SWIFT Fights Trend Towards Fintech Alternatives With Launch Of GPI Cross-Border Payments Tracker

Whilst the world’s media obsess about Fintech and Blockchain technology, it’s easy to forget that SWIFT, The Society for Worldwide Interbank Financial Telecommunication to call it by its full name, still rules the financial messaging roost.

In fact, SWIFT has been the top dog for nearly 40 years – since it was first founded, in 1973 with the support of 239 banks in 15 different countries.

Today SWIFT connects more than 11,000 banking and securities institutions globally. It has customers in over 200 countries and territories. It sends more than 15 million messages every day – up from an average of 2.4 million messages in 1995.

Operating from its Belgium headquarters, SWIFT is currently the glue that the holds the financial world together.

Last week, SWIFT released a new cross-border payments tracker that complements its new payments innovation service, called SWIFT Global Payment Infrastructure (gpi), which it released at the beginning of this year.

The new Tracker service is described in a recent press release as “revolutionizing the industry by combining real-time payments tracking with the speed and certainty of same-day settlement for international payments.”

In many ways, this can be interpreted as fighting talk from SWIFT. The rise of blockchain, and other distributed ledger technologies (DLTs), is putting its position as the dominant financial messaging system under threat – by promising faster, more transparent, and decentralised technology that is far less prone to being hacked than SWIFT, which has famously been breached on several occasions over the past decade.

But SWIFT is still the dominant player in the market, by a stretch, and says that since it made its GPI service available at the beginning of the year, it has been adopted by “more than 20 global transaction banks – with another 50 in the implementation pipeline.”

It has also revealed that “hundreds of thousands of gpi have already been sent across more than 85 country corridors.”

Essentially SWIFT gpi does a lot of the things that get people excited about the blockchain. It can speed up the supply chain process and give corporate treasurers a real-time, end-to-end view of their payments with final confirmation when the funds hit the recipient’s account.

And there are other advantages, too. More accurate payment and invoice reconciliation, better liquidity, improved cash forecasting and significantly reduced exposure to FX risks, thanks to same day processing for funds within beneficiary time zones.

Finally, SWIFT’s open APIs mean that the service can be easily integrated into proprietary banking systems, which has led to widescale adoption – more than 110 transaction banks – who between them send more than 75% of all SWIFT cross-border payments messages – have now committed to SWIFT gpi.

It should also be remembered that when it comes to decentralisation, seen as a major blockchain plus point, SWIFT, a cooperative society under Belgian law, maintains its independence. It does not hold accounts for its members, and it does not perform clearing or settlement.

Christian Sarafidis, SWIFT’s Chief Marketing Officer, has said that “by taking advantage of the right technology, at the right time, with the right players behind us, SWIFT has successfully helped correspondent banking reach a significant milestone in its evolution”.

Again, it sounds like SWIFT are determined to bang the drum for their existing technology in the face of a significant threat to their current leading market position from emerging fintech technologies.

But interestingly, another quote, from Wim Raymaekers, hints at another strategy.

“This is only the beginning for SWIFT gpi”, Raymaekers comments. “We will continue to explore new technologies, such as blockchain, and deliver more value-added payment services further transforming the international payments landscape and, in doing so, accelerating global trade.”

Could this be a tacit admission that SWIFT, too, are looking to the blockchain?

A recent article in Finextra discusses the rivalry between SWIFT and one of the most advanced of the blockchain based payments systems, Ripple.

During this year’s SIBOS, SWIFT’s annual conference, which took place in Geneva, Ripple released a statement commenting “SWIFT’s GPI does not address the antiquated infrastructure that makes real-time settlement a constant challenge.”

“GPI does not change the underlying infrastructure at all, it merely makes a minor adjustment to its current settlement requirements.”

Ripple, and other platforms like R3, which recently raised $103m to fund the development of its Corda Enterprise DLT system, are signing up many of the world’s major banks, and completing testing at a rapid rate – although they too, are experiencing their own particular issues.

The Finextra article asks if SWIFT should have genuine concerns about being usurped by blockchain style replacement technologies, and outlines 3 likely scenarios:

1/ SWIFT is indeed usurped by blockchain style technologies, ending its 40 year reign as the world’s preferred financial messaging system, ushering in the brave new world of blockchain;
2/ SWIFT enters into a new collaboration with the likes of Ripple, R3 or Ethereum. If you can’t beat them, join them;
3/ SWIFT creates its own bespoke blockchain based service. It has the expertise, and the customer base.

Whichever scenario emerges as the most likely, it promises to be one of the biggest shake-ups of the finance system for a generation – and it will be fascinating to watch.