Collaboration can optimise digitalisation for clients

By Fred DiCocco, Global Head of Cash Management Business Development, Treasury Services, BNY Mellon

New technology developments are transforming a payments space already under pressure from clients expecting “real time” experiences. Meanwhile, heightened regulatory requirements are encouraging digital solutions and further galvanising the banks to modernise payments. 

Certainly, introducing effective, efficient transaction capabilities is a key priority for the industry. This year is set to be particularly monumental for payments developments, with the launch of SWIFT’s gpi service, along with the launch of the US Real-Time Payment (RTP) initiative and Australia’s New Payments Platform (NPP) – both scheduled to launch in Q4. Over

, with over 110 banks signed up for gpi. 

Such systems are revolutionising how and when customers and businesses perform transactions, and are allowing both the payment beneficiary and originator to have real-time access to payment information, as opposed to an end-of-day file. In terms of cash management, transparency and reconciliation, the benefits are obvious. Such transparency also speeds up value chains by enabling swifter payments and, as a result, the more efficient shipment of goods. 

Through real-time payments, restrictive business hours are becoming a thing of the past. And in many countries, domestic real-time payment systems are already becoming the new norm.

Going global

While enhancements to domestic payments systems are well underway, improving cross-border systems are equally critical, though pose significantly more challenges. Because terms of settlement and clearing vary from system to system, applying instant capabilities to international payments demands standardisation and interoperability on a global scale – requiring cooperation from banks, fintechs and regulators alike.

SWIFT’s global payments innovation (gpi) initiative is a prime example of industry standardisation and collaboration – and for this reason, has the potential to introduce important enhancements to corporate payments. SWIFT gpi aims to improve the speed, transparency and predictability of cross-border payments, and has already attracted over 110 banks in over 224 countries – representing approximately 75% of cross-border traffic . A number of products are being implemented as part of SWIFT gpi, including the cross-border payments Tracker, which allows international payments to be tracked in real-time.

SWIFT’s established regulatory structure, technology and standards – which are already recognised by over 11,000 banks – explain the programme’s wide acceptance and speed of progression. Indeed, the first phase of SWIFT gpi is already live, with features that include faster, same day use of funds (within the time zone of the receiving gpi member), end-to-end payments tracking, and the delivery of unaltered remittance information.

There is also, of course, “blockchain” – the distributed ledger technology – which has the potential to transform the payments space. Blockchain, the technology that underpins bitcoin, can digitally, inviolably, and transparently record transactions between two parties.  As an innovation, blockchain – unlike SWIFT gpi – is starting from scratch, with significant development and established standards required before it can play a larger role in global wholesale payment schemes. Consequently, SWIFT and a number of banks – including BNY Mellon – are working together to establish proofs of concepts (PoCs) and explore ways in which blockchain can potentially work in tandem with existing global payments schemes – including nostro account reconciliation. 

Industry collaboration is key to digitalising payments

Continued industry collaboration is predicted to frame the next payments era. Although fintech innovation brings immense opportunity to transform the payments space, technology alone is not enough to address global payment needs. It is the application of that technology that is key to successfully effecting change: harnessing new technology together is an intelligent strategy to provide optimal solutions for clients.

One strategy is continued bank-fintech partnerships. Although fintechs have a proven aptitude for technological development, banks possess the industry expertise, the working capital, and the client trust that many fintechs lack. Marrying the skillsets of banks and fintechs can ensure the strengths of both parties are leveraged, and help to ensure new concepts and ideas are explored and delivered effectively. 

Moreover, collaboration between clients, banks and fintechs is imperative to establishing solutions that are optimal for clients. In this sense, cross-industry collaboration can be fostered through innovation centres – physical hubs where bank-fintech innovators and clients can work together to develop transformative solutions and identify challenges. 

Certainly, new technology and payments innovation should centre on the client. And it is through industry collaboration that we can ensure clients are the primary beneficiary of the payments transformation journey. 

The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.