FX International Payments
By Mike Faden
SWIFT – the bank-owned cooperative whose financial messaging services enable the bulk of international bank payments – says its gpi is taking off. For banks, this SWIFT initiative is also a major step toward maintaining the long-term survival of the correspondent banking model in a world with a growing number of fast-moving competitors in payments, experts say.3,4
In February 2018, roughly a year after launching the service, SWIFT said that its gpi was delivering hundreds of thousands of business payments daily, representing 10 percent of its international payment volume and more than $100 billion in value each day.5 Furthermore, 50 percent of payments were being credited in less than 30 minutes, and nearly 100 percent within 24 hours. SWIFT said that 150 banks around the world have signed up to use the service, and volumes are expected to grow rapidly as new banks join.6
SWIFT gpi is designed to address a number of frustrating problems that have traditionally plagued international bank payments, according to banking experts. One key problem is how long it takes for an international wire transfer: some payments take days to reach recipients, due to market conditions, compliance requirements, and/or the availability of correspondent banks. Finding out the status of an in-progress payment, or investigating why it has been delayed, can be difficult and time-consuming. Additionally, the fees and FX rates charged by correspondent banks as the payment moves through the network are often opaque and might be deducted from the payment amount, thus impeding reconciliation.7
The initial phase of SWIFT gpi, aimed at B2B international wire transfers, is designed to offer four benefits:8,9
In order to use SWIFT gpi, financial institutions must sign a new service level agreement (SLA). According to a Deutsche Bank white paper, the SLA includes the following commitments:10
End-to-end tracking is achieved using a new capability introduced to support SWIFT gpi: a cloud-based tracker. Like the parcel trackers provided by delivery companies, the tracker shows the status of the payment as it passes from bank to bank through the correspondent banking system. To enable tracking, each payment is assigned a unique end-to-end transaction reference (UETR). The UETR is included in the header of the SWIFT MT103 payment message used for international wire transfers.11 Each bank can update the tracker, making it possible to check the progress of the wire transfer and see where a payment is being held up. The tracker can be accessed via a graphical user interface (GUI) and also via application programming interface (API), allowing the service to be embedded in other back-office systems.12
SWIFT plans to add several enhancements to the service in 2018. Among them is extended tracking, which means that a UETR tracking reference will be included in all wire transfer instructions carried between all 11,000 financial institutions on the SWIFT network—even for payments initiated or received at banks that haven't signed up for gpi. According to SWIFT, this will offer users of the gpi service the ability to track any payment, at all times, as it moves across the network.13
Another planned enhancement is "stop and recall," which SWIFT says will allow payment messages to be immediately stopped in case of fraud or error, no matter where they are in the gpi transaction chain.14
There are several potential levels of gpi implementation, with differing benefits for businesses, according to information provided by SWIFT in a March webinar.
In the lowest level, a bank participating in SWIFT gpi can directly access the payments tracker, but businesses cannot. Businesses, therefore, must contact the bank directly to find out the status of a payment. Pre-gpi, according to SWIFT, a bank might have had to conduct an investigation to get this information.
In the second implementation level, businesses can access tracking information via the bank's corporate portal. This can allow them to directly obtain real-time status updates for each international wire transfer, as well as the details of bank fees and FX rates and beneficiary payment confirmation. Roughly 33 banks are incorporating gpi into their customer portals, with 10 live already, according to SWIFT.
The most advanced level involves the integration of gpi functionality into corporate systems. One enhancement here is the ability for businesses to generate the UETR payment tracking number themselves, when they initiate a payment. This means that the UETR can be included as a reference in the information sent to the company receiving the payment, further facilitating reconciliation and processing.15
Some experts say that SWIFT gpi can help to alleviate industry pain points by addressing challenges in corporate international wire transfers. However, it is also thought that business will only realize the full benefits if banks more broadly adopt the initiative and make it available to their customers.16,17 Some banks expect that businesses, as well as banks, will save time and resources because fewer time-consuming investigations will be needed.18
A year after its launch, SWIFT gpi is being used for about 10 percent of international bank payments, reducing the time it takes for wire transfers to complete. In addition to supporting same-day international wire transfers, the service provides end-to-end payment tracking and greater transparency about costs.
Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.
1. SWIFT gpi: Time for action, Deutsche Bank; http://cib.db.com/insights-and-initiatives/white-papers/SWIFT_gpi_time_for_action.htm
3. “Moving forward with SWIFT gpi,” Deutsche Bank; http://cib.db.com/insights-and-initiatives/flow/moving_forward_with_SWIFT_gpi.htm
4. "SWIFT gpi: setting the new global payments standard," The Banker; http://cib.db.com/docs_new/The_Banker_SWIFT_gpi_December2017.pdf
5. “SWIFT gpi reduces cross-border payment times to minutes, even seconds,” SWIFT; https://www.swift.com/news-events/press-releases/swift-gpi-reduces-cross-border-payment-times-to-minutes_even-seconds
7. “Implementing SWIFT gpi for an effortless payment environment,” GTNews; https://www.gtnews.com/articles/implementing-swift-gpi-for-an-effortless-payment-environment/
8. SWIFT gpi: Time for action, Deutsche Bank; http://cib.db.com/insights-and-initiatives/white-papers/SWIFT_gpi_time_for_action.htm
9. “SWIFT gpi reduces cross-border payment times to minutes, even seconds,” SWIFT; https://www.swift.com/news-events/press-releases/swift-gpi-reduces-cross-border-payment-times-to-minutes_even-seconds
10. SWIFT gpi: Time for action, Deutsche Bank; http://cib.db.com/insights-and-initiatives/white-papers/SWIFT_gpi_time_for_action.htm
11. “MT103, Wikipedia; https://en.wikipedia.org/wiki/MT103
12. SWIFT gpi: Cross-border payments, transformed, SWIFT; https://www.swift.com/resource/swift-gpi-brochure
13. "SWIFT introduces universal real-time payment tracking,” SWIFT; https://www.swift.com/news-events/press-releases/swift-introduces-universal-real-time-payment-tracking
14. SWIFT gpi: Cross-border payments, transformed, SWIFT; https://www.swift.com/resource/swift-gpi-brochure
15. SWIFT gpi: How to benefit from it, SWIFT; presented at SWIFT gpi for corporates webinar, March 2018
16. “SWIFT gpi: setting the new global payments standard,” The Banker; http://cib.db.com/docs_new/The_Banker_SWIFT_gpi_December2017.pdf
17. SWIFT gpi: Time for action, Deutsche Bank; http://cib.db.com/insights-and-initiatives/white-papers/SWIFT_gpi_time_for_action.htm
18. “SWIFT gpi: setting the new global payments standard,” The Banker; http://cib.db.com/docs_new/The_Banker_SWIFT_gpi_December2017.pdf