The financial cooperative Swift has opened its global network to remittance traffic, a move it hopes will encourage more banks to develop international transfer services.
And Wells Fargo & Co. has extended its own remittance service, permitting customers to initiate transfers through its online banking site.
Swift began handling remittances this month through its SwiftNet Remit service, and this week released a set of standardized contracts and guidelines designed to make is easier for banks to establish remittance relationships with each other.
Michael Knorr, a managing director in Citigroup Inc.'s global transaction services unit, said Swift's efforts could help banks "get back in the game to compete more effectively with … nonbank providers."
As one of the world's most global banks, Citi already uses its own network to offer remittance services to more than 100 countries through its QuikRemit Service.
Citi also participated in the Swift remittance effort, and Knorr said that Swift's service would help Citi continue to expand.
"SwiftNet Remit will allow us to add other distribution capabilities," Knorr said. "Instead of redoing this from scratch when we want to enter new markets, we have a good baseline to build from."
Michael Whyte, Swift's senior market manager for banks and low-value payments infrastructures, said banks have been challenged in the past in trying to develop remittance relationships with correspondents in distant parts of the globe.
Most such relationships require participants to develop proprietary agreements, and involve customized technical integrations between the individual banks' systems, Whyte said. Forcing banks to repeat the process with every new partner is a waste of effort, he said. "You're not achieving the economies of scale you would expect by reusing" the contracts and standardized systems.
The SwiftNet infrastructure, which is widely used around the world, can address the connectivity question, he said. Executives of Swift, formally the Society for Worldwide Interbank Financial Telecommunication, plan to promote the remittance service next week at the group's annual Sibos conference, in Hong Kong.
And to make the business side of the equation easier, Swift has spent much of the past two years working with an advisory council to establish a set of standardized guidelines and contract templates that are consistent with both the business practices and the technical issues.
Though individual banks must still forge their own partnerships with counterparts in other countries, Whyte said the standardized paperwork will "make it significantly easier and faster for them to come to a business agreement."
He acknowledged that person-to-person payments are something of a departure for the SwiftNet system, which is used primarily for real-time, high-value wire transfers.
But while the cash value of remittance transactions may be lower, it is still important to the consumers sending money, he said. "They have very high service expectations. This service has high value to them," he said.
Whyte said that the money transfer companies Western Union Co. and MoneyGram International Inc. account for about 20% of the world's remittance market, and bank-based networks have 30%. The rest is split among a multitude of smaller competitors.
The United States has more than 70 major money transfer operators, for example, and in the United Kingdom, there are more than 4,000 money transfer entities outside the regulatory umbrella of the Financial Services Authority, he said. "The remittance market is hugely fragmented."
