Paying it forward in a hyper-connected world

This article was originally published in the Autumn 2019 issue of The Record. Subscribe for FREE here to get the next issues delivered directly to your inbox.

Payments is a deceptively simple term in today’s data-driven world. The payments industry has seen unprecedented transformation, with new market entrants, new technologies and standards such as open banking creating a dynamic and increasingly competitive marketplace.

As the theme of Sibos 2019 – thriving in a hyper-connected world – suggested, this is about much more than the fast movement of money. It’s about agile, innovative and digitally enabled business that builds on rich, data-driven relationships with a vast range of users. And it’s about how financial firms can use a combination of technologies such as application programming interface (API), artificial intelligence (AI) and the immense computing power and scalability of the cloud, to enable a payments world without borders.

Member-owned cooperative SWIFT – the financial messaging services provider behind Sibos – is built on collaboration. Last year it joined forces with Microsoft to announce a cloud-native proof of concept to host SWIFT infrastructure and enable native payment transfers on Microsoft Azure. Together, the two companies are working to facilitate the future deployment of SWIFT messaging solutions in the cloud, enabling faster, more efficient and secure operations for banks, corporates, service bureaus, and other payments ecosystem players.

“At SWIFT, we are using technologies including APIs, cloud and AI to create a cross-border payments experience that is as fast and seamless as domestic systems in some countries,” says Craig Young, chief information officer at SWIFT. “This technology is helping us transform an existing system that already offers unprecedented security, resilience and universality, with dramatic speed, functionality and transparency.”

Constant experimentation with technologies, including distributed ledger technology, enables the organisation to lead the field in payments innovation. “Ultimately, in financial services, technology is an enabler,” says Young. “While APIs may not be that new in other sectors, for instance, their use in financial services is in its advent and bringing about great change in the industry. APIs afford easy connectivity and interchange, so we incorporate them; cloud computing enables many banks to use our services while limiting the investment, so we deploy it; virtualisation and containerisation allow for better resiliency and smoother deployments, so we use them. When newer technologies enable us to provide better solutions, we will develop and deploy them, too. And when we move forward, we will continue to ensure our community is able to move with us and embrace innovation cost efficiently.”

The data-driven relationships that are emerging hold great potential for organisations that can successfully leverage their data and make the best use of human and machine capabilities.

“The potential and need for data analytics in the financial industry has grown dramatically over the last decade – with an even greater impact forecast for the future,” says Young. “At SWIFT, we have the opportunity to generate more value out of the broader transaction data set we manage for both the improvement of our product development processes and to deliver better business intelligence services to our customers. Increased and better use of data, along with AI and machine learning tools, are already improving screening algorithms and reducing the number of false positives leading to higher rates of straight-through processing. As better data and more mature AI becomes available, manual intervention will naturally reduce even further. Another key issue is the need to solve the problem of missing or incorrect data – and SWIFT is leading on this, too, with its range of message validation tools.”

As the domestic payments industry has transformed, momentum has naturally carried over into the cross-border payments. “Instant payments technology in some domestic payment systems has driven global demand to be able to pay and be paid in real time, putting the obligation on us to meet these expectations when it comes to cross-border payments,” says Young. “Recently we have made huge strides with instant payments around the world by using our existing rails for cross-border payments to meet today’s need for speed, traceability and transparency.”

The innovation that has transformed domestic retail payments is already facilitating huge improvements in cross-border payments. By embracing the SWIFT gpi standard in global payments, for example, Young says that banks are now sending and receiving funds quickly and securely to anyone, anywhere in the world, with full transparency over where a payment is at any given moment. Over the next few years this momentum will significantly impact the cross-border payments experience.

“Translating these gains to cross-border payments is more challenging for a number of reasons,” says Young. “More than 200 jurisdictions and 180 different currencies globally means different challenges to overcome to make seamless cross-border payments a reality. Nevertheless, new technology and the demands of the global economy necessitate ever-faster, secure payments. All payments in the future will need to be instant, transparent, ubiquitous, and secure – account-to account, anywhere, at any time. With the help of new technology, we are creating a cross-border payments experience on par with the fastest domestic systems.”