Inbound Payments Tracking: A Game-Changer in the Making

With SWIFT’s cross-border inbound tracking service for gpi becoming the latest addition to the treasurer’s toolkit, Nicolas Cailly, Deputy Head of Payments & Cash Management, Societe Generale, explains the new realms of possibility for treasurers.

Receiving positive reviews from stakeholders from the outset, it is no surprise that Nicolas Cailly, Deputy Head of Payments & Cash Management, Societe Generale, describes SWIFT gpi as a “revolution for cross-border payments”.  After all, as the lead in Societe Generale’s own very close involvement in Swift’s ongoing programme of technical development and user democratisation, he has first-hand experience of what gpi, and its subsequent developments, really means to its stakeholders.

Building transparency

The gpi revolution, as experienced by treasurers, has three key pillars, explains Cailly. First, it is fast. With around 40% of all gpi cross-border payments settled in under five minutes, and 95% being settled in one business day, it offers a “tremendous change” over prior network experiences.

The second gpi pillar is real-time tracking. As Cailly also notes, this too is a “game-changer”. Where previously if a cross-border payment stalled within the system, there was no way of immediately telling what the problem was, or even where the issue had occurred. “I see real-time tracking as the ‘Metroline’ within SWIFT,” he enthuses. “We can now see where a payment is at any time, which means we can also contact the relevant institution for a quick resolution of the problem.”

Improved transparency and responsiveness have seen corporates able to self-service in most cases, reducing the number of payments investigations. Transparency is thus the third gpi pillar. All participants within the payments chain have visibility over every available data point for each payment. This remarkable level of insight includes bank fee breakdowns, FX and charge codes, and even the relative performance of each processing bank within the chain.

Even with Societe Generale maintaining a 100% record in following SWIFT’s strict gpi service-level agreements (SLAs) around timing and data quality, Cailly fully grasps that with gpi, clients now have a window on its future performance too. Such transparency is a strong incentive for every provider to keep delivering.

Opening up

One of the most recent phases of the gpi revolution has been the advent of gpi for corporates (G4C). This brings the opportunity for corporates to directly use gpi payments data and issue their own unique end-to-end transaction reference (UETR) within the system. The UETR acts as the basis for all gpi functionality, such as the payment tracker (rather like a parcel tracking number is used to track the delivery of goods) which can then be incorporated within treasury’s own processes.

As a part of the G4C model, corporates with SWIFT membership have the option to directly access the platform, tracking their own payments, although currently this is a manual operation only, explains Cailly. But, he adds, where a bank offers it, any corporate can choose to access G4C services via their bank’s web portal, enabling it to directly execute actions such as querying a specific payment’s status. Alternatively, a corporate can opt for direct connection with its bank, with perhaps the easiest method here being via an application programming interface (API).

Connection enables payment reports to be directly consumed by the corporate’s treasury management system (TMS) or enterprise resource planning (ERP) system. This not only allows payment fail alerts to be received directly and responded to immediately but, with the UETR, it also facilitates automated payments reconciliations, providing what Cailly describes as “a significant boost” to cash management efficiency.

Early adopter

Societe Generale has been involved from the outset in the development and early adoption of G4C and gpi and its multiple extensions. The bank’s commitment is obvious in that it has already implemented gpi in 14 out of its 18 global settings, enabling almost 200 currency corridors for its corporate clients.

Such enthusiasm also positions the bank as the natural trailblazer of the gpi programme in its home territory of France. Under Cailly’s guidance as National Group Chair for the country, Societe Generale also leads the representation of the domestic corporate community, lending it a stronger voice in front of SWIFT and the various other programme stakeholders.

Indeed, with all banks in the gpi working group bringing on board corporate customers expressing a keen interest in the initiative, he notes that this approach has been especially effective in helping to shape both gpi/G4C strategy and the formation of functionality and services into productive working solutions for corporates.

Inbound tracking

Perhaps this collaborative methodology is no better illustrated than in the genesis of the next phase of gpi: inbound cross-border payment tracking. That corporate treasurers should come up with this idea has been somewhat surprising to the non-corporate working group contingent, admits Cailly.

