February 2017

 

SWIFT has announced the successful completion of the global payments innovation (gpi) initiative pilot phase. This, together with the subsequent go-live for those having piloted is a key milestone for the industry’s ambitious roadmap aimed at reinventing corporate cross-border payments. Flow Insights asks Paula Roels for her thoughts on the collaborative efforts of the world’s leading banks and progress made within the past year.

gpi is now up and running and all within the space of little more than a year. How has the community achieved this and how has it been welcomed in the market?

The last 12–14 months have been extremely challenging but rewarding. Our industry has often been accused of being slow to react to market needs, but the speed at which the gpi initiative has developed has proved the doubters wrong. As things stand, more than 90 banks have signed up to the initiative, representing more than 75% of cross-border payments (click here to see how to join). From the initial discussions at Sibos in 2015 up until now, through numerous workshops across the globe, we have made huge progress in preparing the groundwork to deliver on key deliverables that we as an industry set out; i.e. to enable end-to-end tracking of payments, same day use of funds, transparency of fees and unaltered transfer of remittance information. At times, our discussions have been highly technical, yet we managed to get the service level agreement (SLA) rulebook into place fairly quickly. While most of our efforts have been centred on the Customer Credit Transfer services, we have in fact already been in discussions to deliver on the V2 phase bringing in many additional optional services. Although the gpi is indeed fully up and running, the real benefit will come once the cloud based tracker solution accessible via APs is available in Q2 2017 and banks start making full use of it.

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Source: SWIFT, 2017, pages 20-21

Hasn’t the gpi initiative been somewhat hyped? Aren’t those deliverables around tracking and traceability a given these days?

To a certain extent that is true. Customer expectations are changing. On the retail payments side there has been a move towards real-time and individuals are accustomed to high levels of customer experience in terms of transparency, convenience, speed and price. Those expectations are spilling over into the wholesales side. The fact of the matter is though, up until now, that has not been available and the gpi initiative will definitely deliver on all those aspects.

So how will corporates stand to benefit from these developments?

Well, if you look at it from today’s perspective, when a cross-border payment is effected, the corporate treasurer has no real view on when that payment finally hits the beneficiary, nor the final costs associated with that payment. Treasurers themselves have often termed this as the “black hole”. That is the message we have received from our own Deutsche Bank corporate and FI workshops that we arranged in 2016 across the regions. That uncertainty, in turn, can lead to issues with suppliers and financial risks as a result of payment delays. Also, having same day use of funds will clearly help corporates with their liquidity management.

What is Deutsche Bank’s stance on gpi?

Deutsche Bank is part of the Vision Group (the ten largest transaction banks globally) driving the long-term vision of the cross border payments industry. We view gpi as one of the most important innovations in the correspondent banking space – offering a much improved cross border payments experience. From a strategic perspective, we decided not to invest in the piloting based on bilateral MT199 exchange, but rather invest directly in the cloud based tracker solution which will go live in Q2. Many of our peers have taken a similar stance. By taking this approach, we have also been able to better incorporate our own Cash Inquiry App into the process, whereby Corporate Bank operations/Treasury can verify payment status.

What will be the focus in 2017 and beyond?

The gpi Customer Credit Transfer services merely marks the beginning of the gpi journey. In V2, the community will be focusing on further groundwork to implement additional services such as the possibility to have much richer information within the payment. Here, in particular, we will be looking to facilitate XML transactions which will help corporates with their reconciliation efforts. Other developments centre on introducing MT202COV and the possibility to cancel a transaction.

Whereas V1 and V2 focus on today’s biggest challenges, V3 focuses on the potential of new technologies responding to tomorrow’s needs. As, SWIFT has already announced, it is starting a Proof of Concept (PoC) to explore how to obtain liquidity information in real-time and update nostro databases using Distributed Ledger Technology (DLT). Deutsche Bank will also be participating and providing resourcing for this project.

There is still a long way to go on the gpi journey, but this initiative shows that, although banks compete with each other in the correspondent banking business, collaborate efforts are indeed vital to benefit international trade as a whole.

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