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Over the years, payments network Swift’s roadmap for trade has seen its fair share of recalibrations and resets in an effort to keep pace with industry demands and technological innovations, often meeting with a lukewarm reception from a sceptical industry.

Among the twists and turns have been the surprise scrapping in 2019 of its trade services utility, the centralised matching and workflow engine that operated as the backbone for the bank payment obligation, an early attempt to digitise trade. The emergence of blockchain technology, meanwhile, saw Swift pressed into defending the utility of its network as new entrants sought to disrupt the cross-border payments landscape.

More recently, Swift has been focused on transformation initiatives, including a dramatic overhaul of its infrastructure in 2020 to expand beyond financial messaging to end-to-end transaction management, while taking an increasingly active role in standardisation efforts to help support trade digitisation.

During the Sibos event in Toronto, GTR spoke to Shirish Wadivkar, who took on the role of global head of wholesale payments and trade strategy for Swift in September last year, to gain an insight into the organisation’s current priorities.

 

GTR: Conversations at Sibos have revolved around greater linkages between trade and payments. What does this mean for Swift’s approach to trade?

Wadivkar: At Swift, we acknowledge that trade is, in fact, the backbone of payments. Payments start after trade is completed. There’s a realisation that we need to connect these worlds. It’s not sufficient to just make payments frictionless but we need to also make commerce frictionless, and to do that, payments and trade must come together. This is the unification of strategy for us at Swift, and why my team is tasked to work on payments and trade and their interlinkages.

While documentary trade is still core, the growth is in open account non-bank intermediated trade, which shows up as payments on Swift. Open account financing messages don’t go over Swift. We’re not talking about ISO 20022 for trade yet, but what we do in payments does help trade processing. Delivering ISO 20022 for payments will generate benefits for the trade world, enhancing efficiency in open account financing and reconciliation, and generating good data.

GTR: What is Swift doing to support trade, and what are you focused on?

Wadivkar: Our strategy for trade, especially at a time when trade is under pressure and banks need to show profitability and growth, is not about boiling the ocean. We are focused on pragmatic aspects that can move the needle for banks and improve efficiency around trade. We look at it in three different areas: foundation, core and advanced.

The foundation area is really about standards. We’ve seen in trade many digital platforms emerge, and some have seen limited growth, some have shut down, and others may be rethinking their strategies. A lot of this is because of fragmentation. Addressing this requires commonly agreed standards. Having this foundational layer of standards allows us to build a strong data layer to do more going forward. This is also the thinking behind the work on the corporate-to-bank API standards for guarantees we have delivered with the ICC, enabling the automation of what is a high-volume, cumbersome process for banks and corporates. The foundation layer is about improving the reception in the market of ISO 20022 for richer and more structured data.

Having established standards, the next step is to ensure they are used. We’re somewhat altruistic about it; we don’t necessarily want people to use the Swift network for the standards. We want standards to be open, published and available across any network. Even if you’re running a proprietary connection between a bank and a corporate, to reduce fragmentation we suggest using the global standard that we built after broad-based industry consultations. So, with trade under pressure, our operation at the foundation is to help reduce costs, improving the return on investment in trade.

Then, there’s the core layer: interoperability, which is the beating heart for Swift. Over time we’ve noticed digital islands being created in trade. One thing we’re discussing with our community is how we can provide network optionality to banks. It’s still a nascent concept for us, however, our goal is to assist banks to connect to networks outside of Swift in a way that maintains data quality and transaction integrity and allows for end-to-end tracking.

As a case in point, we have conducted successful experiments with electronic bills of lading (eBLs). It’s crucial to acknowledge that the eBL standard isn’t a Swift standard – it’s an industry standard created and promoted by the FIT Alliance, but this demonstrates our support for the industry and how Swift’s investments in its network, infrastructure and reach, not to mention the trust that people have in Swift, can underscore the rationale for using the eBL standard.

We carried out two eBL experiments and will provide explanations to the industry on the second one, which involved two banks and four providers. It’s a mature experiment now. Our approach to anything non-foundational is to conduct the experiment, pause and await the industry’s reaction. If the experiment generates a viable business case, it then moves to production. We avoid building ahead of the curve as it’s counterproductive and incurs unnecessary costs.

Finally, the advanced aspect of our trade strategy revolves around data.

Without the right dataset, digitisation is impossible. Contrary to popular belief, the trade data available on Swift is quite limited compared to the data held industry wide. For instance, goods movement data and the supply chain financing portion of the dataset aren’t on Swift. While financing data is on Swift to some extent for documentary trade, as are payments, the dataset is significantly larger outside Swift.

To respond to use cases like ESG, fraud prevention or anti-money laundering, there’s a need for a more extensive dataset. This is why we categorise it as an advanced strategy — it’s not something that can be easily achieved on day one. We plan to collaborate with the industry to reach this goal. We have a global trade leaders group, with representation drawn from banks worldwide. This group plays a crucial role in both defining the strategy and executing it, creating the necessary groundswell for such a complex initiative.

GTR: As technological advances bring new networks to the market, how does Swift stay relevant?

Wadivkar: I think, as a network, our job is to ensure that what we do is industry-ready. There are places where other networks have grown, delivering better solutions that the industry is consuming, and that is good. In some cases, these networks have limited scale – despite having great products – because they lack the right level of network density. Our response is to consider how we can assist our client banks, who are at times investors in these initiatives, to connect more efficiently to new networks.

We are open to collaboration with the community and third parties, even more so in trade, as we understand that trade is, and will remain, fragmented. There’s no need to build everything on one platform; that approach doesn’t reflect the reality of trade. Instead, we’d rather enable a platform to connect to other platforms and assist clients in doing so.

GTR: A year into your role at Swift, what are your key priorities and what would you most like to achieve?

Wadivkar: I sincerely believe that the capillarity of Swift’s network is its most valuable asset. My focus is on ensuring that banks not only utilise this asset but also leverage it to offer better use cases and new business models to their clients, at a reduced cost. This approach would not only allow them to be more nimble and flexible but also enhance their connectivity and expand the reach of the ecosystem significantly.

In essence, my ultimate goal is to see Swift driving network optionality for its clients. This would enable them to grow their businesses and franchises, and connect to multiple networks without compromising on comfort, security and stability.

Image credit: Swift