SWIFT on gpi, the future of global payments and PSD2

SWIFT recently announced that 50% of payments sent via gpi are credited within 30 minutes, and almost all of those payments are now credited within 24 hours. This rapid growth, both in terms of participants and payments volumes, is reflected in the fact that the service has been has adopted by more than 150 financial institutions around the world. More than $100 billion a day is being sent daily across 220 international payment corridors, representing nearly 10% of SWIFT’s cross-border payments traffic.

How is this progress possible, and where will it lead to next? I spoke to Harry Newman, Head of Banking, SWIFT, about SWIFT gpi’s speedy progress, the future of global payments and of financial institutions in general.


What advantages does this progress provide for financial institutions worldwide?

Speed: Thanks to SWIFT gpi, banks are able to credit payments to their clients within minutes and even seconds. This is a very significant step forward for banks and for their customers.

Nearly 50% of SWIFT gpi payments are credited to end beneficiaries within 30 minutes, and almost 100% of payments within 24 hours. Those that take longer typically involve more complex foreign exchange conversions, compliance checks or regulatory authorisations.

Transparency: a real-time view of payments means banks are able to provide corporates with better cash management services, and they can be informed immediately when a payment is received via automatic status updates from their bank. This helps them optimise their cash flow. Additionally, remittance data arrives unaltered allowing better and quicker reconciliation by the corporate.

Traceability: The SWIFT gpi Tracker allows banks to follow the status of a payment in real-time and provide that information to their corporate client. The technology is analogous to tracking the delivery of a parcel from a warehouse to a customer with the additional benefit of knowing that it has been opened and inspected. The tracking service is cloud-based and accessible via APIs, offering banks efficient and cost-effective connectivity which they can integrate into their corporate offerings.

Receipt of payments: A key benefit of using SWIFT gpi is that it defines a payment as ‘successfully completed’ when it is credited by a bank to an end beneficiary’s account – typically a bank’s corporate or retail client. This is an important differentiator when compared to other systems which focus on the speed of transfers between two banks without considering the additional time taken to process the payment by the receiving bank.

Predictability: SWIFT gpi provides predictability for the corporate who now knows where the payment is and when it is credited.  As a result, less liquidity is needed to cover a more predictable, shorter payment cycle and enquiries are fewer and easier to handle for the corporate.

Improved financial compliance: SWIFT gpi is integrated into banks’ back-office, compliance controls and processing functions, strengthening financial compliance for banks and their customers.

What blockages remain in improving the speed and agility of global payments? How do you think they will be solved in the future?

SWIFT gpi improves many of the key areas of correspondent banking by reducing problems and speeding up the payments process, and providing the speed, transparency and traceability of payments that banks’ clients require. The service has transformed the way cross-border payments are sent, and we continue to work closely with our community of members to inform corporates and help them maximise these benefits.

 

How do you view the threat from challengers like Ripple?

It is important for banks and their corporate clients to have choice when sending cross-border payments. While there are a number of different payment providers available, the SWIFT model has proven itself over several decades and acted as the cornerstone of cross-border correspondent banking payments.

We have a history of innovation and collaborating with our members to ensure we continue to meet their evolving requirements. SWIFT gpi is a continuation of this collaboration and has been a tremendous success. Traffic on SWIFT gpi already accounts for nearly 10% of total SWIFT cross border payments, and over USD 100 billion is being transacted every day across more than 220 international corridors.

We are delighted with the total number of banks using the service, the geographical diversity of these institutions and the customers and sectors they serve. To date, 48 out of the 50 top banks in the world on the SWIFT network have committed to using SWIFT gpi, and more than 150 banks are currently using the service in total.

This includes smaller and regional banks that do not necessarily have the same global reach as the largest banks, but are a crucial gateway for local corporates and businesses to send and receive payments. We expect both the number of banks using the service and payment volumes to increase throughout 2018.

 

Following this achievement, what’s the next stage for SWIFT?

We have a product development roadmap for SWIFT gpi, which remains on schedule. The immediate goal is adoption and, over time, steady expansion and upgrading the service to provide new value added services. A number of planned upgrades are set to be introduced in 2018 and will be announced in due course.

We also continue to explore how to incorporate new technologies such as blockchain as part of our product roadmap, but it is not a panacea in itself. Any payment service must offer speed, transparency and industry-wide connectivity. SWIFT gpi incorporates all of these without incurring huge costs for banks and their customers by using existing, mature technologies based on cloud services and APIs.

Once blockchain technology maturity and benefits are clear, we could quite readily adopt it if it provides a clear added benefit to banks and the corporate clients.

 

Who do you predict to be the winners, and what do you think will be the long-term effects for financial institutions, post-Open Banking and PSD2?

Corporates are the ultimate winners, as the benefit from an improved and more efficient payments process. We have received considerable support from corporates to date; indeed, banks are urging corporates to use gpi and corporates are requesting the service because they recognise the benefits in terms of speed, transparency and traceability. As more banks use the service and integrate it with their corporate offerings throughout 2018, the number of corporates benefiting from the service will continue to grow rapidly.

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