October 2018

While new entrants continue to disrupt the global payments market, financial institutions have been embracing the SWIFT global payments innovation (SWIFT gpi) initiative as a means to give corporates multi-bank end-to-end payment visibility in real time. flow’s Clarissa Dann provides an update on how legacy infrastructures are evolving to meet a brave new payments world

Founded in 1896, Switzerland-based Roche is the world’s largest biotech company, with a mission to search for better ways to prevent, diagnose and treat diseases and make a sustainable contribution to society. In 2017 Roche Group employed about 94,000 people worldwide, and the company is active in more than 100 countries, meaning that Martin Schlageter, Head of Treasury Operations, is a busy man.

“Over the past decade we have consolidated our manifold electronic communication channels with banks into a standardised exchange of message flows via SWIFT. By doing this we have achieved a lot of standardisation, automation and speed for our transaction processing. But cross-border flows were still expensive, slow and lacked transparency,” reflects Schlageter.

This clearly needed to be fixed, and failure to do so was simply not an option for SWIFT and its banking community. McKinsey’s 2017 Global payments report (released in October at Sibos) warned, “Non-banks have stepped up the pace of innovation, and the advent of open banking and development of e-commerce ecosystems stand to fuel significant disruption in the coming years. Financial institutions must rise to the occasion and play a formative rather than reactive role in this transformation.”1

Through SWIFT gpi, that is exactly what they have been doing. “SWIFT gpi is not just about fixing some issues around cross-border payments but re-establishing the firm belief that SWIFT is the cornerstone of global connectivity that underpins our overall operational treasury strategy,” says Schlageter.

Bank adoption

Officially live since early 2017, SWIFT gpi uses the existing SWIFT messaging and correspondent banking system, but with a new set of business rules captured in a set of multilateral service level agreements (SLAs) between participating banks. The SWIFT member banks committed to gpi agree to provide “same day use of funds, transparency of fees, end-to-end payments tracking, and unaltered transfer of remittance information”.2

An end-to-end transaction over the SWIFT network typically involves multiple interbank messages exchanged between different parties in the payments chain. As explained in Section Two of Deutsche Bank’s December 2017 SWIFT gpi white paper, Time for action, a new 36-character unique end-to-end transaction reference (UETR) now usefully identifies and tracks the lifecycle of the transaction to which the messages relate,3 allowing for the first time for full transparency of the time it takes payments to travel across the world.

At the time of writing more than 200 global transaction banks had signed up with a capability to channel payments into more than 200 countries. In March 2018, SWIFT gpi already represented 10% of SWIFT’s total cross-border payments in volume, and by June this had climbed to over 25%. More than US$100bn in SWIFT gpi messages are sent every day, enabling payments to be credited to end beneficiaries within minutes – sometimes within seconds.

of gpi transactions are settled in less than 30 minutes

Source: gpi Observer Analytics (SWIFT, August 2018)

While this is an encouraging trajectory, SWIFT needs as many banks as possible adopting gpi so that it becomes the new and improved standard for cross-border payments. Javier Orejas, IATA’s Head of Banking EMEA and the Americas, touched on this in the previous edition of flow,4 saying, “SWIFT gpi is a must for transaction banking service providers to compete against non-banks, as it tackles all the pain points and reduces the related costs around investigations. For corporates, it’s a no-brainer.”

More than 72 of the 200 banks that signed up are now live,5 21 of which are in the APAC region. SWIFT’s CEO, Gottfried Leibbrandt, emphasised this at the EBAday Conference in June 2018: “The biggest corridor for payments over SWIFT gpi is between China and the US (nearly 50% of payments are SWIFT gpi), as Chinese banks vie to keep pace with competitors from the e-commerce arena such as WeChat and Alipay.”

Importantly, 10 of the live gpi banks are Chinese and 17 other Chinese banks have committed to SWIFT gpi and are in the process of going live. These banks represent an estimated 86% of cross-border payment traffic conducted by Chinese banks in mainland China.

