Smarter Payments Tracker Eyes Interoperability

In corporate payments, high-value transactions with tall demands for compliance, transparency, speed, efficiency and security aren’t just placing a burden on the businesses sending and receiving funds. Financial service providers are operating in a global payments market filled with disruption as they work to offer cross-border corporate payment services that live up to businesses’ standards.

In the latest Smarter Payments Tracker, PYMNTS takes a deep dive into the challenge of interoperability in achieving better cross-border payments services and experiences.

While the world and its technologies are becoming more integrated, the financial services sector has a slew of hurdles it most overcome to promote a level of interoperability required to accelerate and streamline cross-border transactions. But as the Tracker explores, there are several initiatives in the works to tackle those challenges — including in the corporate sphere.

Payments messaging firm SWIFT has taken recent steps to promote interoperability of its payments network, recently announcing that it would allow blockchain platforms to loop into SWIFT’s global payments innovations (GPI) service to facilitate real-time transactions.

More recently, SWIFT also announced new guidelines for financial institutions to adopt the ISO 20022 payments messaging standard, a way to streamline communication and transmission of data between service providers to facilitate cross-border transactions in a more efficient manner. In its announcement, SWIFT noted that this standardization will be especially impactful for high-value corporate payments within the correspondent banking sphere.

“Adoption of ISO 20022 will continue the transformation of correspondent banking already ongoing,” SWIFT said in its Wednesday (July 31) announcement. “International payments often contain unstructured and ambiguous transaction data, causing unnecessary delays and failed processing. ISO 20022 will modernize international and domestic payment rails, enabling right and new payment services.”

Elsewhere, InstaReM strengthened its position in the cross-border small business payments market with the introduction of a new feature last year allowing SMBs to make simultaneous payments in various currencies to multiple recipients in less than 24 hours — a service reliant on interoperability and seamless coordination.

In the public sector, corporates and government entities are also collaborating in pursuit of interoperability.

As the Tracker notes, the European Commission and European Central Bank are currently collaborating to develop an interoperable payments network to facilitate transactions around the European Union — across borders, and in real time.

Across the pond, meanwhile, the U.S.’s Faster Payments Task Force under the Federal Reserve is researching ways to promote payments industry standards to accelerate and safeguard payments without undermining competition.

Interoperability, which can occur in one of three ways — interoperability between financial institutions within the same open-loop system, network interoperability between different payment schemes and parallel system interoperability in which payment service providers act as an intermediary between merchant and card networks — is essential to ensuring a smooth payments experience for payers and recipients.

As the latest PYMNTS Smarter Payments Tracker shows, while enhancing payments often requires competition, collaboration is also key to promoting interoperability, particularly when it comes to the traditionally friction-filled cross-border corporate payments space. That means corporates, financial service providers (including FinTechs and traditional FIs), government agencies and industry bodies can, and should, all have a hand in initiatives that can standardize and streamline processes.

“It is only a matter of time before interoperability becomes the norm,” the Tracker concludes, “especially as more governments and businesses launch related initiatives. All solutions must be explored until that point is reached.”