Making real-time cross-border payments a reality
Harry Newman, Head of Banking at SWIFT, sat down with Joy Macknight from The Banker at Sibos 2019 to discuss the drivers behind real-time cross-border payments, and how the SWIFT community is moving to make them a reality.
The Banker: What is really driving the move to real-time payments across the world?
Harry Newman: It is just the way we live. Today we live in a digital age. We have instant gratification of everything – and payments have to go the same way. We have had real-time payments for some years in domestic environments and they are now taking-off pretty much everywhere. We just see that as a trend that is going to go on and on.
If people experience real-time payments in their private lives, they’re going to want them in their business lives as well. So, the treasurer of a company, for example: If they are at home they can order on a website and pay in real time and receive goods in real time – or pay a bill in real time. They are then going to expect the same in their corporate life. We have seen that trend take place; we’ve seen perhaps sixty different countries develop real-time payment systems. That will just keep growing and growing around the world until every jurisdiction has its own real-time payments infrastructure.
TB: What challenges does this pose for the banks?
HN: Banks have to reinvent and work in real-time as well because it’s not just real-time, it’s a pressure to move to ‘all-time’, to 24/7. The flow might go up and down a bit but, ultimately, payments will flow that way and they will just keep moving because, at some point, somebody is trying to make a payment. We have to adapt and move with the demands of the customer base.
TB: Most of these real-time payments systems are domestic. What are the challenges of doing this cross-border?
HN: With cross-border, things are obviously a bit more complicated because you have to cope with the different jurisdictions; you have to cope with the different rules that apply in each country. Because each country develops its own system to meet its own requirements, that’s normal, that’s logical. But internationally, you have to cope with that and then you have to cope with the different compliance regimes that apply – because international payments are placed under tighter regulation than domestic ones – and understandably.
TB: You have done a pilot recently to link SWIFT gpi with domestic market infrastructures to enable instant payments across these corridors. Can you tell me a little bit about that and also about the benefits of it and how it is progressing?
HN: We have done three trials so far. We have done proofs of concept with Australia, with Singapore, and with Europe with TARGET Instant Payment Settlement (TIPS) – the ECB’s instant payment solution. In every case, what we find is that by bringing together gpi internationally, combined with the local real-time payments system, we can have an end-to-end payment in seconds to the end beneficiary.
In today’s world, people talk about bank-to-bank speed – that is really not as interesting. What matters more is when does the client get their money and when can they spend it. So, in all three cases, we find that we can have an integration between the international space and the domestic real-time space, which is able to credit the client during the night, in real time, and it is also done through banks of course – because it provides a solution that banks can now start to market to their clients. So, all three are great and we’re looking forward to a new future.
TB: How do you envision the future of cross-border payments?
HN: Through our gpi instant payments service, we have created a central capability and we are inviting all real-time payment systems in the world to come with us on a journey. We envision a partnership between SWIFT and the local system to provide real-time, end-to-end system payments. That is the future and we know that now is the time we can do it. We have done the proofs of concept and we are happy to work on more of those with all the jurisdictions to make it happen. Really though, now is the time we can build it and we are ready to go.
To find out more about instant cross-border payments, read Harry’s thoughts in a new article published by The Banker: Making cross-border payments seamless, convenient and fast.