'SWIFT taught computers to Indian bankers'

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a network that helps financial institutions to send and receive information about financial transactions in a secure way.

Headquartered in Belgium, SWIFT globally processes 27 million transactions on a peak day. SWIFT India was established in 2012, to provide reliable, secure and reusable domestic messaging platform for India’s domestic financial community.

Deccan Herald’s Uma Kannan recently met Saqib Sheikh, chief operating officer of SWIFT India, and he spoke in detail about SWIFT India’s services and its future plans.

SWIFT India recently received the RBI approval. What was it for and when did you commence your India operations?

SWIFT has been used in India since 1991 with the top banks using our services for cross border financial transactions. It has been here for 24 years, and we have 117 financial institutions in India that are connected with SWIFT.  Globally, SWIFT has its presence in 212 countries and is used in 10,000 financial institutions. Not just banks, corporates too use our service. SWIFT provides a network that enables financial institutions worldwide to send and receive information about financial transactions. In India our services are largely used for the cross-border exchange.

The RBI did not allow SWIFT for the domestic exchange and the reasons were  due to concerns around sovereignty of data, foreign governance concern, because they do not want a foreign provider in critical markets like payment systems, and pricing in foreign currencies. We founded a joint venture with nine Indian public and private sector banks — Axis Bank, Bank of Baroda, Bank of India, Canara Bank, HDFC Bank, ICICI Bank, Punjab National Bank, State Bank of India and Union Bank of India. These nine are also shareholders.

Who owns SWIFT India?

SWIFT SCRL, the global banking cooperative, owns 55 per cent share and the rest are held equally by our bank partners. The year 2013 was a strategic year for us. We wanted to have a full service and in 2014, two data centres were deployed and began operations in India. For security reasons we would not disclose the places of data centres, but they are geographically dispersed. We submitted all documents to RBI, and March this year we received the approval from the RBI. They gave 11 terms and conditions and all of them were fulfilled. Two external audits have also been done and documents have been submitted to the RBI. In February 2015, we went live, and banks are piloting with us. By the end of this year, we will see live traffic.

What kind of services were you doing in 1991?

State Bank of India and Punjab National Bank, among others, have been using the SWIFT services since 1991. During our 20th year celebration, someone was mentioning like how SWIFT was the first computers in banks, and that the way bankers learnt about computers was through SWIFT. Indians have been spread across the globe. There is always a need for payments. Either parents send money to their children staying abroad, or children send money back home. Indian banks had been dealing with global banks to facilitate those payments. Global banks such as Citi Bank, HSBC, Standard Chartered and ANZ, have been always using SWIFT. We have also launched five services such as RTGS (Real Time Gross Settlement), inter bank trade finance and inter bank treasury. In future, we will provide services in the security space, foreign exchange central counterparties and other domestic financial transactions.

Are there any other players in this particular space?

SWIFT is the only platform that cuts across market and asset classes. In that way there are no competitors. But in each space there are private network providers. For example, the RTGS has its own channel and the ACH has its own channel. We are not replacing any of these channel and we will be an alternative to  existing channels.

Apart from the existing channels, they can use our system too. Nobody will dismantle their existing network. We serve all — corporates, large private banks, large public sector banks and payments banks.

What about foreign players?

If you take the history of SWIFT, it’s not-for-profit. It is owned by banks. Other people have tried to enter the space, but it is difficult to compete with a member owned not-for-profit organisation. Every year, SWIFT globally sees consistent growth in adoption and traffic. More traffic has come into our network and this has allowed us to slash average per transaction prices. Our business model is per message and based on the value of the financial transaction. Whether the transaction is for Re 1 or Rs 1 crore, it’s the same price. If you take globally, it’s €7(Rs 3) per transaction. It’s the one that we charge for banks and banks might charge citizens more money.

Indian banks might be charging $10 for foreign remittances, but SWIFT is charging the bank only Rs 3 per transaction. The global SWIFT network seeks more than 27 million transactions on peak days. What we realised was that the growth in traffic of our network is the predictor of GDP growth. If you take India, in the last eight years, we have observed an average of nine per cent year-on-year growth. As far as business overseas is concerned, India is witnessing healthy growth.