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SWIFT gpi: a little less conversation, a little more action

Posted: 6 November 2017 | | No comments yet

Following a year-long trial, SWIFT’s global payments innovation (SWIFT gpi) is ready to take the mantle as the universal delivery standard for cross-border payments. But, for this to happen, widespread adoption will be necessary. Based on Deutsche Bank’s own implementation experiences, Paula Roels, Head of Market Infrastructure & Industry Initiatives, Cash Management, advises institutions how to best become gpi-ready…

SWIFT gpi: a little less conversation, a little more action

Unsurprisingly, corporate treasurers are demanding that cross-borders become faster, traceable and offer richer payment data with greater transparency over credits and fees. SWIFT gpi – an industry-wide initiative – represents a response to these calls. Using a cloud solution, SWIFT gpi can interconnect every intermediary in a payment chain to increase transparency over transaction fees, FX rates applied and, importantly, ensure the same-day availability of funds. Yet, for the initiative to become the cornerstone of cross-border payments, there must be a near ubiquitous uptake by financial institutions. Deterred from early adoption by costs or, indeed, scepticism over SWIFT gpi’s potential to become an industry standard, some banks have yet to implement it. In this respect, the banking community must demonstrate the initiative’s potential. Given that SWIFT expects 40 institutions to go live before 2018, it’s time for conversation among the banking community to subside in place of wider implementation.

Addressing industry pain points

Certainly, SWIFT gpi’s ability to lessen the industry’s pain points is well-known. In phase one of its roll-out (V1) – launched in February 2017 – corporates already enjoy: same-day availability of funds, if received before the bank’s cut-off time; visibility over payment deductions and exchange rates (thanks to all charges being documented in the cloud); end-to-end payment tracking and confirmation via the cloud; and access to unaltered remittance information in full.

Although they are perhaps secondary to the boons for end-customers, equally clear are the advantages for financial institutions. Leveraging SWIFT’s resilient cloud-based platform, banks can improve payment speed, transparency and traceability in a way that compromises neither their compliance obligations nor their market, credit and liquidity risk requirements. All of this will, of course, only help to strengthen existing client relationships and win new business.

Thanks to enhanced claim management processes introduced in V1, banks can also reduce their operation costs and resources spent on investigating claims of non-receipt. For correspondent banks, straight-through-processing (STP) rates may also improve from connecting all parties in the payment chain in an end-to-end digital ecosystem for payments – helping banks to create cost savings and remain competitive.

The SWIFT gpi Tracker – available to live gpi member banks since May 22, 2017 – is a significant step forward in offering banks full visibility on a transaction’s status. The Tracker is similar to shipment tracking services offered by logistics providers; only in this case, banks must report updates to the end-customer. From a technical perspective, the tracking functionality will be supported by a unique end-to-end transaction reference (UETR), which means that each party in the payment chain will be able to confirm their position, making it possible for others in the chain to identify where the payment is in the lifecycle. The second and third phases (V2 and V3), meanwhile, address cost and inefficiencies in the current cross-border payments landscape – by introducing the Stop and Recall Payment service (gSRP), the gpi COVER service (gCOV), the International Payment Assistant service, and exploring ways that distributed ledger technology (DLT) can improve the reconciliation of banks’ nostro databases.

Implementing SWIFT gpi

While uptake will see 120 banks (at the time of writing) going live eventually, there’s no denying that more can be done. International and regional banks should recognise that SWIFT gpi is far from an industry fad; instead it’s fast becoming the standard for cross-border payments – already used for three quarters of cross-border payments globally. And the extent of its benefits will only materialise once the banking community fully embraces it – hopefully sooner rather than later.

So, what can banks yet to sign up to SWIFT gpi learn from the implementation processes of others? Naturally, depending on the scope of the project, budget and resources available, implementation approaches (and timelines) vary. Budget constraints, for instance, may stifle efforts by smaller or regional banks to adopt early – leading some to connect to SWIFT gpi via their correspondent bank (and, therefore, forego full access to the cloud platform). Nonetheless, there are a number of universally applicable steps that ought to be taken:

  • Begin with co-creation workshops to understand customers’ challenges. Not only can workshops identify pain points and solutions – essential to building a business case internally – they can also unearth potential service enhancements that complement SWIFT gpi’s core offering. These insights can then be shared with influencers internally with the aim of identifying “SWIFT gpi champions” from different departments – an essential consideration when forming a working group later on
  • Build a robust business case. Banks should use this groundwork to build a strong business case for adoption – arguably the greatest challenge of the process. The case for SWIFT gpi’s implementation is unlikely to succeed if it revolves only around short-term revenue generation. Instead, it should emphasise the long-term: the need to protect bank’s revenues in an increasingly competitive market
  • Refine the implementation strategy.  If successful, the next step is to create a cross-departmental (and cross-regional) internal working group. The group’s objectives should be to develop a strategy based upon its conversations – both internal and with clients – and to also engage technology vendors and SWIFT itself for implementation support. Ultimately, the group should determine where SWIFT gpi should be implemented, in which currencies and using which technologies (including the API option). Deutsche Bank welcomed the opportunity to adopt gpi using API connectivity, and was one of the first banks to go live with this option
  • Prepare for implementation. Once SWIFT has signed the implementation agreement, the bank needs to carry out any necessary alterations to its internal systems and processes to become compliant with SWIFT gpi’s business rules and technical specifications. This can require banks to secure further resources for IT capacity and talent
  • Enter the testing phase. First, bilateral testing with SWIFT certifies that the bank’s systems are compliant. Second, the bank must conduct community scripted tests with other gpi banks, followed by live penny testing within a pre-defined group of banks. Upon conclusion of the tests, the bank enters into the controlled live usage stage, including transacting with other gpi-ready banks.
  • Go live. The final step in this (on average) six-month process is to transition into fully live operational mode, which should be accompanied by a period of market communication.

Time for action

For the banking community to benefit fully from SWIFT gpi’s zero-sum gains, as many institutions as possible should accelerate towards live operational mode. Once this happens, we hope that the transformative capabilities of the payment standard should become increasingly apparent.

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