Rapidly changing technologies, nowadays, embolden banks to improve their operation by moving faster towards the digitization of their services, offering customers simpler and more accommodating ways to conduct their businesses and oversee their financial lives.
Essentially, new technologies aspire to challenge the traditional methods banks commonly use in order to transfer funds, internationally. Whereas banks and other financial institutions have already begun adjusting their operations, the truly significant change in banking is expected once financial technologies—that have been rapidly and continually developing in the past decades—will be implemented in order to modernize, not merely update, the financial services community.
While it is true that many of the available banking services are in need of an upgrade, the most prominent service in need of a change is the international money transfer service. Individuals and businesses often transfer money abroad. Although it is a common practice, it can also be time consuming and somewhat pricey. Traditionally, banks use the SWIFT system in international wire transfers. Albeit having some advantages, this old-dated technology can no longer compete with modernized technologies that are designed to offer customers the ultimate experience.
Characteristics of the traditional SWIFT money transfer system
The SWIFT wiring system has long been in use as one of the most reliable and efficient methods designed to allow international money transfers. Whereas the advantages of the SWIFT system remain unblemished, in today’s digital climate, the shortcomings of the system far exceed its assets.
Advantages of the SIWFT system:
- Enables transfer of funds to any location worldwide.
- A trustworthy method for transferring funds which holds on to high standards and low risk. Transactions that are carried with the SWIFT system are safe and secure.
Disadvantages of the SWIFT system:
- Transactions are time consuming as they take up to 5 working days.
- Due to the involvement of several banks in each transaction, higher fees are paid.
- Currency conversion costs are added to the total cost of any transaction.
New technologies to challenge the traditional SWIFT system
Electric Money technology and Blockchain-based systems can offer an alternative for the traditional SWIFT system, presenting new, efficient and relatively inexpensive methods for international money transfers. Corresponding with current digitalization trends, these alternatives will be able to facilitate customers with modernized banking experience.
Blockchain technology
One of the prominent features and advantages of Blockchain technology is its decentralization: having one single database, the system operates as a unit, yet each of its parts is capable of operating independently. This is highly beneficial when it comes to international money transfers since no third parties are involved in Blockchain-based transactions. Using this technology decreases the fees commonly paid in international wiring, therefore reducing the total cost of each transaction.
Furthermore, Blockchain-based money transfers are undeniably faster, benefiting both banks and customers: banks save time and invest fewer resources in each transfer while customers are able to send and receive money faster.
Banks have already begun revising potential Blockchain systems in order to implement them within their proffered services. Since this technology is conducive to banks and customers, banks have additionally begun investing in companies which develop blockchain technologies. Following this digital rejuvenation, banks are likely to improve their user interface and customize their customer experience management to suit the new digital possibilities that are gradually becoming more and more available.
Electronic Money Institutions (EMI’s) offer upgraded financial services. EMI’s, such as PayPal, for example, enable global money transfers that are both faster and less costly. Thus, these digital alternatives challenge SWIFT’s traditional money transfer method and bring customers into the digitally advantageous present.
