SWIFT, an interbank cooperative headquartered in Brussels, has unveiled its first active direct contact for international payments – a move that could have serious implications for the global payments landscape.
On Thursday, the cooperative announced that the British-based Lloyds Banking group was the first to contact SWIFT gpi Instant, a high-speed cross-border train that pays in seconds. The SWIFT GPI payment system connects to the UK’s express payment infrastructure, allowing customers to send cross-border payments 24 hours a day, seven days a week.
According to the new SWIFT system:
“This allows banks to leverage their existing infrastructure to offer better service 24 hours a day, 7 days a week, with faster speeds, clarity of payments and, most importantly, the ability to predict when the final recipient’s account will be credited. . ”
SWIFT, which represents the Association for Global Interbank Financial Telecommunications, has become the global standard for secure international payments and trade finance. But the network has been criticized for its costly and long-term inefficiency.
This critique supported the innovation of global payments for SWIFT or GPI. GPI was launched in 2017 and has improved payment tracking and transparency on over 1100 routes over land.
Despite these improvements, SWIFT innovation may not happen fast enough. As the Financial Times points out in December 2018, SWIFT’s new competitors are not only startups such as TransferWise and Revolut, but also large financial institutions that profit from blockchain technology.
The Interbank Information Network, led by JPMorgan Chase, is a blockchain consortium that uses distributed ledger technology to improve compliance and reduce processing delays. The network, which has over 130 banking partners, has since been renamed Liink and is based on the Onyx blockchain.
Blockchain technology has been identified as a major disruptive force in the global payment environment. Unlike SWIFT, blockchain allows cross-border transfers in a decentralized manner, which means that payments are directly approved.
Ripple is perhaps the most famous example of a global blockchain-based transmission system. RippleNet’s decentralized infrastructure has 3 seconds of payment processing and zero error rate for the messaging system.
The use of SWIFT as a weapon through aggressive sanctions has also forced some countries to switch to blockchain. Turkey, Venezuela, Iran and Russia have experimented with blockchain platforms to create parallel financial systems.