As transaction banking is witnessing a flurry of digital innovations, one major value proposition stands out: transaction visibility and control through enhanced tracking.
By André Casterman, Chief Marketing Officer at INTIX, the data management fintech and Chair of the ITFA Fintech Committee.
Doing business requires the continuous exchange of information, of money as well as timely delivery of goods and services. The Internet made information fly in real time, flawlessly and at global level. Money, however, has not reached that level of speed and convenience as it still takes multiple days to credit remote beneficiaries on most country-to-country routes, even within the EU such as from the UK to Belgium. In a world moving to real-time experiences and the Internet of Things (IoT), this isn’t sustainable. Change is inevitable.
Major efforts can be witnessed since a few years across the banking industry to remedy this situation. All players ranging from transaction banks, incumbent infrastructure providers and new entrants recognise the need to drastically improve long-standing practices in global payments and global trade. The heat is on.
Cross-border payments get on the SWIFT Tracker
In the cross-border payments market, various propositions have emerged to increase speed and enhance convenience for end-customers. Most of those require working with fintech intermediaries focusing on specific corridors and client segments, thus lacking a global proposition. They succeed to attract niches of clients but fail to address global needs consistently.
One well-known player is best positioned to address new needs: SWIFT.
SWIFT’s global payments innovation (gpi) is the foremost example of an incumbent infrastructure reacting to emerging needs, and preparing itself for future battles with self-proclaimed competitors. Transaction workflow management is not part of SWIFT’s initial design as the early mission of SWIFT was to automate the telex. Payment message tracking has therefore been introduced as an added value layer which is what SWIFTgpi brings to the industry. By monitoring and tracking cross-border payment-related messaging flows, SWIFTgpi succeeds to increase end-to-end transaction visibility. It revamps ageing inter-bank payments practices, thereby helping correspondent banks offer a new experience to their Corporate and SME clients, as per Figure 1. Such innovation is a no-risk all-gain move for transaction banks. Certainly the very first one for banks to consider investing in.
Figure 1. SWIFT has added a tracking capability on its global financial messaging platform in order to increase visibility on inter-bank payment flows
Cross-border payments may get on the blockchain
Next to SWIFT’s efforts, a series of entrants are betting on the promises of the blockchain. Those need however more time to prove themselves even if short-term progress is palpable. By relying on the blockchain as underlying value transfer layer, new fintechs embed payment processing, tracking and auditing into their native value propositions. Long-term ambition is to underpin global commerce with an “Internet of Value” as suggested by Ripple. Stellar is another such provider active in global payments. Both look promising and will surely be replicated by other crypto currency players. Whereas swiftGPI suggests an incremental improvement to legacy business practices, the new crypto currency solutions such as Ripple’s xRapid and xVia – when successful – will be hugely transformative.
Figure 2. The blockchain embeds transaction tracking natively (source: FT)
Trade Finance gets digital and tracked on the blockchain after centuries of paper use
On the trade finance side, most recent innovations consider the blockchain as the most promising way to digitise trade information flows. Examples include R3 / TradeIX (Marco Polo) as well as we.trade, IBM / Maersk and some others. Here too, tracking is part of the key value proposition as reported by IBM and Maersk on their joint TradeLens platform: “… a blockchain-based cross-border supply chain programme to manage and track the paper trail of tens of millions of shipping containers across the world.”
Before trade and trade finance get fully digitised (which will take another decade), tracking trade transactions and offering increased visibility is also very valuable. It is being implemented by some major trade banks and it is actually achievable before moving to the blockchain by relying on their internal systems and processes. Figure 3 illustrates such capability as offered by HSBC – the largest trade finance originator – which brings a Trade Transaction Tracker to the mobile devices of its clients. Here too, tracking, visibility and control are of the essence.
Figure 3. HSBC Trade Transaction Tracker
It’s all about offering clients increased visibility and control by tracking transactions in real time
Whether based on well established messaging schemes such as SWIFT or brand-new still-to-be-proven technologies such as the blockchain, one value proposition stands out: in both cases, clients benefit from maximum visibility on their on-going cross-border transactions thanks to continuous tracking, preferably reported in real time. When problems occur, correspondent banks can intervene faster and resolve outstanding issues, before their clients are impacted.
One more thing (*) … tracking your own internal transaction processing
When offering increased payment / trade transaction visibility to your clients through SWIFTgpi and/or any blockchain providers, one capability is often underestimated: your technical ability to track transactions internally within your own IT environment. As most of the transaction status and details reside in various internal systems, a dedicated enterprise-wide transaction tracking layer is required to enable end-to-end tracking, as suggested by figure 4. This is what the INTIX data management technology delivers.
Figure 4. Internal transaction tracking offered by INTIX combined with SWIFTgpi
Financial institutions wishing to offer transaction tracking capabilities to their clients will face a series of challenges given the legacy internal systems they have to deal with. Rather than making legacy systems redundant, data management technologies extend their life time, thus avoiding a major infrastructure revamp and the related costs and risks.
As depicted on below figure 5, the INTIX data management layer acts as an enterprise-wide business activity monitoring capability integrating both internal and external transaction data feeds. It caters for high-performance tracking of high-volume transactions in real time.
Figure 5. The internal data management enables end-to-end transaction tracking combining both internal and external data feeds in real time
Invest now: it is a safe bet and will become a “must” soonest
Offering increased transaction visibility to your clients is a safe bet. Various industry innovations are elevating client expectations and succeeding to prove their value, such as SWIFTgpi. This is why investing in enhanced internal transaction visibility and control is key to keep up with market trends. The INTIX Transaction Tracker makes it happen. It can be applied on any financial transaction such as cross-border payments and trade finance.
Contact us at firstname.lastname@example.org or visit www.intix.eu to discover how the INTIX data management technology can help you expand your global payments and trade value propositions to your clients – at no risk.
(*) “One more thing” used to be a key phrase used by Steve Jobs to introduce the best news at the end of its product shows.