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	Legacy payments platform Swift is piloting a new system to speed up banks’ cross-border transfers and reduce errors, firing a shot across the bow of a blockchain-based project that claims to do the same thing and payments fintechs that offer cheaper, faster services.

Founded in 1973, Swift was banks’ original answer to the question of how to move money around the world more quickly and easily. The platform is now owned by 2,500 banks and is used to shift more than $200bn around the world daily.

Inefficiencies, however, have left the platform ripe for competition from payments start-ups such as Revolut and TransferWise, as well as the Interbank Information Network (IIN). More than 130 banks, led by JPMorgan Chase, have signed on to the blockchain-based IIN project, which shares information between banks on a mutual distributed ledger. That allows them to quickly resolve errors and compliance issues that can delay payments by weeks.

In a testament to how banks are hedging their bets on the future of payments, several of those banks are now part of a pilot for Swift’s own fix for lengthy payment delays — — a new “prevalidation” system in which banks use an application programming interface (API) to access each other’s data to check things such as the validity of bank account numbers when a payment is initiated.

Under the blockchain-based system information is shared on a mutually distributed ledger hosted on the cloud that can be accessed and edited by all participants in real time. The API system, by contrast, allows banks to access each other’s data on a bilateral basis, ensuring the recipient’s account information is correct before it is sent in an effort to reduce delays.

“We know that there are still some payments which are badly formatted and missing some information,” said Luc Meurant, chief marketing officer of Swift. “Instead of correcting that later in the chain and delaying payment, we are trying to anticipate as many of those issues as possible (with prevalidation) so payments can be processed faster.”

Swift estimated that around 10 per cent of all payments on its platform were held up because of errors. Manish Kohli, global head of payments and receivables at Citi, said the new system would “considerably reduce” the costs banks incur to resolve problematic payments and would improve customer experiences. That would “absolutely” allow banks to cut pricing and compete more effectively with fintechs, he added.

Mr Meurant said that while the solution was going after “exactly the same kind of issues” as IIN, Swift’s fix was superior because its angle is “one of scale and industrialisation” and the solution could be rolled out to Swift’s 10,000-plus members relatively quickly.
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JPMorgan Chase has been the leading voice on the IIN, but is also one of the 15 banks taking part in the Swift pilot. A spokesman declined to comment on the relative merits of the two projects and JPMorgan’s decision to back both.

Mr Kohli said his bank, which has not joined the IIN, believed the Swift solution was more viable because APIs were already widely used within banks in applications such as sharing customer data to give people an aggregate view of their accounts in one place.

“We felt this would be faster to scale,” said Mr Kohli, adding that payments solutions only really work if they are ubiquitous.

He pointed to Swift’s success in introducing its global payments innovation (GPI) as evidence that it can achieve quick adoption. GPI, which allowed payments to be tracked end to end and introduced transparency on fees, was introduced more than a year ago and is being used in more than 50 per cent of Swift’s payments. It will be used exclusively by 2020 by users of the Swift network.