Home Opinion pieces Building the future of financial transactions together

Building the future of financial transactions together

Changing customer expectations, increased competition and ever-evolving technology continue to challenge existing business models, causing unprecedented pressure to innovate fast. Many of these challenges are not unique to individual institutions but shared by the entire industry. To solve these challenges and build the future of financial transactions, the entire financial ecosystem needs to collaborate.

Sido Bestani, Regional Director, Middle East, Turkey & Africa, SWIFT

Digitisation has radically reshaped the payments space, with the pandemic a catalyst accelerating the trend. In a recent report, the Boston Consulting Group (BCG) found that in the UAE the number of customers using online banking saw a 42 percent increase and the use of mobile banking rose by 65 percent during the pandemic.

The Middle East is a vibrant innovation hub, and in recent years, local authorities have been instrumental in enabling the sector’s digitisation. Much has also been done in the region to adapt regulatory frameworks and invest in communication infrastructures.

Fostering greater inclusion and openness

In MENA, almost 60% of the population is aged under 30. These young people are tech savvy and digital interactions are at the heart of their everyday lives. They expect the same experience when it comes to payments, making the market ripe for digitisation.

The shift towards embedded finance, whereby services are seamlessly inserted in other products to create a type of cross-pollination between brands and systems will shape the entire system into a significantly more accessible and inclusive ecosystem for all users.

Several national programmes aiming to further enable digital services have been implemented in the Middle East and we now observe a similar trend at a regional level.

Exploring new technology

For over 40 years, SWIFT has collaborated with its network to identify industry-wide challenges and develop solutions for the benefit of the entire global financial system and innovation remains central to our new strategy. Thanks to our unique position at the heart of the financial industry, we have a vital role to play in identifying and evaluating the viability, practicality and potential of emerging technologies to deliver value to our community.

For example, we are engaging with central banks, financial institutions, technology providers and academics to understand possibilities that central bank digital currencies (CBDCs) could enable, and how SWIFT could support central banks should they wish to implement digital currencies. As part of that exploration, we published a paper in May 2021 discussing the opportunities and challenges of CBDCs for international payments.

Additionally, we continue to explore how to harness the power of SWIFT’s unique data with artificial intelligence (AI). Combining AI with SWIFT data has the potential to provide unique insights that can help resolve existing and emerging challenges across financial services without compromising the integrity of transaction data or the privacy of users.

Data is the name of the game

Data is one of the most valuable commodities in the 21st century, enabling people and organisations across the world to make better decisions and vastly improve economic productivity.

For the payment’s community, the transition to ISO 20022 plays a central part in data-based innovation, symbolising a transformational change in the way network participants can extract rich data.

In parallel to ISO 20022 migration, the upgrading of multiple domestic payment systems in the region and across the world allows for the unification of data sets, opening opportunities for automation, efficiency, and even the creation of new services that could be driven by AI and machine learning (ML).

SWIFT sees the value offered by AI and ML particularly in the context of predictive technologies and we are exploring the use of tools that predict and identify anomalies to deliver the goals spelled out in our new strategy.

These technologies have the potential to improve customer experience and insights and remove friction in the payments process by predicting where things may go wrong or whether a payment is fraudulent. The opportunities to innovate in this area with the community are almost unlimited.

Collaborative innovation

Establishing the right collaboration models within the banking community has been essential for the industry to reach where it is today. To get this right, clearly defining the customer or business outcome, then working out which collaboration tools and approaches are best suited to meet that goal is key.

SWIFT plays a central role in bringing different institutions together to explore new solutions. Through industry-wide collaboration, we can develop solutions that mutualise costs and drive a far greater change than individual institutions could do alone. And collaboration can take many forms.

Innovation hackathons

SWIFT regularly brings the financial ecosystem together to discover creative solutions to industry challenges. In 2021, SWIFT partnered with the Bank for International Settlements (BIS) on a hackathon to explore the potential of ISO 20022 and APIs to enhance cross-border payments. SWIFT has hosted multiple hackathons, bringing together innovators from across financial services. This year, the SWIFT Hackathon 2021 is bringing together teams from across the financial community to develop AI and ML solutions that can reduce friction across the entire industry. The winning teams will present their solution at the world’s largest transaction banking event, Sibos; and we will be inviting them to come and co-create their solution with us so that it can benefit the entire financial community.

Community collaboration

In 2020 we launched SWIFT gpi Instant, a service developed collaboratively with our customers that enables remittance payments from anywhere in the world to be routed from account to account in seconds, with fee and FX transparency, robust security and full regulatory compliance. Connecting SWIFT gpi, the high-speed cross-border rails with real-time domestic payments infrastructure enables banks to use existing infrastructure to provide better service 24/7, with faster speeds, clarity on fees and crucially, predictability for when an end beneficiary’s account will be credited.

Also in 2020, SWIFT began working with more than 20 banks to develop a new low value payment service, which builds on the strength of SWIFT gpi and the high-speed rails that have already transformed high-value payments. This new service, called SWIFT Go, will enable consumers and SMEs to benefit from predictable payments, with costs and processing times known upfront, and real-time status available to both originator and beneficiary customers via their financial institutions.

Most recently, SWIFT collaborated with RegTech Suade Labs to explore how combining AI-based software with SWIFT’s unique transaction data could streamline the complex liquidity reporting requirements that financial institutions currently face.

Fully harnessing the power of APIs is another great opportunity. APIs allow different platforms to talk to each other and facilitate the creation of new products and services through the secure but open exchange of data.

Innovating successfully is not a simple task. It requires a high level of coordination and for everyone to be pointed in the same direction.

Therefore, the next two years are going to be really exciting. With the launch of our next-generation platform, we aim to transform the world of payments and securities by facilitating instant and frictionless cross-border transactions. It will also present opportunities for new partnerships and collaborations using APIs and cloud technology.

By developing a common set of services with and for our customers, our goal is to help reduce the cost and risk of innovating for everyone in the community. Additionally, we are encouraging our community to co-create new products with us to spur on the overall level of service our end-customers receive.

In reality, nobody will single-handedly find the answers to some of the industry’s biggest challenges. But, if we take an evidence-based approach and focus wholly on our end-customers’ experience, there is the potential for us to build some great things together.

Collaboration is part of SWIFT’s DNA and at the heart of our new strategy, and we are working with our community around the world to develop solutions that benefit the entire global financial system.

Find out more: swift.com/innovate