With one of the chief benefits of gpi being the speed of sending payments, the banks had not anticipated the need for inbound tracking, especially where an increasing number of gpi payments are almost immediate. “But then corporate treasurers explained the very tangible benefits of receiving information on inbound payments that take longer,” he says.

It undoubtedly offers beneficiaries immediate visibility over what will be credited to their accounts and, importantly, when. This insight can create huge advantages in terms of working capital management, notes Cailly. It can, for example, enable greater optimisation of funding and investments opportunities, and promote enhanced cash forecasting accuracy.

Inbound tracking data can also help improve supply-chain processes. Where a business-to-business (B2B) supplier needs payment before delivering goods, certainty over the whereabouts of that inbound payment enables the business to free up customer credit lines, potentially generating considerable business value for buyer and supplier.

Pre-validation

Even with inbound tracking providing a level of payment certainty that treasurers have not previously seen, Societe Generale remains vigilant for other gpi opportunities, participating in almost every payments initiative to date. The next project to be delivered that will likely cause a stir in the corporate community, and among banks too, will be pre-validation.

“I believe this to be a cornerstone in the strategy of SWIFT to make frictionless, fast cross-border payments for all,” states Cailly. “It addresses one of the most difficult issues in the payments world: compliance checking.” Despite close alignment in Europe, regulatory requirements still tend to be at variance between regions and other countries. This is one reason why it is not easy to anticipate if a payment will pass through the system unhindered.

Although he accepts that pre-validation does not solve the problem once a payment is underway, Cailly points out that it will raise any potential issue before execution. By flagging up such issues at the earliest opportunity, it gives the initiator time to take remedial action, adding greater certainty to the process, averting more complex and costly upstream investigations.

Successful pre-validation has an additional advantage for corporates. When a confirmation of payment message is received, the system also delivers the data within gpi such as the aforementioned bank fee breakdowns, FX and charge codes. Although this is information corporate users will have clarity on anyway, it is not something retail users will have seen before. This could prove very useful in exposing costs, coming at a time when SWIFT has already announced plans to offer gpi-based low-value cross-border payments services as part of its new inclusive strategy.

All inclusive

SWIFT’s new overarching strategy will see it deliver a next generation digital platform aimed at providing end-to-end transparency and predictability for all. Following sign-off by the SWIFT board, and subsequent strategy-related SIBOS announcements in late 2019, Cailly now believes a rapid and successful execution will “set a new era for payments”.

Indeed, with traditional correspondent banking services based on sequential processing between institutions, the inherent friction this causes, especially around compliance, can be removed by SWIFT’s proposed structural changes. “It will no longer be sequential,” he explains. “Every party in the value chain will be able to see the status of a payment at the same time and enrich the data if necessary.” Enrichment, he adds, paves the way for a raft of new value-adding payments services for corporates.

With Societe Generale having worked alongside SWIFT to help develop its next generation strategy, and then the operational work that will underpin its delivery, the bank is now intent on keeping its customers up to speed. It will be explaining the benefits and opportunities, advising on how best to prepare for this new era in payments.

Part of this process will involve assisting corporate clients in their preparations for leveraging ISO 20022 XML-based payments standards. The data linked to the new payments practices that the SWIFT strategy will unlock will be easier to process and considerably more valuable for all. But this can be unlocked only if reference data is appropriately cleansed, enriched and correctly formatted.

Cailly is under no illusion that the groundwork will be “quite a challenge” for banks, corporates, and vendors to collaborate upon. Treasurers specifically will also need to consider – at a strategic, financial and operational level – how the arrival of real-time processing will impact their activities, both within the function itself, at a wider organisational level, and beyond.

Once this is underway – and Societe Generale is already geared up to assist – Cailly believes that even cross-border payment challenges such as the FX markets not being open 24/7 will be resolved. “And then, in a few years from now, the norm will be international, cross-border, cross-currency, 24/7, real-time payments,” he predicts. And that truly is a game-changer.