A beneficiary is usually oblivious to the intricate networks that data and money flow across before cash lands in their bank account. The sender, however, is struck with dozens of choices to make with a cross-border transfer that might leave them reeling.
At this stage, a network of networks – along the lines of what Unbounded is doing – where senders can differentiate between various platforms and their offering, will be invaluable.
But what will happen as more and more payment solutions come to fruition?
There will be consolidation in the payments industry. It is inevitable.
So, while polite transaction bankers continuously talk about collaboration in payments for the benefit and the development of the industry in general, in reality only a handful of these networks will gain market share and succeed in the long run.
Transaction bankers are playing a tactical game. Some are joining forces with other institutions and consortia – because there is strength in numbers – while others wait patiently on the sidelines to jump on board once a payment platform becomes the market leader.
So many companies are experimenting with blockchain in cross-border payments right now it would be easy to think that a platform that uses this type of technology will reign victorious. Ripple is doing it, JPMorgan is doing it, IBM is doing it, Facebook wants to do it and Visa and MasterCard are looking into doing it.
But then there are companies such as Transferwise, which has been able to gain market share in payments because of its ability to keep costs down, and Swift, which hopes that its own global payment initiative (Swift gpi) and the prevalence of domestic instant payment solutions will spread cross-border without blockchain as a prerequisite. There are also MoneyGram, Western Union and WorldRemit as well as many others.
Do these platforms have a chance?
For the first time in a while, blockchain may not be central to deciding which payment platform will win in the long run. In fact, blockchain may not be as central to transaction banking as it has seemed to be for the last 10 years.
This was in evidence at this year's Sibos conference in London – although no one I spoke to there would say iton the record.
"Nobody in transaction banking wants to be the blockchain cynic, so, for now, we will keep a lot of these feelings to ourselves," one European transaction banker at the conference said.
After years of bullish announcements about how blockchain will transform the payments landscape, Sibos had a different flavour to it this year: a focus on how technology will benefit customers and corporates, as opposed to developments in technology itself.
"What's the point in coming up with solutions that use blockchain if the people we are creating these solutions for in the first place don’t see the benefits in this technology?" another transaction banker at the conference declared.
So what happens if we look at consolidation in payments under this new lens? Which platform will win through as consolidation takes hold?
Some will argue that Swift – which as we have already pointed out doesn't use blockchain technology as yet – is the natural choice. Swift has linked more than 11,000 financial institutions across more than 200 countries and is working with the banks to set industry standards.
Swift gpi was launched in 2017. By September 2019, 60% of all Swift transactions were sent via gpi and 3,500 financial institutions are signed up to the initiative.
But further momentum towards becoming gpi-compliant will wane because of that vast number of institutions connected via Swift – to gain consensus it needs to work with over 11,000 institutions, many in developing markets where domestic instant payment solutions are not the priority.
Swift gpi may not be the answer to faster cross-border payments we all hope for.
On the other hand, JPMorgan's Interbank Information Network (IIN) is growing at lightning speed. After Deutsche Bank signed up to IIN on September 20, another 25 banks quickly followed suit, bringing the total number of banks signed up to the platform to 356 since its launch in 2017.
More top-tier banks will follow Deutsche, because joining JPM IIN makes sense: the bank is the largest dollar clearer in the world and its treasury services business processes around 26 million transactions a day – worth more than $3 trillion in 108 currencies and 100 countries.
Yes, 356 banks isn’t 11,000 – but that’s the point. It is a manageable number, and once IIN starts processing cross-border payments on its platform, more banks will come on board. Rather than JPM having to convince members to become part of IIN, as Swift will have to do with gpi, banks will join precisely because of what IIN has to offer.
What is important is an ability to remain nimble in this evolving landscape. Whether or not the platform uses blockchain technology is a moot point.