From Messages to Processes: SWIFT Got It Right

The interbank cooperative will offer member banks a set of common API-based processing services, such as pre-validation of essential data, fraud detection, data analytics, transaction tracking, and exception case management. Aite Group anticipates that with this move, SWIFT member banks will be able to harmonize the proprietary API protocols now in use and regain a collective control of the business relationship with the clients, which is now at risk.

SWIFT has embarked on a daring move, similar to changing a tire while driving the car. The interbank payment network still must ensure “basic” messaging services that constitute its core mission. However, by offering a common set of platform-based data management services, SWIFT will now allow its member banks to confidently use common industry standards and protocols that remove the use of proprietary technology from the competition equation and to fully concentrate efforts (and budget) on delivering value-added services to consumers and corporate clients. With SWIFT’s APIs and cloud technology providing a set of common processing services, these clients will operate workflows that meet their needs by choosing the most appropriate banking products and services.

SWIFT’s announcement validates Aite Group’s findings that banks will partner together in consortia-based platforms to harmonize the different legacy and proprietary API standards while regaining a collective control of the business relationship with the client. Banks will compete not by keeping client relationships captive with technology but by servicing a bigger population of corporate users’ needs with an ecosystem of API-based products and services. The SWIFT network and community represent such an ecosystem.

Aite Group foresees that with such a strategic move, SWIFT will not only go beyond the provisioning of financial messaging services but also take on a totally new role: becoming the marketplace of payments-processing APIs that allows member participants to become facilitators and distributors of marketplace-based products and services to their own customers. “Participants” and not only “banks” because the marketplace platform must open to financial institutions, fintech vendors, and corporate clients, enabling each participant to become a value producer as well as an aggregator and consumer of its own and third-party products and services. This is the real nature and mission of a platform model: Consumers become producers, and vice versa.

The likely business model that Aite Group envisions for SWIFT is similar to current platform-driven models such as Uber or Airbnb. The platform provider does not own the physical assets but retains the relationship with the client (i.e., the user interface experience or UIX). In the case of Uber, the individual asset owners (i.e., the car drivers) could never afford to operate the network on which they run their business. They need the platform as much as the platform provider needs them. The car drivers produce the services (i.e., the rides) that consumers (i.e., the clients) purchase. Both parties plug into the platform for their user experience. All this is possible because the ride service is “dematerialized:” The use of the asset is disconnected from the ownership of the asset. Finally, the consumers may themselves become producers by offering rides on the platform with their own assets, and vice versa for drivers.

SWIFT holds the right cards to play for such a platform-based model. SWIFT may offer an API marketplace in which the competition between banks will shift from holding the UIX with the client to servicing the client by delivering API-based products and services that more closely align with its needs. SWIFT may open a new era for open banking: Its marketplace APIs will “dematerialize” the banks and separate the asset (e.g., the bank’s deposit, the payment transaction) from the service (respectively, data analytics to spot the most rewarding place to hold liquidity, pre-validation of essential data, and fraud detection to ensure compliance and security of the payment transaction).

If SWIFT will follow this strategy, its collaborative ecosystem will make financial institutions, fintech providers, corporations, payment services providers, and regulatory bodies all consumers and producers plugged into the platform, saving them money because neither will have to deploy internal development teams. The platform will ensure an immediate connectivity and user experience for the customer while allowing banks to enjoy the results as participants of the cooperative platform.

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