Faster Cross-border SWIFT Payments With Global Payments Innovation Initiative

In late 2016, SWIFT said it had successfully completed the first pilot phase of its global payments innovation (GPI) initiative, clearing the way for the service to go live in early 2017.¹ The new SWIFT payments service will initially focus on cross-border B2B payments, providing several key improvements:²

• Recipients receive same-day access to payments rather than waiting several days for funds to clear.
• Fees should be predictable and transparent, so businesses know in advance how much wire transfers will cost.
• Banks can use a new cloud-based service to track each payment from end-to-end as it passes through intermediary banks and ultimately reaches the recipient’s account. Payers receive confirmation that the recipient’s account has been credited.
• Up to 140 characters of remittance information is transferred unaltered to recipients, helping them reconcile payments.³

The new SWIFT payments service potentially has broad reach, enabling businesses worldwide to receive faster payment services directly from their banks. SWIFT’s network connects more than 11,000 banks and other companies in more than 200 countries. The service uses SWIFT’s global technology platform and the existing correspondent banking network; any financial institution that is a member of SWIFT and commits to GPI-required service improvements can participate.

By late 2016, more than 80 banks across 220 countries had signed up to participate in GPI. Those banks account for nearly 71 percent of cross-border payment volumes over SWIFT. During the pilot, 15 global banks tested the design and core functions of the new SWIFT payments services while, in parallel, 10 additional banks started to prepare for the service’s launch.⁴

After the initial phase of the system, SWIFT plans to work on further enhancements that facilitate business benefits such as increased straight-through-processing of payments.⁵

Initial Business Reaction to The Faster SWIFT Payments Service

Though the same-day delivery promised by GPI SWIFT payments is slower than the real-time payments systems that are being deployed in many countries, it may be adequate for many business purposes. Features such as payment tracking and predictable delivery times and fees are important because they help businesses manage and forecast cash flow.⁶

In an audience survey of corporate executives conducted by BNP Paribas at its 2016 annual Cash Management University (CMU) event, 38 percent listed predictability and payments tracking as the most important benefit of the GPI initiative, followed by same-day use of funds (27 percent), transparency of fees (19 percent) and the transfer of rich information (13 percent).⁷

The Challenge: Rising Expectations and Increasing Competition For Cross-Border Wire Transfers

The digital revolution is expected to change the cross-border payments landscape radically over the next five years, as customers demand a better user experience: transparent, real-time, data-rich and easy to use, according to a 2016 global payments report by McKinsey & Company.⁸ Businesses increasingly question why domestic payments can be executed in real time at very low cost, while it can take much longer for cross-border transactions to be executed at much higher cost, the report notes.

GPI will compete with a wave of financial technology innovators targeting cross-border payments, seeking to provide faster payment solutions that disrupt cross-border payments in the same way that new solutions have disrupted the consumer space.⁹ Notably, SWIFT is also exploring the requirements and guidelines for real-time payments and has been involved in the development of the Australian faster payments system.^10,11