Blockchain Pressures SWIFT to Enhance Cross Border Payments

As most of us know that have sent a payment across borders through banks, I can travel from Vancouver, Canada to Barcelona quicker than money can get there. In fact, we know that if I send $100, the receiver will get something less, and neither of you know how much less depending on how many hands are in the pie taking a piece. The quest for real-time B2B cross border payments can seem like the search for the holy grail.

So I was happy to see 21 banks are piloting SWIFT’s new initiative to improve cross-border payments. The pilot is planned to run through to December, the first results of which will be shared at Sibos 2016 in Geneva this September.

The new service is being developed to help companies achieve greater treasury efficiencies. It will enable corporates to receive an enhanced payments service directly from their banks, with the following key features:

  • Same day use of funds
  • Transparency and predictability of fees
  • End-to-end payments tracking
  • Transfer of rich payment information.

Of course it helps to have someone like Ripple making “Waves” (sorry couldn’t avoid the pun, as Wave is another Blockchain company looking to disrupt the bill of lading process). Banks realize they have to bring change to the payment process by reduce their price and providing rich remittance information.

I spoke to Wim Raymaerk, Global Head of the Banking Market and project lead for this initiative at SWIFT, to get his thoughts on all of this, he had some interesting observations.

First is that speed is fine but process matters. The SWIFT technology is in seconds, the SWIFT payment is in seconds, if it is replaced with Ripple that is also in seconds. That does not mean the bank will not sit on the money for 2 days. Just replacing the technology with other technology does not improve process. If I send $100 via blockchain, it does not mean the bank will not deduct fees to process those payments. Whatever technology you use, the business practices by the bank partners is key. If you dont fix the Service Level Agreement (“SLA”) rules, the tech underneath may not matter. Of course tech does matter (ie, security, privacy, non repudiation, etc.), but SWIFT message, blockchain message, both are in seconds.

So what SLA changes are being planned.

    1. Same Day Use of Funds Regardless of Time Zone –if making a payment cross border, it will appear in seller to the seller in her time zone same day. So if send money to Japan from Canada, she has it in her account on the same business day.
    2. Transparency of fees– your bank say it charges this, so there will be no more surprises for Treasurers.
    3. Confirmation– when a bank credits the beneficiary, they send back to you a confirmation so you know your seller has been paid and therefore eliminate disputes between the sender and receiver.
    4. Transfer of rich payment information. SWIFT will make sure that the remittance data is presented, unaltered, to the seller. Raymaekers noted there is a genuine need by companies to have that rich remittance information.

The big question will be how SWIFT integrates this information back to companies, including the confirmation provided by the receiving bank to sending bank. If a corporate is on SWIFT, that’s easy, banks can send a message to a company as there are over ,2000 on Swift.   But millions of companies do not use Swift, they use EDI channels, or banks proprietary platforms, or something else.

This brings up some interesting partnering options for SWIFT:


  • Should they look to remittance data B2B vendors, like some hi tech industries, that can help them channel unique reference data to the banking chain?
  • Or associate with payment vendors - and information could either go through the banking channels or a central repository?
  • Or perhaps they can store remittance data in a Hub and provide a hyperlink to that data?

Those are all models worth exploring and I am sure others as well.   Stay tuned, cross border payments is getting very interesting indeed.

p.s. It’s important to note SWIFT experienced multiple security breaches recently, see WSJ article here

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