Data services: Swift

One of the most pressing current issues facing policy-makers and banks is the need to make global payments faster, more efficient and more secure. Global payments are still restricted by the need to flow through long chains of correspondent banks, passing money laundering checks of varying lengths along the way. Many cross-border payment times are still measured in days.

The situation is starting to change, however. Swift gpi – global payments innovation – is speeding up cross-border fund transfers through common standards and enhanced transparency. The global payments messaging service demonstrated it could complete a cross-border payment in just 13 seconds during a trial in 2019. Much depends on the quality of national infrastructure and its opening hours, but the improvement has still been dramatic.

Aside from solid national infrastructure, a critical element of making cross-border payments faster and more reliable is good data. Alongside a push to overhaul cyber security worldwide, Swift has been working hard to develop a business intelligence tool to help banks improve their own systems and streamline their payment chains.

The resulting system, known as gpi Observer Analytics, gives participants in Swift gpi a much clearer picture of how payments are travelling through the correspondent network. “Financial institutions want to have as much information as possible to help them optimise their payment flows along the most efficient corridors,” says Astrid Thorsen, head of business intelligence at Swift. “Observer Analytics meets this need by providing users with end-to-end transparency on their transactions.”

For the first time, banks are able to track a payment through every stage of its journey from origination to settlement. Swift gpi customers see how quickly a payment is flowing through the global network, allowing them to identify potential bottlenecks and helping to optimise costs and revenue. By shedding light on which ‘rails’ work quickest, it is also encouraging banks to up their own game.

“The new Swift gpi Observer Analytics tool provides valuable insights into our cross-border gpi payment flows and market share,” says Graham Standfield, senior manager for product development at National Australia Bank. “The Observer Analytics data will allow NAB to enhance the international payments experience for our customers through improved payment delivery management with our banking partners.”

The new Swift gpi Observer Analytics tool provides valuable insights into our cross-border gpi payment flows and market share

Graham Standfield, National Australia Bank

Accessed via a web browser, the system highlights direct and indirect correspondents, and can show which payment route is likely to be fastest when sending a payment to a particular country or bank. Users can initiate gpi flows with new correspondents and new currencies, and track the adoption of gpi among other participants in the payment network.

“It is an eye-opener,” says Thorsen. “In the past, there was limited visibility – and you didn’t know what would happen when you sent a payment.”

Banks can also benchmark themselves against their peers and pass the information on to their customers. The system will gain an application programming interface (API) over the course of 2020, allowing firms to integrate it with their back-office functions.

“The Observer Analytics tool has been very useful in analysing JP Morgan’s Swift gpi performance against industry standards,” says Ron McClain, global head of US dollar clearing at JP Morgan. “The ability to drill down into the level of granularity available in the tool is useful, given our scale.”

Observer Analytics went live in October 2018, after a trial with 17 banks. Thorsen notes others have tried to develop their own systems, but doing so proved more complex than anticipated. Swift’s position at the heart of the payment system helped it crack the formula.

Swift is looking to find new ways to harness the data in future. Among several workstreams, it is investigating a means of allowing corporates to track incoming payments, which should help them improve their liquidity management. Swift is also developing a ‘stop and recall’ service, in case payments need to be reversed in a hurry, which could help tackle financial crime – and simply avoid costly cases of human error.

Thorsen says new opportunities will be created as customers increasingly use the gpi service: “We want to move from being descriptive to allowing banks to do some diagnostics on what is happening. We want to allow banks to always be in simulation mode, testing ‘what if’ scenarios to optimise the experience they offer to their customers.”

The global economy is increasingly driven by data, and payments generate some of the most valuable insights on offer. Swift has shown it can harness that information in ways that are likely to prove greatly beneficial to banks and their customers in the years ahead.

The Central Banking Awards were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Rachael King, Victor Mendez-Barreira, Alice Shen and William Towning