Why Banks Should Care About TCIB

For decades, Swift has been the bedrock of international payments. However, relying on a single solution is no longer enough. Cross-border payments need to be faster, cheaper, and more resilient. Electrum believes there is no silver bullet for cross-border payments. What you need is the right rail for the right payment.

Why Swift matters but cannot be your sole solution

Swift is a critical piece of international payments infrastructure, whose reach is difficult to replicate, particularly for banks operating across multiple markets. However, reach alone is not a cross-border payments strategy.

As international trade becomes faster and increasingly real-time, the limitations of traditional correspondent banking with Swift become more visible.

When a business needs to settle a cross-border payment immediately, bottlenecks in correspondent banking networks can present a significant hurdle. While the majority of payments sent through Swift reach the beneficiary bank within ten minutes, the last mile can still experience delays. Local regulations, bank processes, operating hours and time zones can affect when the funds ultimately reach the intended recipient.

Additionally, correspondent banking fees via Swift make this traditional cross-border channel too expensive for low-value payments. A small business paying a provider cannot afford an additional R2 000 for a R50 000 payment.

New regulatory landscapes also create concentration risk if you exclusively rely on a single solution for cross-border payments. One example is the stricter regulations of Electronic Funds Transfers (EFTs) for cross-border payments into the Common Monetary Area (CMA).

Regional cross-border payment systems, such as TCIB, have emerged to address the real-time and affordability gaps.

Why TCIB when Swift exists?

TCIB is a low-value, instant cross-border payment scheme designed for the SADC region. It is open to banks and authorised non-bank financial institutions that meet the relevant participation requirements. In South Africa, participants must be licensed or registered as Authorised Dealers (ADs) or Authorised Dealers with Limited Authority (ADLAs). South African Rand (ZAR) obligations are settled through SADC-RTGS, while non-ZAR currencies are settled via correspondent banking arrangements.

Since TCIB is a scheme linked to every participant, a single integration gives you access across four countries currently, with the potential to reach the entirety of SADC.

For ZAR transactions, TCIB can reduce reliance on multi-bank correspondent chains, creating the potential for a simpler and more predictable cost structure for low-value regional payments.

The commercial value becomes clearer with a hypothetical, but possible scenario.

An artisan nut brand lands a life-changing 70-store trial retail contract. The challenge? They need to fulfil the order by the end of the month.

Their supplier in Zimbabwe can ship today, but needs payment before they begin. Our artisan nut business cannot afford a single delay. Logging in to their primary business app, they see that payment will only reach their supplier in three days.

However, they log onto your app and see ‘make immediate payment’. With one click, the funds clear, the order moves, and you are their new primary bank.

However, TCIB is limited in reach and transaction value. If your clients are sending six million rand to the United States, then you still need Swift.

How multiple rails give you a comprehensive solution

The approach to solving cross-border payments shouldn’t rely on a single rail to do everything. To operate in the cross-border payments space, your focus should not be on which mechanism is better, but rather on leveraging each mechanism's strengths and mitigating its gaps.

A simple side-by-side comparison illustrates how TCIB and Swift can complement each other to create a robust cross-border payments platform.

Figure 1: Swift and TCIB compared

Swift and TCIB differ significantly because they serve different purposes. TCIB is designed to promote trade and cooperation within SADC, particularly for small businesses or remittances. That’s why payments are low-value, fast, and fit within the region's unique cash-out needs. Conversely, Swift is designed for reach, to move any sum of money.

What is the future of cross-border payments?

There is no single solution to cross-border payments because the use cases are simply too varied. The banks that will dominate in the coming years are unlikely to do so on a single rail. They will provide the capability to send money over the right rail for the appropriate payment type, as the business case demands.

Learn how a multi-rail solution can protect your cross-border payments from concentration risk.