By
Chimamanda U. Martha
April 18th, 2024
From SWIFT they said that banks now know they cannot stand still. They need to adapt their own systems to support them. Only a seamless and open global value transfer system can enable that.
Just one week later after Facebook, together with its partners, announced they were going “all blockchain” for payments, SWIFT has released a new paper “Payments: Looking into the future”. Its CEO Gottfried Leibbrant and CMO Luc Meurant confirm in the paper that SWIFT will be using blockchain pending a successful proof of concept with R3, and is expecting a more open model of financial services and apps within the banking ecosystem.
GPI (Global Payments Innovation) is SWIFT’s answer to all the dust blockchain has kicked up in recent years. It’s a roadmap that SWIFT foresees leading to its ultimate goal: instant, global 24/7 payments from any bank account to any other bank account. It is also confirmed that blockchain (distributed ledger technology – DLT) is going to be at its core.
From the company they said:
“Importantly, we don’t think that cross-border payments challenges should be solved for with closed loop systems. Doing so would easily solve for a subset – or multiple subsets – of participants, but value needs to move everywhere – from every account, to every account. Loops create barriers and friction; they reduce fungibility and portability, they limit competition and they fragment liquidity.”
SWIFT and its community-created GPI setting three key foundation stones. First comes the introduction of a humble tag – a unique transaction identifier which accompanies every payment throughout its trajectory. Second is a tracker which follows these payments along their trajectory and reports back on their status, and third is configuring new cross-border convention under which banks commit to process payments from ordering customer right through to end beneficiary within tight timeframes visible to their clients.
More than 55% of SWIFT cross-border payments are already being made through GPI, moving more than 40 trillion US dollars’ worth of payments across borders.
Let’s not also forget that last week MoneyGram announced that they’ve agreed to a deal with blockchain company Ripple that involves an investment of up to $50 million. MoneyGram will use Ripple’s XRP technology to handle cross-border transfers of digital funds for at least two years under the deal. Since that happens it is natural that Western Union and Swift had to make some new moves.
From Swift, they predict that in two years, every cross-border payment will be a GPI payment. The truth is, having third parties who simply move money through other third parties was never going to be a sustainable product.
Last month, a group of banks in Europe started instant GPI cross-border payments through the TARGET instant payment settlement platform (TIPS). The company teamed with the European Central Bank to boost the reach of cross-border payments into Europe through TIPS. As part of that push, the bank settlements will allow for instant credits to accounts.
As SWIFT said – “it’s do or die.”