Introducing the Global Payments Innovation Initiative
Including an exclusive interview with Wim Raymaekers, Head of Banking Markets, SWIFT
SWIFT’s global payments innovation initiative which aims to streamline and increase transparency of cross-border payments, has attracted enormous interest from both banks and corporate treasurers. In this feature, Helen Sanders, Editor, discusses the objectives and progress of the initiative so far with Wim Raymaekers, Head of Banking Markets at SWIFT.
What is the global payments innovation initiative?
This new initiative from SWIFT introduces a multilateral service level agreement across banks to create a common standard for processing cross-border payments, which in turn will transform correspondent banking. Through the first of these service level agreements, corporate treasurers will gain same-day use of funds, have access to rich payment information which is transferred between parties to a transaction, and have greater transparency and predictability of fees, including FX costs. Each transaction will also have a unique reference number which can be tracked from end-to-end through a new, cloud-based solution which banks will ultimately integrate into their electronic banking tools. A pilot is underway, the results of which will be presented at Sibos 2016 in September.
Where did the concept first originate?
The initiative was first conceived as part of SWIFT’s 2020 strategy as a result of a unique collaboration with both banks and corporations. There are a variety of projects taking place globally to increase the speed and convenience of domestic payments which have in turn resulted in increased demand for faster, more transparent cross-border payments. We presented our preliminary ideas at Sibos in 2015 and based on the scale of support, we launched the initiative at the end of the year. At the time of writing, 73 banks have now signed up to the global payments innovation initiative just six months since it was first launched.
Global Payments Innovation Initiative: Key Points
What is the attraction for banks?
Banks want to provide the best payment experience possible to their customers, but this becomes more difficult in the case of cross-border payments which are often processed by multiple correspondent banks. Each bank may have different processing speeds, formats and fee calculations, so although the originating bank takes responsibility for the payment from a customer perspective, it is not able to control it. Therefore, issues of delay or unexpected fee deductions reflect on the originating bank but it cannot influence these issues. Consequently, a faster, more transparent and consistent cross-border payment process leads to better customer relationships and more accountability.
You’ve mentioned the benefit to corporate treasurers already, but what is the level of demand so far?
Although not all corporate treasurers are yet aware of the initiative, there is significant interest amongst those who are familiar with it. In particular, multinational corporations welcome the potential to settle cross-border transactions more quickly over their existing infrastructure, which has a significant supply chain implication, the ability to trace payments and collections throughout their life cycle, and have better predictability of cross-border transaction fees. At the recent Cash Management University hosted by BNP Paribas, for example, SWIFT’s global payments innovation initiative was identified by participants as the most compelling emerging innovation for their business.
What are the aims of the pilot that is currently underway?
21 banks are piloting the initiative, and as I mentioned, the initial results of these will be announced at Sibos this year. These pilots have a variety of aims:
- to achieve same day value for cross-border payments (compared to T+1, T+2 or more today);
- to provide predictable, transparent fees on cross-border payments; and
- for banks, payers and receivers to be able to track the payment from end-to-end using a unique reference number.
We will be demonstrating the payment tracking capability at Sibos, and this is likely to prove a game-changer for cross-border flows. As well as being a standalone cloud-based tool, this cross-border payment tracker will ultimately be an integral part of treasurers’ electronic banking solutions.