SWIFT’s Evolution in Cross-Border Payments: What Fintechs and Banks Need to Know in 2024

How ISO 20022 and New Developments Are Shaping the Future of International Payments

by : Rachid GHOFRANE

As global finance becomes increasingly interconnected, the demand for faster, more efficient, and transparent cross-border payment solutions has grown exponentially. For decades, SWIFT has been the backbone of the international payment infrastructure, enabling secure and standardized communication between financial institutions worldwide. But with the rise of new technologies and evolving regulatory frameworks, SWIFT is undergoing a significant transformation in 2024, driven primarily by the adoption of ISO 20022.

In this blog, we explore the latest developments in SWIFT’s services, focusing on what fintechs and banks need to know about these changes and how they will impact cross-border payments in the coming years.

 

 

The Shift to ISO 20022: A New Standard for Cross-Border Payments

One of the most significant changes SWIFT is making in 2024 is the full-scale transition to ISO 20022, a global standard for financial messaging that aims to improve the richness, quality, and speed of data exchanged in financial transactions.

What is ISO 20022?

ISO 20022 is a universal standard for financial messaging that replaces SWIFT’s legacy MT format. It’s designed to accommodate more data, streamline compliance, and enhance the accuracy of cross-border payments. Think of it as upgrading from a simple text message to a more detailed, data-rich email—one that includes structured information, making it easier to interpret and process across various systems.

 

For fintechs and banks, this means:

• Enhanced Data Quality: ISO 20022 allows for the inclusion of more detailed information in payment messages, reducing errors and the need for manual intervention. This leads to fewer payment delays and fewer compliance issues.
• Improved Regulatory Compliance: By allowing the exchange of more structured data, ISO 20022 helps institutions better comply with stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
• Interoperability: As more countries and institutions adopt ISO 20022, it’s becoming the common language for payments across borders. This harmonization simplifies transactions and opens up new possibilities for global financial services.

For example, a bank in Luxembourg can now send an ISO 20022-compliant payment to a counterpart in the U.S. or Asia with fewer delays or errors, thanks to the standardized data format.

SWIFT GPI: Faster, More Transparent Payments

SWIFT’s Global Payments Innovation (GPI) service is another game-changer for cross-border payments in 2024. SWIFT GPI ensures that payments are processed faster, with greater transparency and traceability, making it a must-have for any financial institution dealing with international transfers.

Key Features of SWIFT GPI:

• Real-Time Payment Tracking: Similar to tracking a package delivery, SWIFT GPI allows both the sending and receiving banks to track a payment in real-time. This transparency is essential for both banks and fintechs, providing clarity to their customers.
• Same-Day Processing: With SWIFT GPI, most cross-border payments are now processed within 24 hours, with many completed in just a few hours. This is a vast improvement over the traditional SWIFT network, where payments could take several days.
• Transparency of Fees: One of the common pain points in cross-border payments has been the lack of transparency around fees. SWIFT GPI resolves this by showing the exact amount deducted at each stage of the payment journey, allowing businesses to better manage their costs.

For fintechs, especially those focusing on international payments, SWIFT GPI is a game-changer. It not only offers faster processing times but also provides the kind of transparency that customers now expect. For banks, adopting GPI means staying competitive in a global market that’s increasingly demanding speed and transparency in financial transactions.

The Role of SWIFT in Enabling Instant Cross-Border Payments

While domestic instant payment systems like Zelle in the U.S. and SEPA Instant in Europe have become the norm, cross-border instant payments have lagged behind. However, in 2024, SWIFT is closing this gap by enhancing its instant payment capabilities.

SWIFT is now enabling instant cross-border payments through collaborations with RTGS (Real-Time Gross Settlement) systems and instant payment networks worldwide. By linking domestic real-time systems with the SWIFT network, financial institutions can now offer their customers the ability to send and receive funds across borders in seconds, rather than days.

• Example of Impact: Imagine a small business in Luxembourg sending payment to a supplier in Singapore. In the past, this transaction could take up to 48 hours to complete. With SWIFT’s enhanced instant payment capabilities, that business can now complete the payment within seconds, improving cash flow and business operations.

What Banks and Fintechs Need to Do in 2024

For banks and fintechs, adapting to these changes is not optional—it’s essential for staying competitive in the global financial landscape. Here are a few steps institutions should take to prepare:

1. Adopt ISO 20022: Ensure that your systems are fully compliant with the new ISO 20022 standard. This will not only improve operational efficiency but also enhance customer satisfaction by reducing errors and delays.
2. Leverage SWIFT GPI: If you’re not already using SWIFT GPI, it’s time to implement it. The demand for real-time tracking and faster payments is only going to increase.
3. Explore Instant Payments: Integrate instant cross-border payment capabilities into your offering. This will not only attract new customers but also help retain existing ones by offering a superior payment experience.
4. Focus on Compliance: With ISO 20022, regulatory compliance becomes more manageable, but it’s essential to keep up with evolving KYC and AML requirements to avoid penalties.

 

Conclusion: 2024 and Beyond—The Future of Cross-Border Payments

SWIFT’s evolution is far from over. With the full adoption of ISO 20022 and the expansion of GPI and instant payments, SWIFT is setting the stage for a future where cross-border payments are not only faster but also more transparent, secure, and compliant with global regulations.

For banks and fintechs, staying ahead of these developments means embracing change, investing in the right technology, and focusing on providing an enhanced payment experience for their clients. The financial world is moving fast, and the institutions that adapt will be the ones that thrive.

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