With competition increasing, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is stepping up its game. Recently, SWIFT revealed plans for a new Global Payment Initiative (GPI) system to tackle information-transfer verification.
This GPI aims to compete with financial products from rivals who are embracing new technology, including Ripple and J.P. Morgan. However, SWIFT itself also showed interest in blockchain earlier this year through its PoC (Proof of Concept) project. Thus, the new GPI may even include a distributed public ledger in the future.
SWIFT developing a new payment system
According to a press release on December 5, SWIFT plans to pilot a pre-validation GPI service. This service aims to improve the identity-verification process and eliminate errors within payment messages. SWIFT plans to do this using application programming interfaces (APIs), which would facilitate bank-to-bank communication.
Based on a real-time API-based mechanism, the pilot will enable sending banks to send and receive API calls over SWIFT to seamlessly check beneficiary account information with the ultimate receiving banks.
Instead of the current manual checks, the API would allow banks to verify clients faster than before. Thus, the automated verification would significantly speed up money transfers.
To adequately test the new GPI platform in cooperation with SWIFT, 14 banks have agreed to join the pilot program. Some of the well-known names to sign up include the Bank of America, Merrill Lynch, Bank of China, Barclays, BNP Paribas, and Deutsche Bank.
GPI service spurred by competition
So far, the adoption rate of blockchain within mainstream industries – including the financial sector – has been slow. However, several large financial institutions are now looking to implement the technology into their businesses.
J.P. Morgan’s Interbank Information Network (IIN) is one of SWIFT’s biggest FinTech competitors. By implementing blockchain, IIN brings public ledger records to banks, allowing them to share important information.
It’s not just large corporations that are challenging SWIFT. In fact, growing crypto organizations may pose a threat to this established market player. Ripple CEO Brad Garlinghouse made a bold claim during an interview with Bloomberg, predicting that his platform will overtake SWIFT. Garlinghouse noted that old solutions need improvements, identifying Ripple’s blockchain network as the ideal replacement.
The technologies that banks use today that SWIFT developed decades ago really hasn’t evolved or kept up with the market.
A rivalry between companies, not technology
Although Ripple and J.P. Morgan are causing headaches for SWIFT, the rivalry is not based on technology.
Earlier this year, SWIFT dabbled with blockchain in its Nostro account project and had positive results. The test included distributed ledger technology (DLT) and Proof of Concept (PoC). The pilot program – in which 34 banks participated –showed that DLT provides the necessary precision and security for exchanging information.
The test project shows that SWIFT is not skeptical of blockchain itself. In fact, it’s applying that technology within existing platforms that is creating competition. Even SWIFT’s upcoming GDI might include DLT solutions, according to Chief Platform Officer Stephen Gilderdale:
It is a strategic priority for SWIFT to work with new technologies like DLT and incorporate them into key solutions like GPI.