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SMART INFO EXCHANGE for SWIFT BANKING

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SWIFT India enables the entire financial community to exchange automated, standardised financial information securely and reliably, thereby reducing costs and risks, and improving compliance and services to its customers, says Saqib Sheikh, Chief Operating Officer, SWIFT India Domestic Services Pvt Ltd, in an interaction with Sneha Mejari of Elets News Network (ENN)

What is the purpose of SWIFT India and how relevant is it to India’s financial markets?

Saqib Sheikh Chief Operating Officer, SWIFT India Domestic Services Pvt Ltd

Saqib Sheikh
Chief Operating Officer, SWIFT India Domestic Services Pvt Ltd

While the banking sector has seen phenomenal growth in credit and transaction volumes over the last few years, many indicators continue to show significant potential and rapidly growing demand for banking services. Currently, more than half the population remains unbanked, and of those who do avail bank services, only a quarter actively use digital banking channels. It is because many of them still prefer transacting on paper at brick and mortar branches.

However, this scenario is changing as the use of digital banking channels is growing at 20–25 per cent annually, in keeping with 34 per cent annual increase in the Internet access. With initiatives like Pradhan Mantri Jan-Dhan Yojana (PMJDY), the number of bank accounts has jumped to 27 per cent in a single year. As the citizenry is educated and targeted by such initiatives, this will put stress not only on existing business lines, but also on businesses with technologies relying on to offer services to their customers in an efficient, user-friendly and predictable manner.

While the country’s GDP has at times been anaemic, as low as 3.9 per cent in 2008, India’s overseas financial transactions have consistently grown by over nine per cent year on year, as seen on the SWIFT network. Regardless of progress in the national reforms agenda, this shows a confident trajectory for growth in the banking sector from both domestic and cross-border business in the coming years.

All this growth will be coupled by an increasingly volatile and competitive marketplace. Digital wallets, bill aggregators and other tech firms are entering into traditional bank businesses. The 11 new payment banks will add to an existing crowded bank space that struggles to find differentiation and competitive advantage. Customers too show little brand loyalty and up to 50 per cent of digital banking users are eager to try services from the new banks.

With India’s growth and inclusive agenda, increasing competition from new entrants and pressing demand from fickle and mobile customers, financial institutions will have to be prepared and agile.

This is where SWIFT SCRL, the global banking cooperative, and its joint venture in India, SWIFT India, will have a major impact. SWIFT SCRL provides financial messaging services to over 10,800 financial institutions in over 212 countries. This is the network over which the financial world conducts its business operations with speed, certainty and confidence. SWIFT India uses this proven SWIFT SCRL technology to provide a domestic financial platform for India’s financial markets.

Who are SWIFT India’s customers and what difference can it bring to them?

SWIFT India provides a messaging service. The concept is simple – financial institutions can send structured financial transactions in a highly secure and reliable manner to one another. The beauty is in its scale and re-usability. The service can be used across markets, financial instruments and counter parties. Whether you are a bank who needs to send payments for clearing and settlement to RBI or NPCI payments systems, or a corporate customer who wishes to open a letter of credit, or a broker dealer wants to confirm his/her securities trade, the same messaging platform can be used.

With guaranteed delivery, ability to send individual transactions or bulk files of 250 megabytes or more, and almost no down time, this creates a powerful foundational platform on which the industry can grow and innovate. No longer do banks, NBFCs, corporates, payments systems, stock exchanges, clearing houses and other financial institutions have to invest in disparate channels for trading, confirming, settling or advising their counterpart and customers.

What services does SWIFT India provide?

In February 2015, SWIFT India’s messaging platform has gone live and today we provide messaging services to banks and corporates in payments, trade finance and treasury markets. To use the service, financial institutions require a SWIFT infrastructure, comprising minimal software and hardware, to be deployed and integrated at their premises. This enables them to connect to the network and communicate with customers and counterparties.

Banks and corporates are in the process of integrating with the SWIFT India platform and by the end of 2016, they will be able to clear and settle high and low value payments, exchange letters of credit and bank guarantees and trade in foreign exchange and money markets, all over a single channel fully integrated with their back office systems, eliminating paper and manual processing.

Is there an exciting project you are working on now that will have significant impact?

SWIFT India’s heritage is that of a cooperative. Our customers are our owners and our focus is reducing costs and risks, and enabling innovative new products and services.

This platform will enable financial institutions
  • To connect and communicate with payment and securities market infrastructures, counter parties and corporate customers in a highly secure and reliable manner
  • Build capacity and resiliency in critical financial systems, reducing operational and systemic risks generated from significant projected transaction volumes
  • Develop a rich end-to-end channel for their customers to transact with speed, transparency and certainty.

In practice, this means banks and corporates define the way in which we conduct business and deliver services. SWIFT India has established working groups focussed on payments and cash management, trade finance and treasury, which the community defines the financial standards with which the market will communicate over the SWIFT India platform.

Financial standards define the language with which the industry communicates. It is important that the language and its lexicon is well understood, otherwise the sender of a financial instruction will not achieve the desired result. In a financial system this can create sizeable financial risk.

To address this, SWIFT India in consultation with its working groups has issued “2015 Version 1 Usage Guidelines”. These guidelines are derived from global financial standards and adapted for India’s markets. Accessible to customers of SWIFT India, these guidelines establish the language with which the industry can uniformly communicate with one another. These 2015 Version 1 guidelines will be adapted as business needs evolve.

What are your future plans for the company?

As Indian financial institutions connect to the platform, we will see a major shift in traffic from inefficient and insecure bilateral connections to a common foundational communication platform.

The SWIFT India platform is scalable and functionally extensible, and we will open the channel to many more markets, instrument types and counter parties. Our next area of focus will be the securities market place, where exchanges, clearing houses, dealers and investors have similar challenges in dealing with disparate channels.

In all circumstances, we will proceed under the guidance and direction of our customers and community.

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