With the role of the middle man in financial services increasingly under threat from a host of new startups and technologies, international banking co-operative Swift has stepped in with a range of service level agreements intended to differentiate and improve the customer experience in correspondent banking by increasing the speed, transparency and predictability of cross-border payments.
Designed in collaboration with the industry, the initiative will initially focus on a business-to-business payments service supported by participating banks in early 2016. Under the programme, corporate users will be exposed to same day use of funds, transparency and predictability of fees, end-to-end payments tracking and richer payments information.
It will operate on the basis of ‘business rules’ captured in multilateral service level agreements (SLAs) between participating banks and will be open to all Swift member banks.
The initiative comes as correspondent banks the world over see their traditional roles eroded by a multitude of new real-time money transfer services and innovative technologies. Blockchain proponents like Ripple make no bones about their intentions to cut out the middle man in the creation of a frictionless payments network based around distributed ledger technology for both intra-bank and interbank transactions.
Gottfried Leibbrandt, CEO, Swift says: "Correspondent banking serves the industry with millions of secure cross-border payments day in, day out; with this initiative we are building on those strengths, enabling banks to provide distinctive cross-border payments services and providing real benefits to end customers. This is a critical step in cross-border payments innovation."
Following the pilot focused on cross-border payments for corporates, Swift says it will work together 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, liquidity and processing efficiency considerations involved in cross-border payments".
Swift has been stung into action by the emerging threat to its franchise posed by blockchain startups and collaborative initiatives such as the interoperable standards-setting effort under development by the R3 blockchain consortium.
Just today, Russia's Sberbank announced its intention to join the R3 coalition, which has already recruited 30 global banks to the fold:
Last week, Swift signalled a shift in strategy for its innovation unit Innotribe, narrowing its startup focus to emerging economies in order to re-engage with the industry as a force for driving collaboration around new utility-based services for member banks.
Wim Raymaekers, head of banking markets, Swift, adds: “We will continue to develop new and enhanced services, utilising Swift’s Innotribe initiative to further engage the fintech community and explore the application of innovations such as real time payment status tracking, the use of peer-to-peer messaging and blockchain technology.”