Engaging Corporate Perspectives in the Development of SWIFT gpi

SWIFT

Following a successful pilot in 2016, SWIFT’s global payments innovation (gpi) initiative is now live with 12 banks already exchanging gpi payments in over 60 corridors, an important milestone in the transformation of cross-border payments. As gpi continues to build momentum, corporate treasury and finance professionals have a critical role to play in determining its next priorities. 

 

This was the background behind the corporate workshop hosted by SWIFT in which ten leading corporations participated. The workshop provided an opportunity for corporates to share with SWIFT the challenges they are currently experiencing in cross-border payments, to discuss the current and planned strategy for gpi, and establish a process of co-creation and engagement in the future.

Corporate cross-border payment challenges

Corporate participants outlined their key challenges/objectives in cross-border payments, which included:

• Predictability and timing. While treasurers and finance managers recognise the advantages of same-day (or quicker) payment, the bigger priority is predictability of the payment reaching the beneficiary account.
• Traceability of payment. The ability to track the progress and status of payments is a critical requirement for corporate payment users.
• STP and integration. Corporate participants agreed that the value of new solutions, such as a new payments tracker, is enhanced when delivered as an integral element of their existing treasury and payments infrastructure. One participant noted,

“For multi-banked corporations that have adopted a bank-neutral connectivity strategy, it is not feasible or desirable to access different electronic banking systems for each bank. Consequently, payment tracking and future capabilities need to be delivered through existing web-based and host-to-host connectivity channels.”

• Quality and completeness of remittance data. Truncated or missing remittance data create significant problems in reconciling flows, leading to high volumes of queries for both accounts payable (AP) and accounts receivable (AR).
• Fee transparency, including FX costs. Fees levied by correspondent banks are often unpredictable. This problem is exacerbated by FX conversions at an unknown rate.
• Deductions. Deductions of charges create reconciliation problems but also additional payment claims from the beneficiary when the full amount is not received. In some cases, penalty charges may also be payable if the beneficiary does not receive full payment.
• Rejections and investigations. Treasurers and finance managers have little visibility of when and why a payment has been rejected, and the investigation process can be time-consuming.
  
  

Introducing gpi

SWIFT introduced the background to gpi and explored how the first version, and future phases, would address these challenges. The growing number of national (domestic) real-time/faster payment schemes is creating an expectation of faster, transparent cross-border payments. In part, this demand is due to the effect of new market entrants who are challenging the existing cross-border payment model. In addition, more onerous requirements in areas such as KYC are prompting all market participants to evaluate how to increase cross-border payment efficiency whilst achieving compliance.

SWIFT gpi was conceived as a response to these changing demands, with the intention to deliver enhancements to the cross-border payment experience rapidly, initially by leveraging initial bank and market infrastructure, whilst establishing a roadmap for future digitisation and transformation of payments. The initial objectives of gpi are that payments should take place on same-day, be fully traceable, with transparent fees and full remittance data. SWIFT gpi delivers a global payments tracker, opening up a world of new experiences for corporates. This includes:

• Faster, same day use of funds within the time zone of the receiving gpi member;
• Remittance information transferred unaltered;
• Transparency of fees;
• End-to-end payments tracking.

 

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The initial launch of gpi includes three products:

• Tracker – this is a tool that SWIFT provides to banks, that banks can then offer to customers to enable them to track the current status of cross-border payments from end-to-end, including correspondent banks and costs at each stage of its lifecycle. Banks can then integrate the tracker into their customer offerings in accordance with their channel strategy.
• Directory – based on SWIFTRef, this allows participants to find out which banks are gpi members, in what currencies/ countries they are reachable, and the cut-off times that apply.
• Observer – this monitors bank compliance with the SLA, helping banks to monitor their own performance, but also to select correspondent banking partners based on their SLA compliance level.

 All 56 SWIFT-connected market infrastructures (such as EURO1 and TARGET2) can already process gpi payments. Local market practices have also been agreed for gpi participant banks for payments passing through CHIPS, Fedwire (US) and CIPS (China) so that payment tracking is not ‘lost’ when payments are routed domestically. As of January 2017, 92 banks had signed up for gpi, covering 224 countries and 71% of SWIFT cross-border traffic.

 
Corporate feedback on the gpi value proposition

Wim Raymaekers

Corporate participants expressed strong interest in gpi and indicated that the current and future versions would go a long way to addressing some of the challenges they were currently experiencing. A number of participants said they would approach their banks as a priority to understand their gpi strategy and encourage adoption and delivery of the tracker capability to corporate customers. As one participant observed,

“SWIFT gpi is one of the most important developments we have seen in international cash management for some years, and a bank’s ability to support gpi and deliver gpi services, such as the payments tracker as part of their electronic banking offering will quickly become a selection criterion.” 

Another continues,

“It is not only for specific payments that we see the value of gpi, but all types of cross-border payments. For example, some small payments may result in disproportionate levels of resource to deal with queries or investigations, so traceability offers considerable benefit.”

Inevitably, a new initiative of this scale brings challenges that will need to be overcome as gpi develops. As one participant commented,

“As banks are able to decide whether to sign up to gpi, and to determine what capabilities to embed in their customer solutions, there may be issues for us in terms of consistency of experience between banks.” 

Another corporate demand will be the ability to integrate payment tracking information into the treasury management system or enterprise resource planning tool to provide a single point of reference. In addition, as another participant suggested,

“There may also be interest in banks developing value-added services based on gpi. For example, in some industries, such as shipping and others with time-critical supply chains, the ability to track and receive updates to the payment status through mobile channels may be valuable.”

 
Future corporate engagement

Both SWIFT and corporate participants confirmed the value of an ongoing dialogue to help shape the future of SWIFT services, including gpi. Wim Raymaekers, gpi programme manager at SWIFT concluded,

“SWIFT gpi was designed with the corporate treasurer in mind and we engaged with them right from the start. We look forward to continue working closely with the corporate community on this co-creation journey, together with banks, to align bank and SWIFT service deliveries with evolving corporate needs.”