SWIFT: supporting cross-border payments in Africa Featured

  • Written by  Dale Benton
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SWIFT: supporting cross-border payments in Africa

For over ten years, SWIFT has supported African cross-border payments ,, and will continue to embrace innovative technologies of the future.

SWIFT connects more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries. The company enables its global community of users to communicate securely by exchanging standardised financial messages to facilitate global and local financial flows, supporting trade and commerce all around the world.

SWIFT’s recent report, “Africa Payments: Insights into African Transaction Flows”, reveals that intra-Africa payments clearing and trade is increasing in importance. The paper maps commercial payment flows against financial flows, pointing to an increase in the use of African currencies for cross-border payments and a decline in the dominance of North American clearing banks and the use of the US dollar.

The data further highlights a significant increase in intra-African commercial payments, with almost 20% of all cross-border commercial payments being credited to an African beneficiary. This indicates that more goods and services are being bought and sold within Africa, up from 16.7% in 2013. Intra-African clearing of payments has also increased, from 10.2% in 2013 to 12.3% in 2017. This indicates that an increasing number of payments are being routed through Africa instead of via a clearing bank outside of Africa.

As a member-owned cooperative, SWIFT plays an important role in the Southern African Development Communities’ (SADC) Real Time Gross Settlement System (RTGS). SADC RTGS (previously known as SADC Integrated Regional Electronic Settlement System (SIRESS), established in 2013, is a common electronic payment system which enables direct cross-border interbank payments in real-time. From its inception to 31 March 2017, 83 participants carried out 712,099 transactions with a value of 3,100 billion rand on the system. The system delivers faster settlement time, a reduction of settlement risk and lower cost of transacting. SWIFT also supports the East African Payment System (EAPS) where the company continuously seeks out opportunities to further the digital payment conversation through innovative technology.

“With rapid change occurring in both the payments and securities landscapes, SWIFT is continuously researching and testing new technologies in practical use-case scenarios and working together with banks to rejuvenate the correspondent banking model,” says Denis Kruger, Head of Sub-Sahara Africa, SWIFT.

“To this end, we launched the SWIFT global payments innovation (gpi) service in 2015, to enhance corporate customers’ experience of correspondent banking by increasing the speed, transparency and predictability of cross-border payments.”

Through SWIFT gpi, customers’ transaction times have been significantly shortened to minutes and in some cases even seconds. Currently, around 70% of gpi payments leaving Africa are completed and credited to the end beneficiary within 30 minutes.

Efficiency and speed is one thing, but introducing multiple solutions and increasing the number of digital transactions can only heighten the risk surrounding cashless payments and transfers. SWIFT recognises this and Kruger points to financial organisations as they increasingly position themselves at the frontline of defence. “All over the world, regulators require financial institutions to meet stringent Know Your Customer (KYC), anti-money laundering and sanctions rules and regulations,” he says. “African banks need to comply with such obligations in multiple jurisdictions. This is demanding - and increasingly costly - but the costs and reputational impact of non-compliance are even higher.”

The Africa Cyber Security Report 2017, conducted by Serianu, revealed that the cost of cyber-attacks on African businesses is around $3.5bn annually.

To this end, SWIFT launched the Customer Security Programme (CSP) in 2016 as a sign of the company’s strict commitment to recognising the importance of cybersecurity, not just in Africa but around the world.

“We strive to reinforce and safeguard the security of the wider financial services ecosystem through our Customer Security Programme, a dedicated programme supporting banks to secure and protect their local environment, prevent and detect fraud in their commercial relationships and continuously share information and prepare against future cyber threats in collaboration with others,” says Kruger.

“Having accurate, up-to-date information on relevant cyber threats is critical and we are supporting greater levels of intelligence sharing across the global community.”

Additionally, SWIFT has developed a broad finance crime compliance portfolio with the SWIFT community. This portfolio is a suite of managed and shared services that leverage SWIFT’s platform, technology and standards to remove the complexity and give African banks a simpler, more-cost effective way of meeting the challenges of financial crime compliance.

Around the world, SWIFT has played an integral role in standardisation across the financial global industry and it has done so by creating and maintaining financial messaging standards and reference data standards. These standards ensure that data exchanged between institutions is unambiguous and machine friendly, enabling efficient automation and reducing industry costs and risk.

A key example of this is ISO 200022, a methodology that supports rich data structures and enables data transparency and interoperability. This standardisation is both global and open, with no single interest controlling it and as Kruger notes, also flexible enough to be adapted as new technologies emerge.

Africa’s financial market is still growing and can benefit significantly from SWIFT’s standardisation. Kruger points to South Africa as a front runner in the adoption of global standards, citing the South African Central Securities Depository State becoming one of the first security market infrastructures to use ISO 15022 which sets a series of principles necessary to provide the different communities of users with the tools to design message types to support their specific information flow. Along with the South African Reserve Bank, both institutions are looking to move to ISO 20022 in the near future, highlighting Africa’s growing appetite and capability for the modernisation of the financial industry.

“ISO 20022 is also expected to help with the practical implementation of regionalisation projects in African financial markets,” says Kruger. “As the financial industry on the continent matures, financial communities are looking to share investment costs and expand their activities from their local bases. The adoption of the global ISO 20022 standard will provide a common language for such regionalisation initiatives.”

SWIFT has already cemented itself as a key player in sub-Sahara Africa and through its cooperative nature and structure of its network, products and services will continue to meet the evolving needs of its customers. A key example of this is SWIFT National Member Groups. Acting as representatives of SWIFT shareholders and users, serving in an advisory capacity to the Board of Directors and SWIFT management, the National Member groups are present in 35 African countries and allow SWIFT to customise its solutions to fit local requirements. This has seen the implementation of SWIFT’s Sanctions Screening in Nigeria in 2014 to tackle financial crime compliance regulation with the Central Bank of Nigeria.

The digital revolution is in full force, and SWIFT’s customers are continuously influenced by new technologies regulation and evolving consumer behaviours. As it moves forward and embraces this changing landscape, SWIFT remains committed to being a central part of this evolution.

“One key priority for the coming years is promoting SWIFT gpi, the new standard in cross-border payments, to the wider financial community both in Africa and across the world,” says Kruger. “We currently have four banks live on the service in Africa, Standard Bank, ABSA Bank, Nedbank and FirstRand Bank, with many more going live in the coming months. The service is supporting these African banks in becoming more competitive by increasing the speed, transparency and end-to-end tracking of cross-border payments.”

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