• Process frictions such as compliance processes complicate moving money across borders
• The increasing number of payment options, such as QR codes and alternative forex transfers, offers great opportunities for both consumers and businesses
• Ensuring frictionless payments rests on the public’s trust towards underlying infrastructure

Why can’t moving money between parties in different countries be as fast, transparent, and simple?

In fact, it can be. We’ve demonstrated through SWIFT gpi that payments can travel across the world to reach beneficiaries in a matter of minutes, if not seconds, with full transparency. It has never been a technology issue, but rather one of process frictions.

Process frictions arise in many ways. Payments can get entwined in necessary compliance processes: checking for possible money laundering, for instance, screening against sanctions lists and meeting reporting requirements. SWIFT calculates that up to 10% of banks’ cross-border payments globally end up delayed by such reviews.

Also, international payments are subjected to FX conversions, checks and balances regardless the value of the transaction.

The good news is that progress is being made to address both of those pain points, enabling both frictionless and secure payments.

For instance, a growing number of countries are renewing new domestic payment schemes to enable cross-border instant payments. These initiatives include Singapore’s Fast and Secure Transfers (FAST), Hong Kong’s Faster Payments Systems, Australia’s New Payments Platform, and Thailand’s PromptPay, along with similar programs in the Eurozone and the Middle East.

SWIFT has run tests enabling its gpi service to focus on the cross-border payments being cleared through the real-time domestic systems. This is not straightforward without SWIFT gpi, as bridging two domestic “rails” requires addressing multiple currency systems and regulatory jurisdictions. Now a live service, gpi Instant used by banks around Asia Pacific have found that payments between these jurisdictions can be effected almost immediately. This is “frictionless” in action.

The difference between a trial and making instant cross-border payments an everyday reality is ensuring that banks’ internal systems manage the risks involved. To do that, they need to consider:

1. Data quality to ensure know-your-customer compliance and transaction monitoring
2. Payment controls to protect against fraud
3. Shared intelligence to carry out sanctions screening and testing, increasing on a real-time basis

Banks are already embracing tools to address these challenges. Many consumer banks in Asia have digitised account opening, using APIs connected to government databases to authenticate customers and conduct remote KYC checks. The outbreak of COVID-19 and social distancing have accelerated these developments. There is also a growing number of fintechs promoting a diverse collection of digital payment solutions complementing the wider ecosystem.

The robustness of regulatory supervision and internal bank capabilities vary widely, however, particularly in a diverse region such as ASEAN. Increasing digitisation also invites cyber risks.

SWIFT works with domestic communities, including regulators, banking associations, and financial institutions, to lay out best practices. One such example is when we set up a payments control mechanism that is available on the SWIFT platform to signal when a payment ought to be investigated or halted. This fraud control utility is designed to be flexible as well, with the rules around detecting fraud configured to meet local conditions.

SWIFT is also partnering with local government and financial institutions to help them advance open banking and open APIs, which are becoming vital building blocks in making cross-border payments seamless.

The burgeoning number of payment options, from QR codes to alternative forex transfers, is a great opportunity for consumers, SMEs and corporations. But it is also creating fragmentation and inconsistency of designs and bilateral, country-to-country capabilities that do not easily scale across multiple markets.

SWIFT, as a member-owned utility, is a widely recognised proponent of standards, starting with our messaging services for correspondent banking payments. We are now extending this expertise to the new world of open banking. This is the key to ensuring these new solutions are interoperable and avoid recreating the frictions that technology was meant to abolish.

In reflection, SWIFT is a neutral industry platform that already spans the world after all. Over 11,000 financial institutions rely on us to send and receive information about financial transactions in over 200 markets, and reach over 4 billion bank accounts. Nearly two thirds of all payments sent on SWIFT are via gpi, in over 150 currencies across more than 200 corridors. These gpi payments typically settle in a matter of minutes, and often seconds.

Trust in the underlying infrastructure is key to ensuring payments are frictionless, and SWIFT’s infrastructure is robust, resilient—and proven.

This is the bedrock of SWIFT’s vision to make international payments as instant and frictionless as domestic payments. And as we move toward that future, we will continue to innovate responsibly – focusing efforts not just on speed, but on the safety and security of transactions, too. 

We look forward to collaborating with financial institutions across the region and together we can make instant cross-border payments a reality for all facets of the real economy.