SWIFT has announced plans to test a cross-border instant payment system in Asia Pacific. With the region becoming more integrated in terms of business and particularly e-commerce, a cross-border instant payment system will be an attractive service among SMEs. Still, at the end of the day, it all comes down to cost.
In anticipation of the launch of Australia’s own instant payment platform – the New Payments Platform (NPP) – GlobalData released a report in October 2017 featuring various real-time retail payment platforms around the world, predicting possible implications for the service, including the creation of the necessary conditions for instant cross-border transfers. SWIFT’s announcement that it will be testing its cross-border SWIFT global payment innovation (GPI) payment service in Asia Pacific using the NPP platform in Australia is the first step on such a path.
At the current testing stage the SWIFT GPI service will only serve payments from participating banks in China, Singapore, and Thailand for payments going to Australia. Funds sent to Australian recipients from participating banks will use the Australian NPP instant payment platform that was launched in February 2018 for the final leg of the transfer into the customer’s account. In this case the cross-border payment will not only be transferred almost instantly, it will also be paid to the mobile number or email address associated to the PayID of the payee in Australia.
In the long run, once the instant cross-border payment capability is officially rolled out both banks and consumers will benefit. For participating banks, it will save them from having to invest in their own cross-border infrastructure as they can use the SWIFT platform to offer the service that once would have taken a few days to clear. On the consumer front, instant cross-border payment will be a nice-to-have on the occasions when a fund transfer to someone in another country is urgent.
However, with all the different cross-border payment channels already available, the most critical issue that SWIFT will have to address is the cost it will pass on to consumers and businesses. If the service is not cost competitive compared to other readily available services, SWIFT may end up only serving the needs of consumers who are in urgent need of international transfers. Consumers or businesses that make transfers on a regular basis, which will be the majority of those requiring cross-border payments, will most definitely choose a more economical channel. So this is a great step, but one that needs to be cost-aware if it is to make a big impact in the cross-border payments market.
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