By Dino Sani
The exponential growth of fintech innovation in recent years
has brought remarkable upgrades to Latin America’s
financial services – most notably in the efficiency
and ease of retail and domestic payments.
But, despite this impressive progress, there is still a
great deal to do when it comes to modernizing global
Furthermore, owing to the emergence of new trade corridors
to the Latin American market – particularly from Asia
– meeting the demand for real-time cross-border
corporate payments has become a greater priority than ever
before for the region.
Given the importance and scale of such an undertaking, banks
worldwide are increasingly collaborating to find solutions that
enhance the efficiency and security of the global payment
infrastructure – resulting in myriad partnerships
focused on delivering the required digitalization to effect
greater harmonization and to help bring trading blocs closer
In this respect, SWIFT’s global payments
initiative (gpi) – the first phase of which went live
earlier this year – has only been achievable through a
critical mass of banks putting aside competitive differences in
order to produce a network effect, driving standardization and
interoperability in the payments sphere.
The initiative holds a great deal of promise. Leveraging a
network equal to 75% of SWIFT’s cross-border
payment traffic, gpi is designed to facilitate same-day payment
clearing, as well as full transparency of transaction costs and
With over 90 institutions backing the service (of which
approximately 20% are from the Americas, including Banco do
Brasil, Itaú Unibanco, and Banco de Crédito del
Peru), gpi represents a milestone in banking collaboration that
could ultimately help break down trade barriers and facilitate
more efficient, effective transactions in Latin America.
Of course, any project that requires a critical mass also
needs to ensure regulatory and process standardization in order
to succeed. In this respect, one key development has been the
ISO 20022 initiative, which has introduced common messaging and
standards between financial institutions.
ISO 20022 messages have more data fields, can transfer
information such as remittances and can also support non-Latin
characters – crucial for transacting with Asian
ISO 20022 should help drive interoperability between
domestic payment systems, and the ISO Real Time Payments Group
has recently been created to explore and help standardize the
role of ISO 20022 in real-time cross-border payments.
A key challenge here is achieving the network effect
in Latin America, with Colombia currently the sole participant
on the continent in the payments space.
ISO 20022 is present elsewhere in the region, however, which
is promising in terms of potential future growth in the
payments arena. Brazil, for example, has used the format for
securities since 2011, and is a member of the ISO 20022
Registration Management Group (RMG), the governing body of the
Certainly, interest in adopting ISO 20022 for financial
business transactions appears to be gaining momentum in the
region. Nine projects are underway in South America, and
central securities depositories in Barbados and Jamaica have
recently signed up to the SWIFT ISO 20022 Harmonization Charter
– a framework of principles for the harmonized
adoption of ISO 20022 – and are "poised to support
regional and international initiatives."
With the combination of the growing presence of ISO
20022 across Latin America, and global cross-border payment
initiatives gaining in strength, it is hoped that this will
help to encourage Latin America buy-in for ISO 20022 adoption
Banking on blockchain?
Elsewhere, distributed ledger technology, or "blockchain,"
is being explored with great anticipation by the Latin American
market, with the belief that its cryptographically secure and
transparent qualities make it a well-suited solution to
facilitate payment flow in an onerous regulatory
Indeed, the region’s best known start-ups
in the blockchain field, including Argentina’s
BitPagos, have opened up new avenues for cross-currency
payments for many small businesses.
In light of blockchain’s huge potential, both
banks and fintechs are involved in collaborative initiatives,
exploring how it could transform the nature of payments. The
R3 consortium, for instance, comprising approximately 70
financial institutions, including Itaú Unibanco, has
been founded with the aim of addressing the practicalities
– including achieving common standards and
communication protocols – required to turn
blockchain from a proof of concept into a practical solution
for the financial services industry.
Amid the buzz surrounding the disruptive nature of fintech,
Latin America is certainly well-placed to benefit from its
resultant technological advances.
But it is only by working together on this shared goal that
banks can hope to truly transform global payments. Thankfully,
with a critical mass of start-ups already operating in the
fintech ecosystem, as well as a host of key financial players
embracing the benefits of collaborative partnerships, we are
edging ever-closer to creating ground-breaking developments for
Mr. Sani is the head of treasury services Latin
America at BNY Mellon. The views expressed herein
are those of the author only and may not reflect the views of
BNY Mellon. This does not constitute treasury services advice,
or any other business or legal advice, and it should not be
relied upon as such.