The fast-changing technological environment is pushing banks to innovate their operations and take bigger steps towards digitization. While there are many services in need of an upgrade, one of the most important are international money transfer services.
While banks use traditional methods for sending funds overseas, many new technologies are set to challenge that notion. Financial technology is growing at an astonishing pace, and we can expect it to change the way we do our banking dramatically.
It’s evident that banks and financial institutions have already begun to modernize their operations. But the biggest changes will begin with the implementation of brand new technologies as opposed to simply updating the old.
Sending money abroad is a common practice for individuals and businesses but can often be time-consuming and costly. Banks traditionally use the SWIFT system for international wire transfers. And while it has some advantages, there is a lot of room for improvement. There are new technologies and services for international wire transfers that offer customers a better experience and therefore challenge the SWIFT method.
What is the SWIFT transfer system?
SWIFT is the most commonly used system for sending and receiving money internationally. Having been in use a long time, it’s a popular and trusted method of wiring funds overseas. SWIFT has many advantages as a transfer method. However, there are numerous disadvantages as well.
- Transfer money to any location across the globe.
- Well known and trusted transfer method holding a high standard and little risk.
- Transactions are safe and secure.
- Slow transaction processing – can take up to 5 working days.
- Higher fees due to multiple banks involved in transactions.
- Currency exchange fees added to the total cost.
Which new technologies are challenging the traditional SWIFT system?
The disadvantages of the SWIFT system have highlighted new technologies that fill in these gaps. Banking trends like Electric Money technology and Blockchain based systems can be an attractive alternative for transferring money internationally.
Blockchain technology is decentralized therefore there is no third party involved in a transfer. This can greatly reduce fees that are usually added to international wire transfers.
It also offers a much faster system for transferring funds which is beneficial for banks and customers. Faster transactions save the bank time and resources while the customer can send and receive funds faster.
Banks have already started testing blockchain based systems and investing in companies that can implement the technology into their systems. With this innovative revamp, many banks will likely enhance the user interface improving customer
Electronic Money Technology:
EMIs, or Electronic Money Institutions, have been emerging and offering upgraded financial services. EMI’s like PayPal offer fast and easy transactions and pose a challenge to traditional SWIFT transfer methods.
Sending funds internationally is generally much faster via EMI as well as more cost effective. The rising popularity of electronic money Fintech companies will continue to challenge the traditional banking environment by offering a better banking experience.