Swift is putting its digital payment tracking to work, attracting partners to help it counter the fintechs that hope to steal some of Swift's turf in international business payments.
Swift this week launched collaborations with Visa and digital payment company Wise, with both companies using Swift to add speed and visibility to cross-border payments.
The new Swift partnerships come at almost the same time as U.K. fintech
Both Wise and Visa will use
As small banks add more countries to their cross-border payment networks, the expense can add up, according to Steve Naudé, managing director of the Wise platform, which pools resources across its network to enable multiple banks to process payments in different countries.
Financial institutions can route Swift payment messages to the Wise platform, which performs correspondent services for cross-border transactions. This includes pre-validation and access to connections
Wise hopes to reach banks that sell banking and payment products to small businesses, which have to sell to international markets to reach new clients, and also have to source materials internationally. This requires the ability to pay in different currencies and comply with different laws, which traditionally required correspondent banks and other third parties.
"One of the big problems for smaller businesses is [that] these payments aren't instant," Naudé said. "And there's loss of contact with the money as it flows through the payment process."
In another partnership, Visa will add Swift's pre-validation to a card network program that catches potential errors in payments before the transaction is executed. Visa and Swift positioned the partnership as a way to increase routing options and access to the status of payments.
Similar to Wise, Visa positioned the Swift partnership as a way to reduce pressure on businesses that are tapping international markets. Visa, which like Mastercard is diversifying by adding services for clients that do not rely on card payments at merchant points of sale, did not provide comment by deadline.
Swift this week also entered into a partnership with environmental, social and governance software firm Greenomy to provide sustainability reporting data for Swift's community. Greenomy will track and report energy and carbon emission data for Swift's other partners and members of Swift's messaging network to monitor adherence to European energy policy and similar carbon-reduction frameworks in other regions.
Alternatives to Swift flood the market
In recent years, competitive forces have compelled Swift to expedite its innovation efforts, said Meng Liu, a senior analyst at Forrester, adding that the market includes cross-border payment networks that diverge from the traditional correspondent banking model, such as card-based systems, blockchain-powered channels, and potentially central bank digital currencies.
"Swift is concerned about its future relevance within the cross-border payments industry," Liu said. "Rather than engaging in direct competition with these alternative networks, Swift may find greater strategic value in fostering collaboration and partnerships."
A notable illustration of this approach is the partnership with Wise, she said. "Additionally, Swift has undertaken collaborative initiatives with certain central banks to establish CBDC infrastructure."
The expense and time involved in that process is not economically sound for small banks and businesses. Fintechs sense an opportunity. Revolut this week released RevTags, which enables business clients to use a tag to make payments directly to another party without an account number or other details— a product that's available in more than 150 countries and two dozen currencies.
Other firms use a range of technology, such as blockchain, the cloud, connections with local banks or a combination of strategies to shave processing for international B2B payments. The list includes payment firms like Wise, Airwallex, Nium, Thunes, Rapyd and blockchain firms such as Ripple, Circle and Stellar, though there are dozens of others.
Liu anticipates that for now, Swift will co-exist alongside these and other firms that enter the market.
Inside Swift's strategy
Swift connects more than 11,500 institutions across more than 200 countries and moves the equivalent of the world's GDP every three days, giving it a massive scale that it can use to lure partners.
"Swift has built an infrastructure that connects the world, that is trusted and relied upon every day," said Thierry Chilosi, chief strategy officer at Swift, in an email. "Our collaboration with Wise illustrates how Swift can be the bedrock from which the whole industry can innovate to improve cross-border payments."
Eighty-nine percent of payments on Swift's network reach their destination banks within one hour, and 50% within five minutes, due to the adoption of Swift's GPI, according to Chilosi.
"We are also extending the benefits that GPI brought to high-value payments to other areas. Swift Go, for instance, brings the same types of speed and transparency to low-value payments typically sent by consumers and small businesses," Chilosi said.
Swift has used cloud-hosted technology and application programming interfaces to upgrade its rails, including support for instant settlement, CBDCs and asset tokenization.
"As we look ahead, in a world of increasing fragmentation, we see the role we play in connecting payment systems and making sure different systems can work together becoming even more important," Chilosi said.
Cross-border payments are a significant competitive weapon for businesses, said Enrico Camerinelli, a strategic advisor at Datos Insights.
"It's a critical business success factor for organizations involved in international trade to pay overseas suppliers and get paid by foreign clients quickly, securely and transparently," he said.
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Swift wants to play the role of providing interbank infrastructure to link financial institutions and business operators, Cemerinelli said.
"Intermediaries are not an unnecessary party to remove, per se," Camerenelli said. "But they certainly become a stumbling block if they cannot support the business client and basic essentials."
