Banks are no different to other large organizations; they often only react to events when they have to. To be fair, this is not always true, but it is particularly true in cross-border payments where they have seen the emergence of new alternative payment systems and services, see AribaPay for latest example. There have been several honorable exceptions, but from the banks collectively there have been no meaningful improvements (for corporates at least) until SWIFT’s global payments innovation initiative. 

Global payments innovation initiative 

The vision of the global payments innovation initiative is to enhance cross-border transactions by leveraging SWIFT’s proven messaging platform and global reach. Together with the industry, SWIFT has created a new service level agreement (SLA) rule book, providing an opportunity for smart collaboration between banks.

Ten years ago this would have been unimaginable: 45 cash management banks* world-wide signing up to a new service level agreement rulebook for cross-border payments which states that there will be:

• Same day availability of funds:  Cross-border payments will appear in the seller’s account the same day the transaction is processed.
• Transparency and predictability of fees: There will be full transparency of the fee structure, with no hidden fees. The amount transferred to the seller’s account will be known and be reconciled right away.
• End-to-end payments tracking: Banks will send back a confirmation to the buyer that the seller’s account has been credited, leading to less friction between buyers and sellers.
• Transfer of rich payment information: Extended remittance information will be transferred unaltered to the receiver, facilitating reconciliation of payments and invoices. (Initially this will be a guaranteed 140 characters.)

If the banks and SWIFT can deliver this level of service, then they really will dramatically improve the customer experience in cross-border payments. 

In the longest Press Release ever, the 45 banks that have signed up for the global payments innovation initiative, all gave detailed comments on their support. One memorable comment was from Susanne Prager, Head of Cash Management, Raiffeisen Bank International, which says it all: “A much needed step to revolutionize the banking industry. The global payments innovation initiative will take cross-border payments to a new level.” 

Pilots in 2016 and live roll-out in 2017

The pilot of the new initiative will start from early 2016. Banks will test the new service for business-to-business payments initially, aiming to have first results by SIBOS. The service will go live after validation of the pilot phase. 

Future development

SWIFT and the banks readily acknowledge that more is needed and that this is just the first step. Following the corporate cross-border payments pilot programme, SWIFT aims to incorporate additional innovations and deploy new technologies to its global payments innovation initiative. SWIFT will work with the industry to define additional service level agreements that will cater for other client groups, further reducing the costs and frictions arising from compliance and processing efficiency considerations involved in cross-border payments. Stanley Wachs, Global Head of Bank Engagement at SWIFT, who is driving the promotion of innovation in global payments to banks, believes that, “With the end-customer at the center of our value proposition, the global payments innovation initiative will dramatically improve the cross-border payments experience”.  

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The banks that have signed up so far for the initiative are: ABN AMRO Bank, ANZ Banking Group, Banco Bilbao Vizcaya Argentaria, Bank of America Merrill Lynch, Bank of China, Bank of New York Mellon, Bank of Tokyo-Mitsubishi UFJ, Banco Santander, Barclays, BNP Paribas, Citibank, Commerzbank, Credit Suisse, Danske Bank, DBS Bank, Deutsche Bank, Ecobank, FirstRand Bank, HSBC, Industrial and Commercial Bank of China, ING Bank, Intesa Sanpaolo, JPMorgan Chase, KBC Bank, KEB Hana Bank, Lloyds Banking Group, Maybank, Mizuho Bank, National Australia Bank, Natixis, Nordea Bank, Oversea-Chinese Banking Corporation, Raiffeisen Bank International, RBC Royal Bank, Royal Bank of Scotland, Sberbank, SEB, Société Générale, Standard Chartered, Sumitomo Mitsui Banking Corporation, TD Bank, UBS, UniCredit, United Overseas Bank and Wells Fargo.

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CTMfile take: SWIFT have had the messages and the infrastructure to support such an initiative for many years, now the collective will from the banks is finally present. But devil is in the detail. This new rule book tears up cross-border payment practices that have been around for decades, e.g. receiving banks adding their own charges, and also many banks will require system changes. The cash management banks are going to have to drive this programme insisting every global payments innovation initiative member bank does it. Similarly, multi-national corporations will need to encourage all their banks and suppliers to adopt these new practices. Maybe attendance at this year’s SIBOS in Geneva to lobby the banks will be essential?