, with speed and certainty.
There are two key elements to delivering this. The first is being able to track international payments around the globe with a single, ubiquitous standard, regardless of the institution handling it. Tracking should also pair with transparency on fees, remittance and FX information to streamline reconciliation and boost the customer experience. And the second is final confirmation that the funds have been credited to the end beneficiary account on all transactions. This guarantees the finality of a payment and unlocks the transformational benefits of having true end-to-end visibility on all payments.
Cross-border payments will be open and smart
Maintaining the openness of the cross-border payments system is fundamental to ensuring efficient flows to everyone, everywhere.
That’s why enabling a vibrant ecosystem in which banks can differentiate themselves by layering services and products to distinguish their offerings using technologies such as application programming interfaces (APIs), is key.
That ecosystem will also enable fintechs and other players add and create their own additional value through offering new innovative payments services. Modern, open, globally adopted standards are a key part of realising this. ISO 20022 will be a driving force in making this happen, ushering in transformational change to the way wholesale payments are made. The standard will drive straight through processing for financial institutions, which in turn means more streamlined and cost-effective payments.
Cross-border payments will be future proof
With a common language, a common purpose and modern, open standards, the correspondent banking community will be well placed to embrace the challenges of the future. This will be pivotal in fraud and compliance, for example. Cyberattacks will continue, adversaries will get smarter, and as payments move faster, the sophistication of fraudsters will keep pace. And regulation is not likely to go away; in fact, the eye of regulators will more likely focus even more closely on the flow of money across borders. Information sharing, raising control levels and developing ever-more sophisticated tools and capabilities, will be key in meeting these demands. Increased and better use of data, along with new powerful technologies such as artificial intelligence and machine learning, are already improving screening algorithms and reducing the number of false positives in areas such as sanctions screening. As better data becomes available, manual intervention will reduce even further, and as a result, so will the cost of compliance.
Realising the vision
The vision is simple. Make cross-border payments as seamless and convenient as domestic ones. SWIFT and its community of 11,000 banks, corporates, market infrastructures and capital markets players are delivering on a revolutionary standard for cross-border transactions to make this happen. That standard is SWIFT gpi. Already, thousands of banks have embraced gpi to send cross-border payments which are fast (the vast majority of payments are credited in minutes, many in seconds), transparent, and trackable from end-to-end. The tipping point in gpi adoption has been reached, with nearly 60% of all cross-border payments being gpi payments. Soon, it will be the new norm for all financial institutions.
Once SWIFT and its community have achieved this, the boundaries between wholesale and retail will blur; correspondent banking and its infrastructure will be as suited to e-commerce, person-to-person and remittance business as it is to wholesale business. The future is bright. Find out more about the future of cross-border payments at this year’s Sibos, taking place at the Excel in London on 23-26 September.
Register now – www.sibos.com