The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has been the backbone of global finance for the last few decades.
However, that dominance is being challenged by blockchain and other innovative financial technologies which provide a cheaper and faster means of transferring money appear across the world.
SWIFT is not taking the challenge lying down though and is coming up with a new system that will challenge the competition.
SWIFT has announced that it is trialing a new payment system aimed at competing with new technologies. Called the Global Payment Initiative (GPI), it aims to be the new backbone of a money- transfer service that connects the current SWIFT network. The system already has 10,000 banks signed up which will give it a significant advantage over the competition.
The latest test for GPI was a transfer test between four different countries. Transfers from Australia, China, Singapore, and Thailand were done and instant cross-border payments were made possible. GPI is designed to identify and eliminate errors and omissions in bank transfer info. If successful, SWIFT thinks that it will make current bank transfers a lot cheaper and faster.
Taking On The Competition
SWIFT’s move to develop a new iteration of its technology is in response to the various threats appearing on the financial landscape. Bitcoin and its blockchain technology first presented a challenge to SWIFT by allowing people to transfer value internationally in a quick and affordable manner. However, its main failing was that it was not integrated into the current banking system.
New technologies are eliminating this failing though. For example, there is the JP Morgan project in the works. Called the Interbank Information Network (IIN), it has already been launched and has now has 130 member banks. This includes some well-known names like Societe Generale and Santander.
The main thrust of IIN is to eliminate friction in the transfer process. This means streamlining everything so that fewer steps need to be taken, reducing both transfer time and expense. This is done by sharing the transaction info on a mutually-distributed ledger similar to Bitcoin.
GPI is moving in another direction though. It uses application programming interfaces (APIs) to allow banks to access information before the actual transaction, making approvals quicker and easier.
In a statement, SWIFT said
“Fully integrated with GPI payments, the service will facilitate real-time dynamic bank-to-bank interaction using APIs to improve the predictability and efficiency of international payments and look at using predictive analytics. It will later be complemented with a post-payment investigation and reconciliation service that will allow for fast resolution of the remaining factors, typically arising from compliance or regulatory requirements, which can slow down the payments process.”
GPI is set to begin operations in 2019 with 19 banks listed for the initial roll-out.
