Place/Date: - July 10th, 2020 at 7:43 am UTC · 5 min read
“Cross-border payment system is undergoing large-scale transformation.”
This is the first sentence written by SWIFT (Society for Worldwide Interbank Financial Telecommunications) in the latest white paper of GPI (Global Payment Innovation Service). At the end of 2016, the first phase of the SWIFT GPI project was completed; in April 2017, DLT PoC (distributed ledger technology verification) was officially launched as a component of GPI, and SWIFT GPI launched blockchain technology; after that, SWIFT continuously updated the GPI system and DLT PoC technology incorporates blockchain technology in cross-border payment services.
SWIFT was founded in the 1970s. Its initial vision was to create a global financial messaging service and a universal language for international financial messaging. After the launch of the messaging service in 1997, SWIFT replaced the widely used Telex technology at that time. The original services provided mainly included messaging platforms, computer systems for verifying and routing messages. At the same time, the development of messaging standards enables people to jointly understand data across languages and system boundaries, and enables seamless, automatic transmission, reception, and processing of communication between users.
However, in recent years, due to the emergence of blockchain technology and the turbulence of the international trade situation, the steady development of SWIFT has been hindered. At the same time, SWIFT’s long arrival time has also been criticized. Forbes analyst Joseph Young once said in December 2018: The SWIFT system is now 45 years old, the efficiency has been very low, and international wire transfers also require 3-5 working days to settle, and if there is no document, it is impossible to send Large remittances, but digital currencies can handle large amounts of transactions more efficiently.
Let’s review SWIFT’s big moves in the past 3 years:
After 2019, SWIFT has been carrying out a series of innovations. In September last year, SWIFT CEO, Gottfried Leibbrandt, one of the 10 banking executives who led the vision of the Swift global payment plan, told the 8000 audience attending the Sibos conference, SWIFT GPI is considering the adoption of blockchain technology. Potential areas for improvement include a more transparent fee structure, and in some cases, it can even achieve near instant settlement times.
According to informed sources, SWIFT GPI (Global Payment Innovation)’s blockchain technology product SWIFT BPI (Blockchain Payment Innovation) has come out and has been tested on a small scale and is expected to be promoted globally in the near future.
It is currently known that more than 80 banks will promise to use SWIFT BPI (Blockchain Payment Innovation) as a new platform. If this plan is truly realized, I believe that with the empowerment of the blockchain, SWIFT’s global payment plan will shorten the completion time of the transaction from 5 days to 1 day, or even shorter, to the point of instant transactions.
SWIFT’s actions in this new project are relatively conservative to industry insiders. Because of the scale of SWIFT itself and its huge size, the impact of new products from launch to promotion will be very large, and even a major revolution in the entire cross-border payment and clearing industry will require great caution.
In fact, blockchain is not a new technology, but a new technology combination. The key technologies of the blockchain, including P2P dynamic networking, shared ledgers based on cryptography, consensus mechanism (Byzantine generals problem, that is, a consistency problem in a distributed scenario), smart contracts, and other technologies, are already 10 A few years old technology is old, but the blockchain skillfully combines these technologies, and on this basis, a perfect incentive mechanism is introduced to use economic principles to solve problems that traditional technologies cannot solve.
Will the new blockchain technology impact the original SWIFT business? We think this should be impossible, but it will be a new empowerment to SWIFT.
The development of things is always gradual, and even the evolution of biology evolves step by step. After all, it is the financial industry. This is the lifeblood of the global pillar. When a new technology emerges (such as a blockchain), the resulting Defining the region will cause SWIFT’s role to change, but it will not die out immediately. One day, real-time transactions between banks are possible. I believe that as a gatekeeper of a closed and highly regulated network, SWIFT’s role is still necessary.
In any case, blockchain empowers SWIFT will greatly optimize the international inter-bank payment system and benefit the world.