January 2018

Are corporates doing enough to push for SWIFT gpi? Flow reviews where this potentially transformative service has got to since its launch and what corporates need to do to break through correspondent banking pain points

One year on from the full launch of the SWIFT global payments innovation (gpi) initiative in January 2017, 36 banks are now live on this inter-bank service agreement with 100,000 gpi payments being made each day (see Figure 1).

At Sibos 2017 in Toronto, a number of sessions provided updates on the take-up and implementation by banks, but as Deutsche Bank’s Global Head of Clearing Products, Christian Westerhaus puts it, “For the industry to be successful, it needs to become the new standard in correspondent banking, meaning we need to reach a critical mass of banks that are fully up and running.”

This cannot happen without the corporate determination to make this the default cross-border payment solution – and it is the banks that are responsible for turning SWIFT gpi into a compelling value proposition for their clients. So, how compelling is it and what is the corporate traction so far?

Figure 1: SWIFT gpi update, January 2018

Source: SWIFT

Corporate cross-border payment needs

Unhappiness at the length of cross-border payment journeys, lack of transparency and transaction costs emerged as examples of what was wrong with the current system – and what precipitated the decision by SWIFT to announce the launch of the SWIFT gpi initiative at Sibos Singapore in 2015.

More recently at Eurofinance 2017 in Barcelona, the Eurofinance Corporate Treasury Network (ECTN) published a research paper titled ‘The Future of Payments: A Corporate Treasury Perspective’ based on responses from 300 senior treasury professionals collected in June 2017. The report reveals that corporate treasurers have always complained about difficulties with making cross-border payments such as:

  • Length of time for rejections and investigations;
  • Tracing payments in case of problems;
  • Global payment process consistency;
  • Transaction cost predictability;
  • Amount sent matches amount received even if charges = “OUR”;
  • Quality and completeness of remittance information sent with payments;
  • Payment stops/recalls; and
  • Uncertainty on timing of crediting payments to beneficiary.

In other words, says the report, ‘old treasury problems are the real drivers’ of change. Corporate treasurers are tasked with the automation of processes to prevent fraud, increase cash and fee visibility and optimise liquidity management, but the correspondent banking system as it currently stands makes this quite hard for them. The Eurofinance research comments that it “turns a simple payment between two parties into a game of pass the parcel for six: payer, payer’s bank, payer’s bank’s correspondent, beneficiary bank’s correspondent, beneficiary bank, and beneficiary.”

Despite all of these pain points, 55% of the respondents said they have no plans to use alternative providers to their current banks to make cross-border payments. One explanation for this could be that the SWIFT global payment innovation (gpi) initiative is being seen as a real answer to these problems by dramatically improving the cross-border payments experience through greater speed, transparency and end-to-end tracking.

In June 2017, a number of Swiss corporates including Nestle, ABB, SBB, Swiss Re, Roche and Wurth Finance published an open letter to the industry encouraging the banking industry to speed up the implementation of SWIFT gpi, with the following four key messages:

  1. Corporate treasuries are looking for more transparency, speed and availability of funds to support their supply chain and cash management.
  2. SWIFT gpi launched by SWIFT addresses these gaps
  3. We, the SWIFT Corporate Group in Switzerland (SGC-CH) support this initiative as it addresses the current pain points of a corporate treasurer when it comes to cross-border payments.
  4. The SGC-CH endorses SWIFT gpi and looks forward to see the increased pick-up by both large banks and smaller regional banks.

Talking on a video on the SWIFT website, a number of treasury professionals provided more detail of their particular experiences, further making the case for the SWIFT gpi solution. These included:

  • Martin Schlageter, Head of Treasury Operations at Roche. “There are a lot of challenges today to send and receive international payments, one thing is time – the duration of payments, the second thing is cost – the transparency of cost, and then there is the limitation of remittance information that can be sent or received. There is also the question of beneficiary account information which can be quite complicated when it comes to international payments.”
  • Peter Claus-Landi, Director of Banking Initiatives at General Electric: “There are cases where an international payment will go through multiple correspondent banks to reach the ultimate beneficiary, and from time to time a payment will get held along the way for multiple reasons and we have little to no insight on this most of the time.”

SWIFT gpi progress so far

Launched at the beginning of 2017, according to SWIFT reporting on the dedicated SWIFT gpi microsite, SWIFT gpi already has more than 140 banks implementing the service, which represents more than 200 countries and more than 75% of SWIFT cross-border payments. At the time of writing some 36 banks had gone live with SWIFT gpi services (including Deutsche Bank). Additional information on Deutsche Bank’s support for SWIFT gpi can be found in the ‘Speaking up for gpi’ article which provides a helpful progress report and diagram explaining the transactional flow and in our white paper, SWIFT gpi: time for action that can be used as an overall reference guide.

You might also want to read an interview in The Banker given by Deutsche Bank’s Christian Westerhaus here, where he makes the point that for SWIFT gpi to become the new normal, banks “must connect their clients to it” and “create that mass adoption, that network, and reach effect and leverage the network”.

In this article, Javier Orejas, senior banker EMEA and the Americas at the International Air Transport Association (IATA), who joined Westerhaus on a panel discussion the SWIFT gpi solution to a correspondent banking problem at Sibos 2017 in Toronto, emphasises again that adoption of gpi by the banking industry is high on his wish list. IATA deals with many currencies and in some MENA countries the transparency gpi delivers will, he told The Banker, “add greater value than it will in more developed countries in Europe and North America”.

How can corporates help drive the adoption of SWIFT gpi?

With more than 6.5 million SWIFT gpi payments already made, what do corporate treasurers know of this initiative and how can they encourage banks to go faster with the implementation?

  1. See if your bank is listed as being live with SWIFT gpi here;
  2. Lobby your national corporate treasury association, for example, the Association of Corporate Treasurers (ACT)  in the UK to encourage discussion around this topic; and
  3. Share some of the information provided by SWIFT and the banks that are involved (see above) and raise it as subject of conversation at industry gatherings – an informal chat over a coffee on an exhibition floor is just as powerful as a pre-planned meeting.

It is only if all corporates get on board with turning this groundswell of SWIFT gpi support into actual transactional business-as-usual that the industry will see the full benefits.

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