Swift gpi: move forward or fall behind

Christian Westerhaus, Deutsche Bank: gpi – a zero-sum gain for the payment industry

Swift’s global payments innovation (gpi) is meeting the needs of corporates head-on, and is going some way to creating a more effortless cross-border payments environment. Deutsche Bank’s global head of clearing products, cash management, Christian Westerhaus, makes the case for banks becoming Swift gpi-ready.

Today, corporates are rightfully demanding more from their banking partners. Among the most commonly shared frustrations with respect to cross-border payments is that funds can take anywhere up to a week to be credited to a beneficiary’s account. Fees are another issue. Banks, at present, charge for processing cross-border payments by deducting their fees from the original transaction amount. However, this creates transparency issues when the corporate reconciles its received and invoiced amounts. Further, foreign exchange (FX) fees can easily become shrouded within long and enigmatic payment chains, while end-to-end remittance information is largely unavailable.

No longer. Developed in collaboration with the wider banking community, Swift’s gpi has been readily implemented by financial institutions since it went live last year. gpi has, for the first time, created an industry-wide payment standard for cross-border payments, by connecting all intermediaries in a payment chain via a cloud-based payment platform. It thereby addresses the corporate treasurer’s most severe pressure points, granting them better visibility of transaction fees, FX rates, unaltered remittance information and, importantly, near-instant payment processing times.

While over 150 banks (at the time of writing) have either already begun processing payments via gpi (Deutsche Bank went live with USD and EUR clearing last year) or have committed to going live, the story is not yet over. Those 150 banks will between them encompass more than three-quarters of all cross-border payment traffic yet the industry must coalesce around gpi more closely to demonstrate its advantages to those banks yet to sign up.

Under the hood

So, how does gpi work? The initiative is being rolled out in three phases, each addressing a pain point of transacting cross-border payments.

Launched in February 2017, the first phase (V1) established the new standard, allowing gpi-ready banks to clear funds on the same day and access to unaltered, full remittance data. May 2017 saw the introduction of the gpi Tracker, a cloud-based database hosted by Swift with similar capabilities to a courier’s tracking platform. gpi-ready banks can enjoy full visibility of a transaction’s journey via end-to-end status updates on any given transaction – from the moment it is instructed until it is confirmed.

Roll-out of the second phase (V2) is scheduled for November 2018 and comprises two mandatory elements. First, it introduces the Stop and Recall Payment service (gSRP), enabling a payment to be immediately stopped via MT192 irrespective of its position in the payment chain (unless it has already reached the beneficiary bank). In a situation where the payment has already reached, however, the service permits the remitting bank to recall the funds – provided the beneficiary bank consents.

The second element is the gpi Cover service (gCOV), which will encompass MT202COV messages under gpi’s scope, thereby expanding the offering beyond customer credit transfers (MT103). This should bring myriad benefits: same-day availability of funds; real-time confirmation of credit; reduced counterparty risk for the instructed agent; and improved straight-through processing (STP) rates…

This is an excerpt. The full article is available in the April 2018 issue of the Banking Technology magazine.
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