Learning to be flexible in a changing world

The rise in electronic payments requires a stronger emphasis on the adoption of innovative technologies. And fintechs, banks and financial institutions will need to devise strategies to accelerate digital adoption. Conversely, India and other countries have witnessed an upsurge in cybercrimes. We are ranked the second-most targeted nation in Asia-Pacific for cybercrimes, accounting for seven per cent of global incidents, as stated by a new study by IBM.

From trade to the entire payments value chain, the pandemic has acted as a catalyst for the digitisation agendas of financial institutions. The pertinent need to leverage data, streamline processes and implement nimbler technologies has never been direr. As a result, major improvements have taken place in trade finance and cross-border payments.

As India looks to solidify its position as a competitive global commerce hub, it is essential to deepen economic integration and lower trade costs. The key to achieving this is trade digitisation. Covid-19 has resulted in banks pivoting to digital trade channels such as the “SWIFT-MT 798 message” — a multi-bank standard for automating corporate-to-bank documentary trade flows, including letters of credit and demand guarantees. This allows them to move away from the burdens of costs and transparency for physical documents and processing.

Several banks and financial institutions, post-Covid-19, have accelerated their adoption of digital processes such as electronic know-your-customer (eKYC) and electronic bank guarantees, fostering efficiencies and trust. The pandemic has made the industry realise that legal reform and harmonisation is much needed to further trade digitisation efforts, such as the Singapore government updating its Electronic Transactions Act to recognise electronic documentary trade instruments.

Fast payments mean better trade finance, as evidenced by banks and financial institutions rushing to implement faster and secure cross-border payment solutions. After the introduction of SWIFT GPI, gone are the days of slow and low-transparency payments that took days. Today, over 92 per cent of our payments are happening in less than 24 hours, and 40 per cent of them within 30 minutes.

Be it large corporations settling high-value transactions, or small and medium enterprises, or consumers sending low-value international payments, financial institutions have recognised that their cross-border payment rails need to be as swift as domestic payment rails — making instant and frictionless cross-border payments an immediate need. By implementing solutions, they are facilitating a seamless payments experience and meeting the industry’s needs for speed, traceability, and transparency.

Standards and rich data can future-proof financial services. In today’s increasingly digitalised world, data is the new engine and oil. Cross-border payments have been plagued by poor-quality data, from incorrect or limited information provided to discrepancies in formats, hampering smooth flow of banking operations and at times requiring manual intervention, leading to longer processing times. Over time, as compliances have become stricter and global KYC regulatory requirements have increased to mitigate risks such as financial crime, money laundering and cybercrimes, using rich and insightful data for transactions is now imperative.

Industry standards such as ISO 20022 help to create consistent data exchange across all business processes, especially for high-value payment systems of reserve currencies. ISO 20022 will support 80 per of global volumes and 87 per cent of the value of transactions worldwide. When coupled with standardised KYCs, anti-money laundering or transaction monitoring, sanctions screening and testing, payments control, and compliance analytics, they generate rich, quality data that improves the efficiency, speed and compliance of payments. Ultimately, high-quality data backed by ISO 20022 will enable superior customer experiences and provide agility to be innovative and offer new value-added services to customers.  

The writer is CEO and Regional Head, SWIFT (India and South Asia). This column has been edited for space