Under the shadow of the pandemic, SWIFT has embarked on a revamp of its underlying technological infrastructure, which may be reliable, trusted and relatively secure, but is no longer fit for purpose in a highly interconnected and sped up world.
When CEO Javier Pérez-Tasso described SWIFT as a “grown-up fintech” in the opening keynote of October’s virtual Sibos conference, it might have surprised some participants to hear the almost 50-year-old financial messaging network described in a way normally reserved for financial software start-ups that emerged after the 2008 global financial crisis.
But it seems the Covid-19 pandemic is forcing most companies—even a 47-year-old banking co-operative—to reinvent themselves.
Under the shadow of the pandemic, SWIFT has embarked on a revamp of its underlying technological infrastructure, which may be reliable, trusted and relatively secure, but is no longer fit for purpose in a highly interconnected and sped up world.
Data today is the new currency and financial services are contextualized within “super apps” like WeChat and Facebook’s Novi digital wallet, that consumers can use every day on their smart devices. In his keynote, Pérez-Tasso talked about a new instant global network that carves a niche for itself in this new world by offering instantaneous settlement of cross-border payments and securities transactions.
While this is a far cry from what exists today, one has to wonder why it took a global pandemic for SWIFT to prioritize “instant and frictionless” transactions. Treasurers have been asking for this kind of service for decades—and particularly the reconciliation aspect, since historically, SWIFT messages haven’t carried enough information for treasury professionals to to quickly and easily reconcile a payment with an invoice.
Blockchain and distributed ledger technologies are already giving us instantaneous settlement of cross-border payments, and it’s doubtful that SWIFT’s gpi (Global Payments Innovation) would exist if it weren’t for solutions like Ripple, which adapted design elements from blockchain and cryptocurrencies to settle cross-border transactions in seconds. Pérez-Tasso is hoping that SWIFT can stop playing catch-up and that some of the agility and innovation normally ascribed to fintechs rubs off on his organization.
While he made no reference to blockchain or distributed ledger as the underlying technology for SWIFT’s new instantaneous network, SWIFT has opened up gpi to blockchain platforms and banks continue to get their hands dirty with distributed-ledger technologies, but Jamie Dimon, CEO of J.P. Morgan Chase, described blockchain as “a very complicated technology that has to be rolled out by use case.”
What has him and most large U.S. banks running scared is not blockchain, however, but providers like PayPal, which is now bigger—at a market cap exceeding $209 billion—than most Wall Street firms with the exception of J.P. Morgan.
“If you look at a lot of [PayPal’s, Alipay’s and Tencent’s] products and services they’re not cheaper, safer or better,” said Dimon. But banks can learn from these companies, he argued, by not torturing their customers with so much administration and by delivering services more quickly.
The cloud and APIs can help legacy banks and financial messaging networks transition rapidly to a highly digitized and automated world.
“Maybe 20% of our stuff is on the cloud; we need to get it all there,” said Dim on.
This year’s Sibos is about more than technological innovation, however. The technologies already exist to help banks transition to this new virtual world, but the theme throughout this year’s Sibos is implementing technology in a smart, responsible and inclusive way.
Can banks build a financial system that works for everyone and not just a select few? For that to happen, they need to reflect society at large. Their hiring policies need to promote diversity and inclusion if they are to help promote the kind of economic growth that will enable them to rebuild after the pandemic has passed.