SWIFT is not waiting around. In March 2018, following a vote by participating countries, in 2017, it announced that the new UETR introduced for SWIFT gpi will be made a mandatory field in all key payment instructions through the annual standards update in November 2018. Wim Raymaekers, Global Head of Banking and Head of gpi at SWIFT, explains, “It means that in all cases, all payments travelling across the SWIFT network will be tracked, regardless of whether the payments are received by a gpi or non-gpi bank. Though of course a bank that doesn’t join gpi will not be able to take advantage of the additional benefits, like extended tracking and stop and recall.”

Three months later, on 25 June 2018, SWIFT announced that its board – with the agreement of the 10,000 banks that form part of the SWIFT community – had endorsed universal adoption by those banks by the end of 2020. Raymaekers added, “Not only does this underscore our community’s belief in gpi, but it provides us with the green light to accelerate gpi’s adoption as the ‘new norm’ in international payments.”

Market infrastructures

Payment market infrastructures (PMIs) have a vital role to play in ensuring that end-to-end means just that – right down to the last mile. Once the international payment reaches a domestic or regional market, local clearing and settlement can involve the PMIs. Ideally, the PMI’s capabilities allow it to validate the presence, format or content of the gpi elements present in the payment, but if this is not possible it does at least need to be able to pass on the gpi elements and their content to the receiving bank – which is responsible for processing the payment as a gpi transaction if it is a gpi bank.
SWIFT has confirmed that the clearing systems of the most widely used currencies – AUD, CAD, CHF, CNY, EUR, GBP and USD – are already gpi-enabled. As Zhang Xin, General Manager of China’s International Payment Service Corporation (CIPS), confirms, “The global RMB gpi payment is able to enjoy an end-to-end, non-broken payment experience, which in turn increases the global acceptance of RMB as a major payment currency.” SWIFT gpi banks can already exchange gpi payments over the 56 SWIFT-connected market infrastructures, including EURO1 and TARGET2.

Renewed focus on the corporate experience

While the adoption status for banks and market infrastructures is all very positive, very few banks have actually brought the SWIFT gpi capability into their app stores and as yet there is no bank-agnostic central platform for corporates. For example, Deutsche Bank customers can already view the status of a SWIFT gpi payment through the Autobahn app using Cash Inquiry. While this is a game-changer compared to the past, what treasurers really want is a 360º-view of all their payments in a multibank environment via their enterprise resource planning (ERP) system or treasury management system (TMS), and this means banks collaborating to ensure the end customer (the corporates) can have this.

Key facts - SWIFT gpi

  • SWIFT gpi is live, has global reach, and we expect a step-change in traceability of gpi payments (with non-gpi banks) in November, following the standards release
  • Payments have already been accelerated – with international payments now proven to take a matter of minutes, not days
  • SWIFT gpi includes full transparency as part of the SLA between gpi banks. However, corporates are demanding that this transparency and full information on payments is also offered to them through their banks
  • Having a multi-bank solution integrated into their TMS/ERP systems is key for corporates, and is being facilitated through the SWIFT corporate pilot that should show first results by Sibos 2018

Deutsche Bank/SWIFT

While many banks live with gpi can provide updates through their customer services team, fully automated SWIFT gpi visibility for corporates is nowhere near self-service status. Feedback from Deutsche Bank corporate clients confirms that for SWIFT gpi to deliver their ideal cross-border payments experience, the following four points need to be achieved:

  1. Cross-border transactions continue to accelerate and payments are confirmed within minutes and not hours.
  2. Extended tracking, i.e. gpi tracking across all cross-border payments (which will largely be achieved with the November Standards release).
  3. The transaction status of cross-border payments is available in real-time across a multi-banked corporate’s ERP or TMS to update payment monitoring dashboards so that time spent chasing payments based on supplier complaints (through incorrect data, payments not received or for the wrong amounts) is minimised.
  4. Access to full information on the corporate’s cross-border payments, including execution time, intermediary banks in the payment routing, FX rates, and bank deducts, so the corporate can have a meaningful dialogue with their banking partners.

