- Key insights: Swift is pushing a new framework that will standardize the customer experience for retail cross-border transactions.
- What’s at stake: Swift’s dominance in cross-border payments is being tested as new instant rails such as Visa Direct, Mastercard Move and stablecoins become more popular.
- Forward look: More than 25 banks have committed to using the framework by June.
As new instant payment rails such as Visa Direct, Mastercard Move and stablecoins gain in popularity, Swift is improving standards for retail cross-border payments.
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The messaging network, along with more than two-dozen banks, is pushing a new framework that attempts to match the consumer experience for domestic payments.
“Retail customers are used to a certain experience domestically, and in most markets, domestic payments are quite good,” Nasi Ahmed, head of payments scheme at Swift, told American Banker. “Customers get full visibility and predictability of what to expect from a payment, and that quite hasn’t translated to international cross-border payments. That’s really what we’re trying to address as a community.”
The idea is to make cross-border payments more predictable and transparent. For sending banks, that means showing the customer the upfront cost, the foreign exchange rate and the estimated processing time for the payment. It also means providing a tracker so the customer can see the status of the payment.
Receiving banks are expected to credit the receiving customer near instantly — so long as the local market infrastructure allows it — make sure there are no hidden deductions, and update the tracker so the sending customer can see when the payment has been completed.
“Standardizing [these practices] across the globe is quite complex, because different markets operate differently, and different banks operate differently,” Ahmed said. Swift operates in more than 200 countries and has more than 11,000 financial institutions on its network.
More than 25 banks across 11 different cross-border payment corridors have committed to processing payments under the framework by June. About 50 banks have committed to using the framework by the end of the year. Swift first said that it was developing a new framework for retail cross-border payments in September last year as part of the
“That number is growing because I think it resonates with the banks and other regulated financial institutions that this is no longer something that’s optional,” Ahmed said. “This is something that absolutely has to happen.”
The correspondent banking system and other traditional cross-border payment companies such as
“Swift is fighting for their lives to a large extent because their margins are definitively at risk,” Tony DeSanctis, a senior director at Cornerstone Advisors, told American Banker. “The only thing they can do to stay relevant is create a seamless experience that’s better than the alternatives. Everybody has Visa and Mastercard capabilities [and] acceptance.”
And while Swift’s primary goal is to make these standards ubiquitous with all of the financial institutions on its network, Ahmed can imagine a world where retail cross-border payment volume gets a boost.
“If traditional rails and the traditional way of sending money through this framework becomes better then, yeah, I can foresee that there would be more flows that come in,” he said.