Cross-Border Payments: Reaching Further with Swift Gpi

by Monika Aminiova 0


As globalization and digitalization gather pace across the payments landscape, the need for fast and transparent cross-border transactions is particularly pressing, says Monika Aminiova, Cash Management Business Development Manager, Treasury Services EMEA, BNY Mellon.

In response to growing market pressure to enhance the existing process, SWIFT’s global payments innovation (gpi) initiative is aiming to transform international payments – by improving transparency, traceability and speed through its global network of member banks. With over 180 banks currently signed up as SWIFT gpi members, the initiative is gaining traction, and more than US$100 billion in gpi payments is now being sent daily across 450 international payment corridors.

Yet, importantly, the degree of transaction transparency and speed that can be delivered for SWIFT gpi transactions depends upon the level of gpi-enablement of the individual banks within the correspondent banking payments chain. For instance, to obtain full payment status information at any point in the transaction process, payment messages must be sent along wholly gpi-enabled corridors, with every bank participant complying with SWIFT gpi rules which mandate same-day settlement.

Widespread enablement and compliance is therefore paramount to realising full potential. And it is by working together and actively seeking to strengthen and grow the SWIFT gpi network, that banks can help ensure that clients receive a consistent and value-added global payments service – thus paving the way for fast and traceable cross-border payments to become the new normal.

Introducing transparency and speed

Typically, cross-border transactions are sent through a correspondent bank network, which provides little information on progress or fees. In addition, transactions – due to a lack of standardization – are identified by arbitrary reference numbers assigned by each bank. Those factors make cross-border payments difficult and time consuming to track or even investigate.

Under SWIFT gpi, however, banks are mandated to assign a standardized, unique end-to-end transaction reference (UETR) and send payment information to the cloud-based Tracker. This information – detailing fees, FX conversion rates and processing time – is then available to all SWIFT gpi compliant banks involved in the payment processing, with banks able to track the payment’s path in real-time, obtain transparency on fees in advance, and receive confirmation that the payment has been credited. Unquestionably, such increased visibility will appeal greatly to corporate treasurers, who can leverage this rich payment information to ensure timely reconciliation, or select the most cost-efficient payment corridor to send the payment, allowing for improved cash flow and forecasting management.

As well as increased transparency, SWIFT gpi is also facilitating increased speed. To be compliant with SWIFT gpi’s “Rulebook”, banks must credit cross-border transactions within a same-day window, thus improving liquidity and allowing corporate treasurers to forecast more accurately.

Continuing to innovate

Further enhancements to the initiative are underway in an effort to not just respond to, but also to anticipate, evolving expectations and add new value for clients.

In November 2018, corporate treasurers are likely to see a significant boost in the visibility afforded to them via SWIFT gpi. SWIFT recently announced plans to mandate all 10,000 SWIFT banks to include the UETR across all payments instructions – regardless of whether they are a SWIFT gpi participant or not. What’s more, SWIFT has also recently announced plans to move all its member banks to the gpi framework by 2020. This will drastically expand the number of gpi-enabled payment corridors, allowing for full remittance information to be made available across an increased number of cross-border transactions.

Also in the pipeline is the ability to stop or recall a transaction – a feature that would be particularly helpful in a suspected fraud or error case. SWIFT gpi’s Stop and Recall Payment service (gSRP) will allow SWIFT gpi banks to send an MT199 message as a request for cancellation or as a response to a request for cancellation.

Another anticipated innovation is the ability to enclose documentation within the payment instruction. The remitting bank will be able, on behalf of their client, to upload a document – such as an invoice – to the payment instruction using the cloud-based Tracker. The invoice would then be received and downloaded by the beneficiary bank, so it can be passed onto the payee. This could have a significant impact on reconciliation efficiency and ease for clients.

Aside from innovations taking place within the initiative itself, it is important to note the efficiencies that could be achieved by connecting SWIFT gpi to other payment initiatives such as the various real-time payments (RTP) system that have been launched in the U.S., the UK and Australia. This is currency-dependent, however, as using SWIFT gpi and RTP systems together requires a clearing house that has RTP processing capability and can accommodate the SWIFT gpi UETR. Given that, there is currently a potential for cross-border real-time payments across the major currencies with adapted clearing houses – such as Euros, GBP, US dollars and Japanese yen. However, as more clearing houses develop RTP and SWIFT gpi capabilities, we could expect to see cross-border real-time transactions across a greater pool of currencies.

Towards enablement

Accelerating such large scale, client-centric changes can only be achieved through bank proactivity and collaboration. BNY Mellon, for example, has been one of the core 21 banks working on the SWIFT gpi program since its beginnings at SIBOS 2016, and has taken part in regular workshops since to drive and shape its development according to client needs.  Subsequently, we are now able to process U.S. dollar payments with SWIFT gpi, with the expectation to expand this capability to Euro and GBP payments.

Fostering the SWIFT gpi network, however, requires more than banks developing their own SWIFT gpi capability. By forming banking relationships with gpi-enabled correspondents, it will be possible to achieve the best possible coverage of payment traffic and currencies. Indeed, by using SWIFT’s online database, the SWIFT gpi Directory, banks can confirm which potential correspondents are gpi-enabled and for which currencies, thus informing choices as to whom to potentially form ties with to optimize cross-border payment capabilities.

In these ways, banks can lead in driving the payments sector towards modernity and efficiency. Through SWIFT gpi-enablement, banks have the opportunity to go beyond satisfying corporate demand for a more competent service – they can leverage it to offer value-added services for clients, and to ultimately enrich the overall cross-border payments experience for a more seamless global ecosystem.

The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not relied upon as such.

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