For this reason a pilot was set up in November 2017 to:

  • Standardise gpi flows between banks and corporates.
  • Provide a single gpi experience for multi-banked corporates.
  • Demonstrate gpi efficiencies in corporate payment processes.

With a SWIFT gpi for corporates (g4C) pilot group comprising 12 gpi banks and 10 corporates currently underway and due to go live by the end of 2018, this multi-bank solution integrated into a corporate’s ERP or TMS system looks set to become a reality rather than wishful thinking.

The corporates mentioned in the announcement about the pilot on 25 July 2018 included Airbus, Booking.com, Borealis, General Electric, IATA, LVMH Moët Hennessy Louis Vuitton, Microsoft, Ping An Group, Roche, and RTL Group.

Commenting in the release, Lisa Wagner, Head of Capital Management at Microsoft, said: “The ability to access a greater level of payment information in a timely manner through SWIFT gpi will bring immediate benefits to our payments experience, with greater transparency and responsiveness to our vendors. Providing multi-bank information all in one place and in the same format fits into our modern finance roadmap.”

SWIFT gpi includes full transparency on fees as part of the SLA. With respect to their corporate customers, each gpi bank decides on the level of transparency they wish to provide, which can sometimes be frustrating for corporates as, without sight of all bank transaction deducts, the corporate does not get the full picture.

Within the SWIFT gpi for corporates pilot, gpi banks have committed to provide a common level of transparency to multi-banked corporates, while leaving room for additional optional information. However, Deutsche Bank will be sharing all information with its corporate clients, and it will remain to be seen whether other banks recognise the importance of providing full transparency to multi-banked corporates. Christof Hofmann, Global Head of Payments and Collection Products at Deutsche Bank, believes that, “this is something that corporates will demand from their banks and may ultimately factor into them moving their business away from banks not providing this transparency”.

Vendors also need time to work with corporates and find the best way of enabling gpi integration with their solutions. “I applaud SWIFT’s approach here as, if we had waited for the vendors to be ready, we would have lost time on this pilot project,” notes Schlageter. Roche and IATA have made small investments into developing their in-house treasury systems so that they can go live in October 2018: “It made sense to find a group of substantial corporates that can do the development in-house and raise interest with the rest of the SWIFT community,” he explains. However, as Hofmann points out, it “depends on the specific demand of each corporate” whether to implement this enhanced solution.

of SWIFT gpi payments are credited within 24 hours

Source: gpi Observer Analytics (SWIFT, August 2018)

Not all corporates do as many cross-border payments as the pilot group participants and those unwilling to make this investment can still use their bank portals and customer services to gain benefits from gpi.

The project group has agreed the design and standardisation around corporate-to-bank payment flows, including payment initiation by the corporate using UETRs (as at present corporates cannot generate the identifier) and receiving status updates. Testing is underway and the service is expected to be live later this year (see timeline).

“This is the beginning of the journey, because in the end what is also relevant to us is that even if we are assured the payment is credited somewhere else in the world 30 minutes later, we need to capture that in our accounting system. It is not just about the payments, but the reconciliation,” concludes Schlageter.

The further potential of application programme interfaces to help pick up this baton will keep Martin and all involved busy for some time to come.

SWIFT gpi corporate pilot (g4C) project timeline 

Nov 2017 Launch of pilot with 12 banks and 10 corporates

Feb 2018 Approval of the agreed solution – design vendors of project member corporates involved

July 2018 Beginning of testing with closed user group with SWIFT and between banks and corporates

Oct 2018 Controlled go-live with first production flows between pilot participants

End 2018 - 2019 Gradual involvement of additional banks, corporates and vendors with a view to go-live outside the closed user group


1 See https://mck.co/2yPYydh at mckinsey.com
SWIFT gpi data in this article is from swift.com
3 See https://bit.ly/2KF4yaq at db.com
See https://bit.ly/2MunXwk at db.com

4 See https://bit.ly/2nl28EL at swift.com

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