Swift, a well-known medium for financial transaction messaging, has come under fire for failing to meet the needs of global financial markets. Some people believe it is inefficient in settling cross-border transactions. It cannot manage any transaction amount in real-time and does not provide transparency about settlement risk and payment status.
Global Payments Innovation – A New Initiative
Swift launched Global Payments Innovation (‘GPI’) to address such criticisms. It has the ability to make funds available the same day for B2B transfers falling within the same time zone. It offers end-to-end payment tracking and transparency, secure remittance information and end to end payment tracking. Twelve banks currently use the first phase of this project, which was launched in January. It is presently used by ING, ‘Danske Bank’ Bank, Citi’ Bank and Bank of China. It currently focuses on B2B payments. Swift also made a commitment to expand its cross-border payment system.
In terms of clearing payment blockages worldwide, such as payment and settlement blocking, the effort to improve global messaging service may be too little or too late, particularly for non-banking customers.
Remittance companies that use ‘Bitcoin.’
These issues are being addressed by both new and old “bitcoin” remitters. Different ‘blockchains are used to transfer money all over the globe. Align Commerce, one of the most famous ‘bitcoin remittance businesses, was funded with $20.25 million. Align Commerce CEO, Marwan Forzley, believes distributed ledgers (and ‘blockchain) are the next generation opportunity.
Cross-border payments in the Global Finance Chain
These payments accounted for around 33 per cent of the world’s GDP and were worth $26 trillion in 2014. The money will remain trapped in the current system because of inconsistent and non-standard infrastructure. A customer must find a transmitter to manage money transfers in order to send payment across the border. Because of its connections with financial institutions in both the recipient and home countries, the transmitter can transfer money. Each institution also has its own intermediary, which increases the complexity of the process. Each bank involved in the transfer process charges a service fee. It can take up to 7 days for a procedure.
In 2014, the global corporate sector was valued at $15.7 trillion. They are able to negotiate fees as low as 1% to 2% of the total payment amount. Small and medium-sized businesses, as well as person to person transactions, can be subject to charges up to 15%. Customers who can’t afford these transactions will find it more challenging to pay for them.
Customers who are from disadvantaged or underbanked parts of the world may not be able to find the paths that will allow them to make cross-border payments. This could include using the infrastructure of a global bank to transfer money.
The efforts of ‘Bitcoin Remittance Businesses
Swift has stated its commitment to transparency in cross-border payments via ‘GPI’, but it did not provide any relief for customers who are unable to negotiate fees. However, the ‘bitcoin remittance firms have attempted to address this issue on a limited scale. These companies allow customers to transact borderless transactions at a low and well-controlled price.
Hong Kong is home to ‘Bitspark,’ one of the biggest ‘bitcoin remittance companies. Despite the lack of traction, the company believes it has the best long term prospects. George Harrap, the CEO of the company, said:
“The vast majority (if not all) of world’s remittances do not go through banks. They are done via cash money transfer shops. They will continue to be able to manage their transactions and business. The cost of remittance companies batch payments will not change. Therefore, companies that transfer $10 million per transfer and drawdown this balance for small transactions may see a reduction in wire fees.
The Problem Does Not Go Away
Swift intends to improve payment transaction recording for its member institutions across the globe. However, it is possible that innovations inspired by ‘GPI may be found in other ‘blockchain-enabled applications. Swift is a member of the HyperLedger Project, which might help to develop cross-border frameworks.
Alan Safari, CEO of ZipZap, raised $1.1 million in 2014 to expand its cash and offer a ‘bitcoin service. He stated that he had raised $1.1 million in 2014 to expand its cash flow to ‘bitcoin’ service.
“ZipZap” uses both traditional (Swift) bank payment rails and ‘blockchain ‘technologies to determine the most cost-effective and efficient transfer option. Swift’s ‘GPI” is used primarily for B2B payments and will not affect ‘ZipZap’s current business flow.
In the Ripple, it is stated that launching “GPI” was more of an effort to stay relevant than a step towards modernization.