Cross-border momentum continues with Swift Essentials introduction

Part of the process enabling that growth of course comes from Swift. It has recently focused on what could be seen as a reorganisation and repackaging of its products into a suite called Swift Essentials. Swift believes the new package improves several important policies and processes including, but not limited to, the speed and reliability of cross-border transactions but also extending into compliance, integration, and corporate treasury management.

The way I see it three areas are the most critical when getting to grips with Swift Essentials. The first centres on efficiency and integration. The new suite connects back-office systems to Swift, allowing for the efficient sending and receiving of financial messages. This integration capability spans a range of tools, including Alliance Cloud, Swift APIs, Alliance Connect Virtual, and others. The second is compliance and risk management. Swift Essentials includes tools and solutions for financial crime compliance, business intelligence, SwiftRef, and MyStandards, among others. The third is embracing new technologies and standards, mostly through its alignment with the ISO 20022 global data standard. While ISO 20022 is quite familiar to anyone in the cross-border payments space, including it within the Swift Essentials suite puts it in the right proximity to address the needs of corporate treasurers by offering greater control, transparency, and interoperability as Swift continues on its mission to create a user experience on par with domestic payments for a financial institution’s end customer. 

All Swift members (banks and FIs – not corporates) transitioned over to Swift Essentials on January 1, 2024. This means that they will pay extra fees to Swift in return for having access to a wider suite of solutions. The pricing is also banded and so will be measured on volume. This banding is only applicable for sent traffic.  The billing for the services will come directly from Swift and not via a payment service provider (PSP).  However, financial institutions will need a separate ‘connector’ (provider of UI and APIs) such as Bottomline to access Swift’s user interface if they want to ensure seamless integration and future-proof for further mandatory upgrades.

What opportunity does Swift Essentials offer? Previously banks and FIs have not leveraged the full Swift arsenal due to the additional costs of solutions like Swift gpi. However, they are paying for it anyway now (with the exception of their sanction screening solution which is an added cost), and so they might as well integrate it. After all, these solutions are designed to improve the customer journey for their end-customers and improve operational efficiency internally. It is likely that financial institutions will choose to focus on a few solutions upfront and scale integration to the rest. We have it on good authority that the first couple will be Swift gpi and then Swift Go. 

We see two positive ramifications and one potential negative from the introduction of Swift Essentials:

It should decrease overall costs and increase speed and transparency.  For instance, it increases the emphasis on addressing the key pain points identified by our Global 2023 Competitive Banking Report where more than 600 C-level experts were asked what their main pain points were when sending cross-border business payments – lack of visibility on payments status (30%), slow or unknown speed of arrival (24%) and poor quality or loss of data (7%). These issues can largely be addressed by ISO 20022 or integrated into solutions like Swift gpi. Therefore, the conclusion is that while the tools are available to solve these pain points, banks and FIs need to adopt the right solutions - and quickly. Step forward Swift Essentials with its suite of solutions that are designed to focus on achieving end-to-end visibility for global payments.  

End-to-end visibility, especially in the context of cross-border payments, refers to the ability of all parties involved in a transaction to track and monitor the payment's entire journey, from the moment it is initiated until it reaches its final destination. This visibility ensures that data covering the transaction's status, details, fees, intermediate entities involved, and potential delays are all transparent to both the sender and the recipient. This concept is crucial for navigating the current world of global payments.

It is also vital that pre-validation of payments is front and centre in improving cross-border payments. That’s where end-to-end visibility begins. It seems like a simple concept, when you drill down into why certain payments fail, it’s due to bad data at the beginning. 

Many issues stem from a data and information disconnect that results from the fact that not all of the stakeholders in the cross-border chain have agreements with each other; it may just be two or three out of a chain of four or five. 

Therefore, the common denominator is Swift, which has relationships across the whole lifecycle of the payment. Without having one central communication then it is impossible to provide that end-to-end visibility and transparency. For instance, it reduces friction and prevents delays in funds being received by the Payee. 

Pre-validation is the key here, as most payments fail due to there being poor data in the first place. Pre-validation is the process before sending a payment, where banks and customers can check the validity of the beneficiary account by comparing it against a library of transaction data. In Swift’s case, that means over 9 billion payments travelling between 4 billion accounts every single year. In fact, Swift estimated in 2021 that “friction in the payments system costs the industry more than USD 2 billion every year, affecting over 700 million transactions. 

The complete suite offers coverage for payment initiation, processing, tracking and settlement. The payment initiation products include fraud detection and defense, including transaction screening against up-to-date sanctions lists. By removing friction and adding the instant payments feature, Swift is aiming at increased speed and what it says will amount to a lower cost. 

However, it could make it harder for smaller banks to do business with Swift. While Swift Essentials pricing is volume-based, other obstacles stand in the way for smaller banks and other companies. For instance, Swift has made it clear that they will stop all in-flow translations after the end of the coexistence period in 2025. However, only 25% of global payments traffic on Swift is now in ISO 20022, and it seems very unlikely that all Swift members will be ready in time. Therefore, there is the potential for these financial institutions to struggle with business continuity. As a result, fail-safes must be put into place such as leveraging additional translation tools such as Bottomline’s Transformation and Enrichment Service. However, the pain for smaller providers doesn’t end there as the real test will come when they try and roll out as many solutions as they can from the Swift Essentials suite to remain competitive, all whilst juggling busy roadmaps and with minimal advisory support from Swift. In fact, Swift has been clear that they are reducing their customer support functionality and that their recommendation is to seek solutions by contacting your Swift bureau for faster resolution. So, the solution is to ensure that you use a trusted third-party provider to connect you directly with the Swift interface and who can help fix any issues and support best practice implementation.  

In conclusion, Swift Essentials is a positive initiative that will ensure that the industry addresses the G20 Roadmap for enhancing cross-border payments by driving the adoption of solutions that improve cost, speed, access, and transparency. However, ambition rarely neglects to leave casualties in its wake and so smaller providers will need additional external support and expertise to keep pace. 

About Vitus Rotzer

Vitus Rotzer is Chief Revenue Officer – Financial Messaging Global at Bottomline. Vitus is a versatile senior executive with strong leadership, management, and business development skills. He has over 20 years’ experience in financial services and software technology within leading and international companies, encompassing sales management and senior executive roles.

About Bottomline

Bottomline makes business payments simple, smart and secure for businesses and financial institutions, of all sizes, all over the world. More than 10,000 corporate customers, 1,400 commercial and business banks, including 15 of the top 25 global banks, rely on our industry-recognised payment and software platforms to accelerate digital transformation in a complex world of business payments and financial management. Bottomline solutions touch customers and payments in 92 countries across six continents. Our teams serve the world from primary locations in the US, the UK, Switzerland, Israel, India, Australia and Singapore. Bottomline is a portfolio company of Thoma Bravo, a highly respected software-centric private equity firm with USD 120 billion in assets under management. Bottomline financial technology helps banks and non-bank financial institutions transform for future needs, and those of their business customers, across the business payments and cash lifecycle through key capabilities including:
Financial Messaging:Securely communicate, reconcile, and manage the data in financial transactions within, and between banks and non-bank financial institutions, both locally and internationally.