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Swift traffic hits record high despite digital disruption

Global / 07-02-18 / by
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Despite facing more competition from digital players, Swift saw record traffic on its core messaging service in 2017.

Traffic topped 7.1 billion messages last year – up 12% from the year before – sparked by double-digit growth in global payments. The last day in November was the busiest in the platform’s history, with 32.84 million messages sent, an 8% increase on the previous record.

The strong growth is perhaps a reflection of the strong rebound in global trade. A recovery in commodity prices helped global trade value to rise by 7.5% in 2017, according to research from Allianz. In volume terms, the insurer says trade grew by 4.3%, marking the first time in a number of years that global trade growth outstripped that of GDP.

The company also accredits the launch of its global payments innovation (gpi) service in assisting the strong growth. Launched in 2017 in response to advancements in technology, gpi allows real-time payments and same-day settlement. It now accounts for 10% of all cross-border payments on the network, Swift says.

Luc Meurant, the company’s chief marketing officer, says that “the success of gpi in 2017 exceeded expectations”. He adds: “With more banks going live, additional banks signing up to the service, and fast-growing demand from corporates, volumes will continue to rise dramatically.”

Swift has been earmarked by some in the trade finance industry as one of the stakeholders most at risk to fintech disruption. In many markets, customers are demanding improvement on payment terms and more efficiency. These demands have sparked innovation within Swift.

As part of the gpi initiative, Swift launched a proof of concept for real-time Nostro reconciliation using a Swift-developed distributed ledger technology (DLT) sandbox with 33 global transaction banks. After months of testing, Swift found that the results were encouraging, but was not yet convinced that DLT is the best technology for its purpose.

Among the digital players that could potentially rival the dominant Swift in the trade finance payments space is R3, which last year partnered with 22 banks from around the world to build a blockchain-based cross-border payments solution. The solution would enable instant transfers of fiat currencies and central bank digital currencies directly on R3’s Corda platform.

Another is Ripple, which provides real-time payments via blockchain-based technology. However, Ripple still accounts for a small market share in comparison with Swift.

Late last year, Ripple CEO Brad Garlinghouse took aim at Swift in an interview with GTR, saying: “Companies should feel threatened if they’re not solving a customers’ problems. If you’re evolving with the marketplace and solving customers’ problems and helping them be successful, why would you feel threatened? If you’re resisting change and not acknowledging how you’re limiting the success of your customer, then you should feel threatened.”

When approached by GTR to comment on the record Swift traffic, a Ripple spokesperson skirted nebulously around the news: “Global payment volumes are increasing across the board due to shifting business needs and consumer demands, driven by growing global commerce. In recent months, we have seen a surge in volume of transactions through RippleNet. SEB, a Swedish bank, for example has now processed US$920mn over RippleNet. What is clear is that the demand for fast, low cost, transparent cross-border payments is on the rise – on average, we are adding one customer a week to RippleNet as banks and payment providers worldwide seek to innovate their payment systems,” read a written statement.

Meanwhile, one area of Swift’s traffic which continues to underwhelm is business settled in Chinese renminbi (Rmb). Amid continuing capital controls from the Chinese government, Rmb usage accounted for just 1.61% of domestic and cross-border payments on the Swift network in December 2017.

Swift research found that while mobile payments services such as AliPay, WeChat Pay and Swift gpi should help the Rmb grow, it has largely disappointed.

“The Rmb has had a difficult year in 2017 and struggled to realise its potential for growth. Experts suggest that capital controls and uncertainties over future regulations mean that a significant reversal of the decline in Rmb usage for trade and payments is unlikely in 2018,” says Swift’s head of market payments for Asia Pacific, Michael Moon.

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