by Damien Godderis, Senior Product Manager, International Payments and Correspondent Network, BNP Paribas
Where is my payment? When will the funds be available? Where have correspondent banking fees been deducted? – and for how much? Which invoice is linked to which payment? For corporate treasurers, making and receiving cross-border payments is often fraught with complexity and lack of visibility. The GPII (global payment innovation initiative) is a timely and crucial opportunity to overcome these challenges and create visibility and certainty in international payments.
Attracting more than 65 leading banks, with BNP Paribas as an early pioneer, GPII is a market-driven initiative co-ordinated by SWIFT that offers unprecedented potential to improve the cross-border payment experience. The aim is to enhance the speed and transparency of cross-border payments, and promote fair pricing by providing better oversight of correspondent banking fees. This is taking place in a context of accelerated change, where banks are looking at rationalising their correspondent network.
The scale of opportunity
Currently, the cross-border payments process often relies on transferring funds between one or more intermediaries, or correspondent banks, before reaching the ultimate physical bank location. On average, an international transaction involves three or four banks, so it is difficult for treasurers to maintain visibility over each step of the process. This can result in a lengthy process with frequent delays and potential risks due to variations in banking regulations across countries. These delays are further exacerbated by the fact that one in every 200 international payments is subject to interbank investigation and exception handling. In addition, as each correspondent bank also deducts its own fees, it is difficult to calculate cross-border payment fees upfront, or to reconcile these fees at the point of settlement.