TDB: Given the recent tie-up with Visa on B2B transactions, how is Swift looking to address continued fragmentation and friction in global payments transactions despite the launch of new payment rails and greater cross-border interoperability?
Shirish Wadivkar, Global Head, Wholesale Payments & Trade Strategy: The growing number of networks, platforms and applications will offer new opportunities for our clients, enabling them to offer new applications, uncover new revenue streams and broaden their reach. We envision that the financial services industry will be multi-partnered, multi-networked and carry multi-solutions.
As a response to this clear trend, we are offering our member banks an option to connect to third-party networks, ones relevant for them and their clients. This allows institutions to reuse their existing technology, operational processes and infrastructure to connect to multiple networks at once. Not only will this save time and money, but it will also result in more options for end customers in how they want to pay, be paid, buy and sell assets, or just exchange information across networks.
Visa will deploy capabilities developed by Swift that can help increase the speed and certainty of cross-border money movement. This includes Swift Payment Pre-validation to enable upfront checks of Visa B2B Connect payments, reducing unnecessary delays by catching potential errors before the payment is initiated.
With so many choices for sending international payments, considerations like data integrity, end-to-end transparency and traceability are becoming essential to the industry as a whole – and Swift plays a valuable role in delivering data services and payment tracking to tie the whole ecosystem together.
These efforts would advance the goals of both organisations to keep the world’s financial infrastructure connected with the right levels of security, resiliency, reliability, and compliance – to accelerate seamless borderless payments.
TDB: Payments has become an extremely technology-dependent business. How is Swift seeking to leverage next-gen solutions in elevating payments modernisation particularly for financial institutions in emerging and frontier markets?
Shirish Wadivkar: Payment networks and service providers will benefit from interoperating with us to scale their businesses and to take advantage of Swift’s capabilities like payment tracking, cloud connectivity and pre-validation, which will enhance the delivery of solutions and products – this is how we help widen choice, access and innovative client experiences.
As we are able to orchestrate transactions from end-to-end, full transaction data is maintained, alongside its integrity. For example, the introduction of ISO 20022 as the common language for payments worldwide, will now enable improved quality and richness of data in both domestic and cross-border payments, which in turns will boost operational efficiencies, and improve straight-through processing rates.
It is essential for the community to not only use such services, but also ISO 20022 as the standard of the finance ecosystem of the future, to tie the whole ecosystem together. In order to help the community reap the full benefits of ISO 20022, we are also continually working to monitor data quality and incentivise the use of structured and rich data.
TDB: The threat landscape continues to evolve as new payment methods and channels are introduced to facilitate cross-border transactions. What do you believe are the most significant risk factors for the industry today and how is Swift supporting its partners in overcoming them?
Shirish Wadivkar: Today, we see three key areas for continued focus in the payments industry: cybersecurity, network resilience and fraud. In addition, the industry is also focused on managing the risks related to the adoption of new technologies and changing regulations across different jurisdictions.
The effectiveness of real-time payments relies significantly on a bank’s ecosystem. An ideal scenario involves a clean ecosystem with comprehensive and accurately formatted payment data. Likewise, downstream compliance processes, such as sanctions screening and transaction monitoring, require precise payment message information for effectiveness.
With Swift Payment Controls (PCS), banks are able to detect anomalies that can be indicative of fraud affecting their institution, customers, or counterparties. Alerting and blocking takes place in real time, so banks can intercept suspicious messages before they are released, preventing financial loss and reputational damage. PCS is hosted on Swift’s secure platform and screens messages “in flight”.
We are working further on anomaly detection offerings to enhance their efficacy by deploying AI driven enhancements and better tools to help detect, and mitigate fraud.
In another bid to prevent errors and frauds in cross-border transactions, we have also launched Swift’s Payment Pre-validation to enable banks to verify payee account details before an international payment is sent. By embedding such data-rich services, we’re able to help financial institutions enhance customer experience, prevent rework and fraud. This API-based solution removes millions of costs to the industry around failed transactions whilst improving the cross-border experience for end customers.
AI and ML technology have the ability to quickly analyse millions of data sets and build accurate predictive models that enhance decision making. This capability is critical as financial crimes evolves. We are developing a state-of-the-art AI platform to help make existing tools more powerful and enable the creation of new ones; and at scale.
TDB: Please give us an update on Swift’s Central Bank Digital Currency (CBDC) interoperability initiative, specifically its CBDC connector solution, and what potential value and use-cases have been identified that will unlock CBDC innovation?
Shirish Wadivkar: Interest in CBDCs continues to gain momentum. While the global CBDC ecosystem risks becoming fragmented, with digital currencies developed based on different technologies, standards and protocols; we at Swift are focusing on interoperability and interlinking between different CBDCs and existing payment systems. This is also in line with our strategy explained earlier, allowing our clients to re-use the Swift infrastructure, standards, identity and security to connect to proposed CBDC Networks or connect such networks to fiat payments and digital asset trades.
In 2022, we developed a solution to enable CBDCs to move between DLT-based and fiat-based systems using existing financial infrastructure.
In March 2023, we tested our CBDC connector solution in a sandbox environment, and 18 participants have already expressed strong support for the solution’s continued development, noting it enabled seamless exchange of CBDCs, even those built on different platforms. This has expanded to more than 30 leading institutions involved, with participants exploring additional trigger-based payments for digital trade platforms, foreign exchange models, etc.
Similarly in September 2023, we have also announced that three central banks are integrating our solution with their own infrastructure for direct testing.
Moving forward, we remain committed to continuing innovation and collaboration within our community. We’ll continue to develop practical solutions that resonate with our strategic focus on facilitating instant, frictionless, and interoperable cross-border transactions for all forms of value.
