Low cost correspondent Swift access
Swift has launched Correspondent Banking Suite, a solution targeting small to medium sized correspondent banks that are seeking cost-effective access to the Swift network.
Such banks are under pressure to minimise operational costs while keeping their Swift infrastructure current in terms of technology and security. Additionally, regulatory requirements and cyber security challenges make it crucial for banks to have in-depth knowledge of their correspondents.
The Suite gives banks direct, cost-effective access to the Swift network via Alliance Lite2, which is a standardised, cloud-based interface managed and operated by Swift.
Sophie Racquet, head of cloud services at Swift, says different organisations had different connectivity needs. “Small to medium sized banks that engage in correspondent banking face a unique challenge. They must reduce their operational burden without compromising on security while navigating the complexities of dealing with multiple institutions.”
On Monday (16 October), Sibos delegates heard that correspondent banks must streamline, adopt new technology and change if they are to survive. “The Tesla car has 18 moving parts, whereas the internal combustion engine has more than 2000,” says Nigel Dobson, general manger, wholesale digital transformation at ANZ, as he made an analogy between the automotive industry’s migration to electric vehicles and the correspondent banking world.
The threat of non-bank players disintermediating banks, such as has happened with the rise of Alipay and Tencent’s WeChat Pay in China, should not be discounted, especially on the consumer side of the business, warned Dobson.
Christian Westerhaus, head of clearing products, Deutsche Bank, global transaction banking (GTB) cash management, argues for a more “hybrid model” in the future, adding that Swift’s global payments innovation (gpi) project “is live now and can already provide benefits”.
However, Emma Loftus, head of global payments, FX and channels at JP Morgan, said there was still a need “to get as many banks as possible into the ecosystem” and to make gpi tracking codes as widespread as possible, “although the intention is there.”
The transparency benefits of gpi, plus better speed and traceability for cross-border payments, were mentioned approvingly by Javier Orejas, banking manager, EMEA at the International Air Transport Association, which processes $360 billion on behalf of its 260 members.
Other pain points for corporate treasurers, says Orejas, included cyber security and standards. These need to be become more widespread if integrating the benefits of the gpi, instant payment schemes and other banking initiatives around the world into treasuries’ enterprise resource planning systems, is to be made easier.
“Banks need to match new tech players if they want to survive,” concludes Orejas, adding that “corporates’ need for faster, quicker, cheaper cross-border payments was plain”. Whether the correspondent banking model is the best way of doing this must be up for debate.
Separately, BNY Mellon has published research into the impact of emerging technology on the correspondent banking model. Increased regulation, competition, and the coming age of millennials and their higher levels of technology understanding and expectations are helping to drive innovation and change in the bank payment space that we have not seen for decades, the report found.
Among the findings are that little more than one-quarter of respondents agreed that blockchain technology would substantially change the global payments experience. Nearly 60% of respondents said it was “too early to tell” if peer to peer system interaction, through the use of APIs, would bring a fundamental shift in the interbank correspondent model
A quarter of respondents felt compliance screening was the largest impediment to straight-through processing (STP) success. Twenty-per cent viewed payment formatting errors as the second greatest impediment.
Enhanced analytics and business intelligence were viewed by respondents as the number one factor in their ability to improve their end clients’ payments experience.
By Neil Ainger, reporter, Daily News at Sibos
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