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.

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:

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.[[[PAGE]]]

To benefit from this, do all banks in the correspondent banking chain need to be a part of the initiative?

Ideally, to achieve end-to-end visibility and consistent service levels for every cross-border transaction, all banks in the chain would need to join the initiative. However, the 70+ global banks that have already joined represent nearly 75 percent of cross-border payments through SWIFT, and adoption is continuing to ramp up quickly. Furthermore, as banks recognise the importance of delivering a high quality cross-border payment experience to their customers, this is likely to become a factor in their choice of correspondent banks.

What can corporate treasurers expect to see from this initiative in the coming months?

The pilot is underway, and we will be delivering new capabilities in a series of phases. By the end of this year, we expect to launch the graphical user interface (GUI) for the payment tracker. This has already been created and is a result of a mutualised investment across banks and SWIFT, which means that banks do not need to create their own. Then in the first quarter of 2017, we will release the open API for this so that banks can integrate this into their own applications.

How can corporate treasurers get involved?

Apart from those who are already engaged in the pilot, the main focus so far is to ensure that banks can align their systems to support this initiative, but this is making rapid progress. Banks will be starting to inform and promote the offering to their customers in the near term, but one of the most important aspects from a corporate perspective is that they do not need to change their own processes or systems to gain the benefits.

How do you see this initiative developing in the future?

While the initial focus is on same-day value for cross-border payments, ultimately the vision is to deliver instant value. Before we reach this point, however, there are other developments in cross-border payments that we want to make. We have five new initiatives underway to build new services, such as a ‘PayMe’ service, which allows one party to request payment from another, a service that doesn’t currently exist through SWIFT. We see these emerging new services offering considerable value to corporate treasurers and finance managers, creating ‘real-world’ change in the way that institutions of all sorts conduct international business.