An interesting Finextra posting covers the topic of a recent announcement by SWIFT that indicates a strategic global initiative to become a connector of accounts for all payment types, domestic and international.
The bank-owned cooperative was set up in the 1970s to provide an international network delivering payment messages between banking institutions to facilitate high value funds transfers on behalf of corporate entities. The author, a CGI executive, suggests that the new direction is an ambitious strategic initiative that takes on card networks.
‘SWIFT have decided to take on the global card players, VISA and Mastercard, and have thrown their hats into the ring to become the global connector for account to account (A2A) payments…For the first time they have declared their intention not only to strengthen their relationship with institutions and large corporations, but also to move into the SME and customer payments space. This changes the dynamic of the SWIFT network, adding transaction volume in place of value as they include low value, relatively mundane payments alongside high value, systemically-important payments.’
While we are aware of the SWIFT migration to ISO 20022 for cross border payments (which has been delayed now by a year to 2022), and how that sets up for interconnectivity between various domestic real-time payments systems, the move to lower value use cases is indeed interesting.
As the author points out, cards networks are truly global. They have also put into place important strategic initiatives to expand into B2B use cases using push to account solution across their rails domestically and internationally.
However, the card messaging is not adherent to the more or less de-facto standard of ISO 20022, which is gradually being adopted as part of the global move towards real-time payments. The networks are moving in that direction as well (think Vocalink, Visa B2B Connect), but it is unclear how it fits into the cards rails at this point.
‘You can see why the banks are so keen to keep control of this global integration. In almost all programs to roll out instant payments schemes, the banks have had to invest heavily in their development and yet the solutions have led to a drop in revenue, both from cash pooling and transaction fees. Therefore, it is important to grab control of the international integration, where no doubt transaction fees can be reintroduced, along with currency conversion, etc. …There are some big bets being placed in the payments market, and it makes sense for SWIFT play their cards (no pun intended). The real question I have, however, is “is it too late”? Will the cards schemes create traction in this market before SWIFT can realize their vision? Has the global pandemic of slowed the globalization down sufficiently for SWIFT to catch up?
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group