May 2016

The Global Payments Innovation Initiative (GPII) may be seen as a reaction by correspondent banks to Fintech disruption, but there is no time like the present to address issues that have been around for some time, according to Wim Raymaekers, Global Head of the Banking Market at SWIFT

The SWIFT-led GPII was announced last year with a series of API initiatives and a strategic roadmap to rejuvenate correspondent banking. Officially launched in January, with 51 banks having signed up to the initiative to work together to create a new service level agreement (SLA) rulebook for cross-border payments, the initiative provides an opportunity for collaboration between banks. Raymaekers said the three main goals of GPII were to enhance data services, reduce cost and mutualise investments.

Twenty-one banks and SWIFT have started a pilot for the initiative to increase the speed, transparency and predictability of cross-border payments. At SWIFT’s recent Business Forums in London, Frankfurt and Tapei, Deutsche Bank’s Christian Westerhaus, Global Head of Product & Strategy, Institutional Cash Management, and Raphael Jansa, Market Manager – North Asia, Institutional Cash Management, discussed the transformation initiative on a series of panel debates.

“The global payments innovation initiative is about business rules for better collaboration,” said Raymaekers at SWIFT’s London forum.

These business rules, designed to improve existing rails in payments, should substantially improve the customer experience, he said. “These rules are about increased and better collaboration between banks on business practices and technologies in order to provide a better service to end customers. It will also facilitate payments tracking, leading to a better user experience. It’s a model of enhanced operational rules to service banks, customers of banks or banks buying services from other banks or third parties who use those services in a more streamlined fashion. In the first instance it tries to improve the experience, the speed of same day in order to get more cost efficiencies and to reduce operational costs associated with investigations, more transparency through fees of charges and tracking ability of payments.”

Deutsche Bank’s Westerhaus described GPII as an innovation rather than a utility, with the ability to address compliance and costs in correspondent banking. “With STP, the overall customer experience can be improved. The approach fits well with the digital agenda of the Bank. In general, the industry’s STP rates are well above 85% - it’s making sure we are compliant where we need to think of the overall value processing chain. There we share the view that the overall customer experience should be improved. It’s about helping our clients to be successful with their clients both in the sending and receiving of payments in order to have a viable business proposition not only today but going forward. End to end is not predictable.”

Westerhaus added that the initiative is about providing messaging benefits from an operational perspective and taking standards to the next level.

Disruption in the industry was generally seen as positive, delegates attending the SWIFT Business Forum in London heard: the convergence of technology and scale could pose a challenge to banks, and the creation of the invisible intermediary. There are intermediaries who are taking the role of service providers and the service users in new, non-traditional ways of interaction. The industry is not far off from the ‘uberisation’ of banking, said one panelist.

Other panelists agreed that GPII would enable correspondent banks to reduce their costs. The difference between cross border and domestic payments comes down to STP, investigations and the liquidity aspect. Addressing these problems through new technologies we will reduce costs and reduce prices, said one panelist.

“Fortunately a lot of the issues we identified as part of the GPII process are not new, added Raymaekers. “They have been around for some time. But it’s the right time to start addressing these issues individually and together.”

As project lead for this new initiative, Raymaekers said: “We aim to incorporate additional innovations and deploy new technologies to this global payments innovation initiative, and define additional service level agreements that will cater for other client groups, further reducing the costs and frictions arising from compliance, liquidity and processing efficiency considerations involved in cross-border payments.”

GPII should also improve the customer experience for banks’ clients in trade flows by providing transparency of costs – it is cloud based so clients can use data for their own needs. ”The initiative ultimately has to be pervasive and improve the customer experience,” said Westerhaus. Clients’ experience has to be at the centre of this volume share, added another panelist.  The service provider and buyer of service would work seamlessly together, he added.

In terms of reducing the costs between banks, one panelist noted the opportunity in GPII to eliminate the vast majority of investigations claims through better rules for collaboration.   

In conclusion, it was noted that new technologies, including the Internet of Things, have dramatically altered client's expectations and have also changed certain corporates’ business models. In response, Banks took up the challenge and are now keen to quickly deliver on those changed client expectations with GPII.

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