Tuesday, 21 May 2024

SWIFT's Moon: "Instant payments - the heart of the payments landscape"

5 min read

By Michael Moon

The approach to cross-border payments should be one that is holistic, utilising financial rails that are ubiquitous, free of friction, fast, standardised and supported by the industry globally.

Much of the focus in 2018 was on the emerging possibilities in the world of cross-border payments. As we enter 2019, the conversation has shifted towards how companies can capitalise on cross-border payments to grow their businesses.

We know that the approach to cross-border payments should be one that is holistic, utilising financial rails that are ubiquitous, free of friction, fast, standardised and supported by the industry globally. This knowledge will translate into major initiatives that include instant or real-time cross-border payment services across the region. Such services will help the industry remain compliant and secure through innovative fraud management tools while driving operational efficiencies via new payment standards.

While the concept of instant payments is not new, underlying business process frictions prevent the industry from fully realising it. These impediments need to first be addressed before payment processes can be optimised and its visibility maximised. A number of instant cross-border payment systems such as SWIFT gpi, have been launched to address these frictions, and this is a trend that is set to continue globally.

Since its 2017 launch, SWIFT gpi has gained the support of over 300 financial institutions, including the world’s 60 biggest banks. It is now being used to send hundreds of billions in payments every day, many of which are made within minutes or even seconds, and accounts for 55% of SWIFT’s cross-border traffic.

In addition, the introduction of new schemes will see the increased linkage of cross-border services with domestic real-time networks across the Asia Pacific region. In the case of SWIFT gpi, a proof-of-concept completed in October 2018 demonstrates that enabling gpi in real-time domestic systems allows payments to be effected almost instantly, even when they involve domestic settlement and non-gpi banks. The fastest SWIFT gpi payment in the trial was sent from China, reaching the end beneficiary account in Australia via NPP in 18 seconds.

Increasing disruption to the status quo

The proliferation of instant payments has led to new emphasis on cyber intrusion. These attacks are falling into two general areas - sending high value fraudulent payments in less mature countries and ‘softer target’ financial institutions; and targeting customer data for ransom. Along with this, there is a shift in the pattern that attacks are taking place in. Hackers are starting to collaborate with one another, and attacks are happening more frequently during operating hours, and in lower values, in a bid to avoid detection.

Be compliant and secure

The industry has responded to these changes with the introduction of intelligent anti-fraud services that allow payments to be as compliant and secure as possible. This is a move that will continue well into 2019.

One such service is SWIFT’s Payment Controls, an in-network solution that helps payment operations teams mitigate fraud risk in real-time through its unique alerting and reporting capabilities. The service may be set to flag, hold, release or reject high-risk or uncharacteristic payments in real-time, according to business needs. On top of that, SWIFT’s Stop and Recall function for gpi enables banks to immediately stop and recall a payment anywhere in the chain, providing another barrier against fraud.

Building a collaborative environment

Despite measures, fraudsters continue to look for new ways to attack. Information-sharing throughout the community will be more important than ever in the new year and the industry will band together in 2019 to fight against these threats.

For example, first adopter banks of Regtech in the region are now openly sharing the output from various sandbox testing and internal Regtech and Fintech partnerships, and we will see more of this in 2019 as the incremental adoption of regtech becomes more aggressive and the gains far more exciting.

SWIFT’s Customer Security Program (CSP) enhances SWIFT-related tools for customers and provides a customer security control framework, while also sharing best practices for fraud detection and enhancing support by third party providers.

A harmonised approach
Information about a payment is viewed as being as vital as the payment itself and we can expect a growing adoption of ISO 20022, a messaging standard that offers richer data and creates a universal language for financial messages. Its adoption across both domestic payment systems as well as cross-border payment networks will let financial institutions analyse the data they gather to create efficiencies within a bank’s operations, and give rise to more accurate compliance processes and better straight-through processing (STP), for an improved banking experience.

Keywords: Regtech, Fintech
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