We paid N25,000 as transfer charges for N15,000 to mobilise one of our partners in Ghana in 2004. The payment was urgent. If it did not happen then, we would the business.
He said to wire the money through Ecobank. Then, Ecobank was the only bank in Nigeria with a presence in Ghana. Our partner would merely walk into any Ecobank branch in Ghana on the streets of Accra and cash the fund from a teller.
It worked as if I stretched a hand in Nigeria and placed the cash in his palm in his homeland Ghana. Quite interesting. However, the sacrifice was huge. Well, Ecobank held us in a stranglehold. We had no choice. We played along. The bank won. Our partner was happy. That was in the past.
On the one hand
It is easy and cheap to make such a transfer now. Many banks offer the same service. Besides, technology has simplified banking.
But this has also attracted the attention of criminals who are searching for ways to bypass the laws and perpetuate their illegal activities.
While cross-border payment is easy in 2024, criminals are taking advantage of this to destroy economies through money laundering.
If there were no banks, how would the drug dealers and money traffickers launder their funds? Funds would be ferried across land borders. Concealed in holdall bags in the trunks of SUVs. And dry-cleaned in the open market.
On the other hand
The existence of banks has made the trade easy for criminals. The banks have become drycleaners for illicit funds. They launder illegitimate funds, making the funds disappear into the system.
As such, the introduction of ISO 20022 Payment Standard, a common, global end-to-end standard, has come to prevent the illicit business of money laundering activity. Oh, is ISO 20022 the reason banks are investing heavily in technology upgrades?
In the long term
The Committee on Payments and Market Infrastructures (CPMI) adopted the standard to improve cross-border payments. The global adoption of the standard will end in 2025.
At its March 2024 meeting, the Swift Board re-confirmed the community’s commitment to ending the coexistence period in November 2025.
It emphasised that priority would go to payment instruction messages to ensure operational continuity and interoperability.
Banks around the world are migrating to ISO 20022 standard. Because corporate bodies are demanding richer, structured data to enhance their payments and reconciliation processes.
Besides, the G20 is promoting the harmonised use of the standard for enhancing cross-border payments.
For instance, NIBSS has deployed the ISO 20022 payment standard. NIBSS employed a foreign company, Payment Components, to implement the global standard. Payment Components has worked with over 65 banks and financial institutions in 25 countries.
The Central Bank of Kenya (CBK) has transferred the Kenya Electronic Payment and Settlement System (KEPSS) to the ISO 20022 platform.
Last month, Kenya’s banking industry regulator directed lenders, including microfinance institutions to start testing the upgraded system for messaging high-value financial transactions aimed at increasing the speed of transfers while heightening the checks against money laundering.
Kenya’s Real-Time Gross Settlement (RTGS) system is operated by CBK to process large-value and time-critical payments. It is the backbone of Kenya’s domestic and regional payment transactions.
The initiator of the standard, Swift, was founded in the 1970s, based on the ambitious and innovative vision of creating a global financial messaging service, and a common language for international financial messaging.
Swift and the Board have urged its members to reinforce their efforts to switch cross-border payment instructions to ISO 20022 in the next 18 months. It said it would continue to provide resources to support the community in achieving this important milestone.
Nicolas Stuckens, Head of ISO 20022 Adoption, and Data Quality at Swift explained that the standard helps the banks to reduce friction, enhance straight-through processing (STP), and better reconciliation.
The ISO20022 Standard will enhance interoperability between domestic and international payment systems, facilitating easier cross-border transactions, and increasing the ease of doing business globally.
In the short term
As a bank customer, what was your experience during this technology upgrade?
[Featured Image Credit]
*Rarzack Olaegbe, the co-founder/COO, eMaginations Comm. Ltd., wrote from Lagos
