“Interlinking market infrastructures means a much wider reach and a better payments experience across borders” was the opening message by moderator Saloni Shukla on day one of Sibos 2022 during the SWIFT-focused Connecting the dots: Market infrastructure interlinking session.
“Market infrastructures have a key role in enabling instant and frictionless end-to-end payments between bank accounts in their own communities. But what do you get when you interlink them?” asked Shukla.
The panel discussion was advertised as an explanation of SWIFT’s vision to interoperate market infrastructures, “combining the global presence of SWIFT with their domestic reach.
“Whether a market infrastructure runs on SWIFT or its proprietary communication channels, linking it with SWIFT has many benefits, including extending its reach globally, leveraging the values brought by the SWIFT platform, providing end-customers a truly instant experience for their cross-border payments and achieving frictionless end-to-end transactions between any two bank accounts globally,” commented Shukla.
Joining Shukla on stage was Erwin Kulk (EBA GROUP), Soon Chong Lim (DBS BANK LTD), Carlo Palmers (SWIFT) and Carl Slabicki (BNY Mellon).
Impact interlinking has on the global market
Carl Slabicki of BNY Mellon pointed out that from a cross-border perspective, cross-border interlinking amounts to a “fundamental reset” and highlighted that it would see a “large” area of improvement over the coming years, providing 24/7 instant payments across the globe.
Soon Chong Lim of DBS BANK LTD reiterated its 24/7 availability offering and told audience members that DBS BANK LTD is utilising identity infrastructures and standardised form factors to allow consumers and small businesses to make small border payments “effectively and cheaply”.
The role SWIFT will play
Carlo Palmers from SWIFT stressed that SWIFT is a critical pillar in achieving cross-border payments “in a frictionless” way. “Interlinking is a big one,” he added, “and SWIFT’s network reach and infrastructure can be heavily reused and leveraged.”
The challenges around interlinking
Carl Slabicki rued the number of challenges as a “complex mess”. He added that consumers “must” be able to pay globally.
Likewise, Soon Chong Lim mentioned that it’s important to “split” low-value cross-border payments from high-value cross-border payments. “As a framework, issues in low-value payments are quite different from high-value cross border payments.”
Clearing
Erwin Kulk of EBA Group noted that solutions are in place to deal with the challenges of clearing. “We [ABA Group] have worked with SWIFT and clearing house. In cross-currency, we can interlink the instant and real-time payments we have,” remarked Kulk. “ABA Group keeps settlement systems conditional on each other, which helps mitigate a number of risks already mentioned, including helping standardised data transport in terms of screening.”
What SWIFT can do to help interoperability and linking
Carlo Palmers reminded the audience to look at SWIFT’s goal of making international payments frictionless. To make them frictionless, data transferred at the source must be accurate, he added. “We have pre-validation sources in place atm. They are limited currently. Things that can be done at the pre-validation phase will avoid failures later on.”
Main contributions that SWIFT could bring
Carl Slabicki stressed that SWIFT had a massive role to play in establishing standards to help bring “everyone together” to pre-validate accounts, beneficiaries and fraud scoring across the globe. “Evolution of standards of everything,” claimed Slabicki, “the inter-operability of payment systems.”
Soon Chong Lim also saw pre-validation as a “top thing”. He continued: “Conditional settlement means joining pre-trade parts. SWIFT isn’t the only solution, though. Pre-transaction is important and post-transaction handling crucial.”
Erwin Kulk said that retail and high-value payments required to be separated. “Interconnecting retail payments are not always SWIFT connected,” he added. “What’s important when looking at SWIFT components is that all the banks are connected,” he commented. “SWIFT has API gateway. High-value payments, SWIFT is a core provider of technical infrastructure.”
The session is now on demand here.
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