SWIFT gpi - Unlocking The Future of Correspondent Banking

The payments industry faces immense pressure on multiple fronts. Waves of technological advances, regulatory scrutiny, and changes in consumer and client behaviours and expectations, are having a significant impact on what was once a staid and relatively unchanging business.

Consumers want their retail experience to be replicated in the banking world; this means instant, frictionless services. At the same time, corporate clients want to reduce payment costs and are entering new trade corridors; they also want transparency, predictability and timeliness of payments.

While the challenges are many, there are signs that the industry is facing them head-on and developing a new, more innovative and dynamic payments landscape.

In the past, moving money across borders has been relatively slow, lacking in transparency and suffered from unpredictable fees.. For banks, manual processing of payments meant that cross-border payments were time consuming, labour intensive and difficult to track.

The industry response for cross-border payments
In the largest change in cross-border payments for the last 30 years, leading banks came together with SWIFT to create the global payments innovation initiative – SWIFT gpi.

Adoption of SWIFT gpi has been rapid and continual since its launch in January 2017.The service now processes US$100 billion in cross-border payments daily. Over 85 banks are live globally, with 300 in the implementation phase. In Africa, the number is growing steadily, with 28 African banks signed up and four already live –Standard Bank of South Africa, FirstRand Bank, ABSA Bank and Nedbank.

More than 55 payment market infrastructures are already exchanging gpi payments, enabling domestic exchange and tracking. Instead of focussing on a limited number of bilateral routes which has limited value both for banks and their customers, gpi already offers very extensive coverage across banks, markets and geographies. For example, SWIFT gpi accounts for 54% of SWIFT payment traffic in major country corridors such as USA-China.

Faster, more transparent & traceable
SWIFT gpi was born out of corporate treasurers’ demands for speed, transparency, tracking and richer remittance information in cross border payments. According to banks and corporates who are on gpi, transaction times have been drastically reduced to minutes, and sometimes even seconds. 70% of gpi payments leaving Africa are credited to the end beneficiary within 30 minutes.

The benefit for the supply chain is massive, as faster payments mean goods can be moved more quickly and trade can take place with fewer bottlenecks on the payments side. Banks also receive fewer queries and have been able to reduce their enquiry-related costs by as much as 50% when they use SWIFT gpi – a major cost saving the industry can pass on to end-users.

In this way, gpi ultimately improves processes between corporates and their banks, between correspondent banks in the cross-border payment chain, and between the ordering party and their end beneficiary — creating a far more efficient international payments ecosystem.

Building on solid foundations
The gpi journey does not stop here. As a cooperative run by the financial services community, SWIFT is at the forefront of building innovation that adds real value to the industry.

SWIFT has developed a strategic roadmap of enhancements and additional services with the gpi member community. Services scheduled for 2018 include:

  • gpi Cover (based on MT 202/205COV) to further increase the timely processing of gpi payment messages when there is no direct account relationship between the sender and receiver;
  • gpi Stop and Recall to allow for a quicker response to suspected fraud or errors and ability to immediately stop or recall a sent payment; and
  • Extended tracking of gpi payments to enable gpi banks to track gpi payments along the full payments chain, even if the banks handling the transaction have not yet adopted gpi.

The extended tracking is particularly important. As of November 2018, all payment messages on the SWIFT network will be required to include the gpi unique end-to-end transaction reference. This enables gpi banks to track all their gpi payment instructions at all times, regardless of whether or not other banks in the process are gpi members. By giving gpi members full end-to-end visibility on all of their payments activity, these banks and their customers benefit from even greater transparency and efficiency gains.

The tracking service has also been extended to corporates in a recent pilot announced by SWIFT. In conjunction with a number of corporates and banks, SWIFT will start testing an enhanced multi-bank standard which streamlines the process for corporate treasurers by allowing them to initiate and track gpi payments to and from multiple banks in a single format and integrate gpi flows in ERP and Treasury Management Systems. The first-of-its kind, this cross-industry collaboration tailors SWIFT gpi for multi-banked corporates, by introducing a common solution delivered in the same way by all gpi banks.

SWIFT gpi is set to be the standard for all cross-border payments by the end of 2020. In today’s evolving payments landscape, collaborative solutions such as gpi help banks to transform their processes and meet their own needs, as well as those of their customers, much more effectively.