One of the major core needs of payment users currently being addressed is speed, efficiency and transparency.
Germinating in the retail sector, user expectations of speed, efficiency and transparency are now emerging in the wholesale space – and market infrastructures and banks are reporting with new real-time payment systems.
While there are several initiatives that show global appetite for real-time payments, only the U.K. and Australia currently support “one leg out” transactions. All other initiatives are domestic only – supporting instant payments in a particular zone or country. To this end, Swift global payments innovation (gpi) is a crucial initiative – improving the speed, efficiency and transparency of cross-border payments and improving the reach of sophisticated payments networks.
Europe already boasts two such solutions. These are SCT Inst, launched in November 2017, and the European Central Bank’s Target Instant Payment Settlement (TIPS) platform, launched in November 2018. Both of these solutions offer end-to-end processing within 10 seconds, with 24/7/365 availability.
A similar story has been unfolding beyond Europe, with 45 instant payment schemes now live around the world – including Singapore’s Fast And Secure Transfers (FAST) and the UK’s Faster Payments Scheme (FPS).
At the same time, inter-bank payments are also accelerating. In Europe, the ECB plans a revamp of its Target 2 RTGS system, which will adopt a streamlined operational model underpinned by SWIFT’s ISO 20022 messaging standard.
The U.S. Federal Reserve Bank also recently announced plans to upgrade its payment infrastructure for high-value, instant Fedwire Funds Transfers, as well as CHIPS payments. This upgrade will enable the bank to migrate its messaging formats to ISO 20022 by the year 2023 – aligning US high-value payments with those of other key geographies.
The launch of systems supporting one-leg-out transactions is illustrative of a broader issue. Implementing an effective global payments network remains one of the most challenging pieces of the payments puzzle – and is also one of the most important. Few businesses today operate without buyers and suppliers in other regions, making sending and receiving payments globally a pressing issue.
Currently, we have no choice but to rely on the traditional correspondent banking model, which has yet to be supplanted by innovation. The way forward here looks to be to refine the system through innovation, rather than to overhaul it altogether.
Through Swift gpi, banks can typically credit payments within half an hour (and often within minutes) with full transparency over payment statuses and fees. In a more recent development – announced at Sibos 2018 – Swift carried out a successful trial of its new, instant cross-border payments service, showing that by enabling gpi in real-time domestic systems, transactions can be effected almost instantly.
Driving wider adoption of this service and targeting a 100% gpi ratio for Swift payments among banks will be crucial to enlarging the global reach of payments – slotting the final, trickiest piece of the payments puzzle into place.
