Monika Aminiova, BNY Mellon

With new value-added capabilities and predictions that it could become the standard for all cross-border payments by the end of 2020, SWIFT gpi is set to have a significant impact. Monika Aminiova, Cash Management Business Development Manager, Treasury Services EMEA, BNY Mellon, examines the value of SWIFT gpi for clients and banks, as well as the reasons why the initiative must reach ubiquity to deliver full value in the cross-border payments experience.

Monika Aminiova

With a rapidly expanding market reach, SWIFT gpi is improving the speed, traceability and transparency of cross-border payments – all without requiring a significant overhaul of existing bank infrastructure. It is a welcome change to the traditional cross-border transaction process, where payments take days to be processed, and offer little visibility into progress and deductions.Over 150 financial institutions have already joined this initiative, and it is now being used to track and credit over 140,000 payments a day.

SWIFT gpi represents an industry response to the need for the payments industry to come up to speed with the digital expectations of the 21st century, and introduce truly optimised, client-centric solutions. New features are also set to be introduced to further enhance the way we make and receive cross-border payments, such as stopping and recalling transactions, and the ability to attach invoices to payments.But ultimately, realising full value from SWIFT gpi in the cross-border transaction process relies on the capabilities of each bank to seamlessly transfer the full details within the payment transaction along the correspondent chain.

SWIFT gpi breaking ground

The first step of the initiative was to shrink the typical two-to-five-day settlement timeframe of a conventional cross-border transaction to one day window.Under SWIFT gpi, all payments are to be processed in line with the “Rulebook”, which commits banks to deliver payments on a same-day value basis, thus ensuring standardisation across the global network and providing a consistent payments experience for clients.

Banks are heeding this commitment; nearly all of the approximately US$100 billion worth of SWIFT gpi messages sent daily are already being credited within 24 hours. What’s more, approximately 50% of SWIFT gpi payments are credited in under half an hour.Clearly, SWIFT gpi has unlocked a payments experience capable of meeting modern expectations for prompt settlement.

SWIFT gpi has also taken steps to meet expectations for real-time traceability through its cloud-based Tracker. This feature of the Tracker has, in fact, already improved the previously lengthy and costly transaction enquiry process.Whereas before, every bank in the transaction chain would assign their own reference numbers to a given cross-border payment, SWIFT gpi calls for a Unique End-to-end Transaction Reference (UETR) number to be attached instead. This standardised reference number format allows SWIFT gpi banks to use the Tracker to easily pinpoint individual transactions along the correspondent banking chain,and download detailed remittance information in the event of a client enquiry. This harmonisation of reference numbers and the efficiency of the Tracker can potentially help banks to reduce enquiry-related costs by up to 50%, and allow clients to see a marked improvement in the speed and quality of the response to their enquiry.

Honing enhancements

SWIFT gpi is aiming to deliver further developments, and recently announced its plans to extend the capability of the Tracker later this year. Come 18^th November 2018, all 11,000 SWIFT banks – whether they are SWIFT gpi members or not – will be required to include the UETR number in every payment instruction, allowing SWIFT gpi members to track all payments on the SWIFT network.

This change will enhance the visibility of transaction information – including details such as fee deductions. Certainly, this visibility would be of real value to clients, as corporate treasurers could view and account for any levies and charges in advance, helping to identify the most cost effective routing corridor. The same day value processing will help with more accurate forecasting.

Banks, however, will have to decide for themselves how and to what extent they will share this information with clients. Owing to European regulations that are already demanding a more transparent pricing dialogue with clients, we could expect to see banks in Europe being prepared to make available the complete tracking information.If this is the case, banks will also need to consider developing an intuitive interface on which to reformat and deliver this information to these clients.

Also scheduled for launch in November 2018 is the ability to issue a “Stop and Recall” payment message which – provided the funds have not yet reached the beneficiary bank – allows remitting banks to halt or recall a transaction; for example, in the event of suspicious activity being identified.

Looking further ahead, SWIFT gpi-enabled banks could offer their clients the ability to attach invoices or other digital documents to a payment, radically streamlining the reconciliation process for both the buyer and the seller.

As well as introducing new features, SWIFT will continue to improve the speed and transparency of cross-border payments. This ongoing process could be bolstered by connecting to other initiatives taking place in the payments space, such as real-time payment (RTP) platforms within individual markets.

Using a RTP rail not only ensures compliance with the Rulebook, but also surpasses its requirement for SWIFT gpi payments to be processed on a same-day value basis. However, this can only be applied to currencies that have clearing houses with real-time payment processing capabilities, such as GBP, Euros, Japanese yen and U.S. and Australian dollars. With an increasing number of clearing houses adapting to both RTP processing and incorporating the SWIFT gpi UETR number across payments, it is expected thata broader range of clients will be able to send, track and receive SWIFT gpi payments in real-time.

Banks driving change

These enhancements hold real promise for the global payments sector.However, it is critical to remember that the SWIFT gpi initiative is underpinned entirely by the engagement of the network of banks it supports. Indeed, for SWIFT gpi capabilities to be optimised across the end-to-end payment chain, critical mass is required – enabling transactions to be consistently tracked and credited along SWIFT gpi-enabled payment corridors.

In terms of selecting gpi-enabled correspondents, banks may increasingly prefer entering a relationship with SWIFT gpi compliant bank when forming banking relationships. The Directory acts asa database that monitors the level of gpi enablement of individual banks and currencies, meaning that banks could use it to specifically choose SWIFT gpi-enabled partners – and therefore subsequently help to encourage ubiquity for the initiative.

Recognising the value of SWIFT gpi and the central role banks have to play in fuelling industry-wide global payment innovation, BNY Mellon has been working closely with SWIFT and 20 other banks on the core development of SWIFT gpi since SIBOS 2016, through regular workshops to ensure the project evolves in line with bank and client expectations. Since November 2017 – just two years since the project’s inception – BNY Mellon has been able to carry out SWIFT gpiU.S. dollar payments, with its dedicated SWIFT gpi team aiming to expand this capability to GBP and Euro payments in the near future.

Undoubtedly, SWIFT gpi is an initiative that has the potential to revolutionise global payments. But it is only through co-creation, cooperation and active engagement that banks can expect to access and harness the full potential of SWIFT gpi – and most importantly, render the cross-border transaction process more transparent, efficient and intuitive for clients.

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 be relied upon as such.