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SWIFT Plans Asia-Pacific Cross-Border Real Time Payments System

By Mike Faden

To date, nearly all real-time payment systems have operated within a single country. Cross-border payments generally have taken much longer, in many cases requiring several days. But increasingly, banks and other payment providers are working to establish regional cross-border payment systems that instantly transfer payments between businesses and consumers in neighboring nations. In one recently announced initiative, global financial-messaging provider SWIFT is working with a group of banks in Australia, China, Singapore, and Thailand to develop a cross-border real-time payment system within the Asia-Pacific region.1

SWIFT Asia-Pacific Initiative

 

SWIFT, which provides the financial messaging infrastructure supporting the majority of cross-border bank payments worldwide, announced in April 2018 that it is working with more than a dozen banks in the Asia-Pacific region to develop the regional real-time cross-border payments service.2 Though SWIFT described the talks as “exploratory” and did not provide target implementation dates, it said the project would roll out in several phases, eventually providing real-time cross-border payments for all bank customers within the region.

 

SWIFT said the system would be based on its gpi (global payments innovation) initiative, a cross-border payments service that has rapidly grown to account for about 25 percent of global SWIFT payment traffic by May 2018.3 The gpi service is designed to deliver same-day cross-border payments, and SWIFT said in February 2018 that nearly 50 percent of gpi payments were credited in less than 30 minutes.4 However, that doesn’t meet the usual definition of “real-time,” a term that is usually applied to payments that complete even faster, typically within seconds. Notably, SWIFT supplied Australia’s domestic real-time payments system, which went live early in 2018.5

 

SWIFT described three development phases for the Asia-Pacific real-time cross-border payments system.6

 

  • Phase 1 will introduce a real-time gpi sub-scheme to enable real-time cross-border payments between regional banks that already use gpi.
  • Phase 2 will “effectively extend the SWIFT gpi rails into existing real-time payment systems within each recipient country,” to ensure that payments can be settled in real time in each of the four countries whether or not customers’ accounts are at banks connected to gpi.
  • Phase 3 would aim to link domestic real-time payment systems via SWIFT gpi to facilitate “full cross-border real-time payments” between their respective customers.

Asian Cross-Border Payments Landscape

 

The SWIFT announcement follows a previous agreement among national payment systems in several Asian countries designed to facilitate real-time cross-border payments within the region. In November 2017, national payment system operators in Malaysia, Indonesia, Singapore, Thailand, and Vietnam signed a Memorandum of Understanding (MoU) to connect their regional payment infrastructures to enable real-time cross-border payments.7

 

That agreement is part of a broader 10-year economic program within the Association of Southeast Asian Nations (ASEAN), an organization of 10 Asian countries. As part of the program, dubbed ASEAN 2025, member states are modernizing and integrating their financial infrastructures, according to an Ovum report, ASEAN Initiatives Seek to Leverage Real-Time Payments for Innovation.8 The effort will ultimately lead to a pan-regional real-time payment ecosystem, the first elements of which could be live as early as the end of 2019, according to the Ovum report. To facilitate interoperability with payment systems in other countries in the Asia-Pacific region – such as China, India, and Japan, which are not among the ASEAN nations – the parties signing the MoU agreed to use ISO 20022 messaging standards.9 ISO 20022 is being widely used in many new payment systems across the world.

 

Several ASEAN countries have already developed or are in the process of developing domestic real-time payment systems, including Malaysia, Thailand, and Singapore. According to Ovum, payment systems operators in those three countries are already in active discussions to create what could become the world’s first cross-border, multicurrency real-time payments network.

 

Real-Time Cross-Border Payments in Europe

 

Perhaps the best-known existing example of a real-time cross-border payment system is SCT Inst, in Europe, which handles instant cross-border payments in euros across Europe. SCT Inst went live in November 2017, and by February 2018 was supported by 25 percent of Europe’s payment service providers in 13 countries.10

 

In November 2018, a new bank settlement system is scheduled to go live, supporting SCT Inst and facilitating its further adoption across Europe. Called TARGET Instant Payment Settlement (TIPS), the system will settle transactions 24/7 instantly using European Central Bank money, eliminating credit risk for payment providers participating in SCT Inst.11 Though it will initially support cross-border payments in euros, TIPS has been designed with the technical capability to handle multiple currencies, according to the European Central Bank.12

 

In the Nordic countries, Swedish, Danish, Norwegian and Finnish banks are exploring the establishment of a regional cross-border payments infrastructure. The system would reportedly enable real-time domestic and cross-border payments in multiple currencies, including the euro.13,14

 

The

Takeaway:

Regional real-time cross-border payment systems are beginning to proliferate across the world, part of a broader trend toward faster cross-border payments that promises to facilitate the growth of international trade.

Mike Faden - The Author

The Author

Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.

Sources

1. “SWIFT explores Asia Pacific cross-border real-time payments,” SWIFT; https://www.swift.com/news-events/news/swift-explores-asia-pacific-cross-border-real-time-payments
2. Ibid.
3. “25% of all cross-border payments now over gpi,” SWIFT; https://www.swift.com/news-events/news/25_of-all-cross-border-payments-now-over-gpi
4. “SWIFT gpi reduces cross-border payment times to minutes, even seconds,” SWIFT; https://www.swift.com/news-events/press-releases/swift-gpi-reduces-cross-border-payment-times-to-minutes_even-seconds
5. “SWIFT revolutionises Australian banking with real-time payments,” SWIFT; https://www.swift.com/news-events/news/swift-revolutionises-australian-banking-with-real-time-payments
6. “SWIFT explores Asia Pacific cross-border real-time payments,” SWIFT; https://www.swift.com/news-events/news/swift-explores-asia-pacific-cross-border-real-time-payments
7. “Payment tie-ups between ASEAN nations are up for discussions,” ASEAN Today; https://www.aseantoday.com/2018/01/payment-tie-ups-between-asean-nations-are-up-for-discussions/
8. ASEAN Initiatives Seek to Leverage Real-Time Payments for Innovation, Ovum; https://www.aciworldwide.com/-/media/files/collateral/trends/asean-initiatives-seek-to-leverage-real-time-payments-for-innovation.pdf
9. Ibid.
10. “SCT Inst uptake surpasses 1,000 PSPs, 25% of European total,” InstaPay; https://www.instapay.today/article/sct-inst-uptake-surpasses-1000-psps-25-european-total/
11. “All about TARGET Instant Payment Settlement (TIPS): a new actor in the European payments landscape as from November 2018,” European Payments Council; https://www.europeanpaymentscouncil.eu/news-insights/insight/all-about-target-instant-payment-settlement-tips-new-actor-european-payments
12. TARGET Instant Payments Settlement (TIPS), European Central Bank; https://www.ecb.europa.eu/paym/initiatives/shared/docs/d8dd9-ami-pay-_20170209_item07b_presentation_on_tips.pdf
13. “Nordea confirm Pan-Nordic payment infrastructure instant in nature,” InstaPay; https://www.instapay.today/article/nordea-confirm-pan-nordic-payment-infrastructure-instant-in-nature/
14. “Nordic banks strive for harmonised cross-border payments infrastructure,” Finextra; https://www.finextra.com/newsarticle/31651/nordic-banks-strive-for-harmonised-cross-border-payments-infrastructure

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