SWIFT gpi: A New Era in Treasury
Fast, transparent, traceable and system-based cross-border payments
Inscrutable networks of banks and reference banks for processing cross-border payments stand in the way of treasurers achieving efficiency and transparency. The SWIFT gpi (global payments innovation) project addresses this issue by offering a new and fast method for processing and tracking payments. Information about banks and financial institutions involved, transfer and crediting times, reference IDs as well as specific fees is available in real time. We take a closer look at the project: Where do we currently stand? How does an integrated solution benefit treasury? And how will this innovation impact treasury?
Challenges in cross-border payments
SWIFT Global Payments Innovation – SWIFT gpi
How the Unique End-to-End Transaction Reference (UETR) works
SWIFT gpi for Corporates (SWIFT g4C) – new dynamic and transparency in treasury
What does this mean for banks and companies
BELLIN spearheading development as an Early Adopter
How will gpi change treasury
Recommendations for treasurers
Cross-border payments usually pass through several banks until the funds have been transferred from the payer to the account of the beneficiary. This is referred to as correspondent banking. This results in four obstacles that are virtually insurmountable for treasurers as things stand today:
1) Time: Traditional cross-border payment orders can take several days from being released to being credited – way too long for efficient cash management.
2) Transparency: Several correspondent banks can act as intermediaries between the bank initiating the payment and the beneficiary bank – an impenetrable banking jungle that causes treasurers sleepless nights for security and compliance reasons.
3) Tracking: Today, treasurers neither know where a specific payment is located nor when it will be credited to the beneficiary – an incalculable business risk and a situation that often leads to time-consuming queries, trying to chase a payment.
4) Remittance data: Remittance data is often altered somewhere along the line or information is lost. Sometimes the amount eventually credited to the account does not match the initial payment order because correspondent banks have deducted fees, resulting in a tedious reconciliation process once the money has arrived.
SWIFT global payments innovation – SWIFT gpi
In January 2017, SWIFT introduced the gpi Service that can be used to process global payments in a fast and traceable manner. The objective is for every one of the around 10,000 SWIFT Network banks to be able to offer money transfers within 24 hours with continuous end-to-end tracking and complete transparency along the entire payment chain by the end of 2020. This transparency and efficiency is made possible by using a specific gpi reference, the Unique End-to-End Transaction Reference UETR.
You can compare the UETR to the tracking number of a parcel: The sender issues a unique, unalterable reference that shows you where the order is located any one time. This reference ensures complete transparency as well as fully digitized and therefore speedy processing. In addition, the sender is automatically notified of any payment status changes. Conventional transfers often drop off the radar for quite some time, and you’re left wondering where your money has gone, not to mention the effort it will take you to retrace and reconcile afterwards. Conversely, gpi transfers generate an abundance of messages that keep you up to date on the status of your payment.
The same applies to the respective bank departments who can also trace corporate payments, enabling them to react to queries much faster. Some banks have integrated functionality in their online banking applications that enables corporate clients to track their gpi payments. Not a bad idea – the only downside is that most corporates use more than one bank for their international payments, which would mean checking several banking portals. This is why a bank-independent treasury management system such as tm5 is a much more elegant solution. All tracking and status information converges in one centralized hub, no matter how many banks are involved.
In November 2018, SWIFT invited a select number of innovative TMS providers to participate in the SWIFT gpi for corporates (g4C) project. They serve as Early Adopters and have been enhancing their technology accordingly. Together with some customers, they are developing and piloting solutions to enable users of their systems to generate gpi payments and to process gpi payment information in the system.
BELLIN is one of these exclusive Early Adopters. Back in 2013, BELLIN and SWIFT pioneered the BELLIN SWIFT Service, the first service of its kind that is fully integrated in the tm5 software. Today, more than 150 customers have obtained their own SWIFT BIC, making them a member of the Standard Corporate Environment (SCORE) and giving them access to the SWIFT Network.
The role of banks
Banks must be able to process certain information in order for it to be included in gpi payment orders. More than 280 financial institutions worldwide, including 49 of the TOP 50 banks, have agreed on a standardized SLA. With so many banks participating, communication is guaranteed. i.e. funds are transferred quickly from one bank to the next. By now, most banks have started processing cross-border payments as gpi payments.
The role of companies
The UETR is crucial for processing gpi payments. Companies that initiate their own payments, for example through a treasury management system integrated payment solution need to attach this reference to a payment order in line with SWIFT requirements or extend the format of a payment in the right place to include this information. The information transmitted by way of the UETR simplifies reconciliation and can be matched automatically, depending on the system.
Development in tm5, BELLIN’s treasury management system, has been completed. In a next step, bilateral communication between tm5 and the SWIFT Network as well as with the customers’ banks will be tested. The project is another example of BELLIN spearheading product development as an early adopter.
Since April 2019, the SWIFT g4C technology based on MT101 messages is available for all BELLIN customers with Release 19.1. With the new release, it will be very easy to begin using g4C. The support for ISO20022 based news and feedback as well as bulk payments from the ERP system, which already include a UETR, will follow in the course of the year 2019.
The feature can be used whenever the following prerequisites are met:
- Your Bank supports g4C (it is able to receive MT101 files with UETR and to return MT199 gpi confirmations) in the countries/regions you hold your accounts
- You use the BELLIN SWIFT Service and have your own BIC
- You have the MT101 format licensed
- The required banks/accounts have UETR handling activated in tm5
Subsequently, tm5 generates the UETR required for a gpi transaction and is able to process status messages automatically. This represents the beginning of a new era in treasury for cross-border payments. But that’s not all: these changes unlock completely new opportunities for automating treasury processes, in turn leading to efficiency gains and increased security.
gpi is fast, creates transparency regarding fees and currencies and provides a wealth of information about the location of a payment and other aspects that simplify reconciliation. The SWIFT gpi initiative is clear evidence that corporate payments are moving towards real-time processing. In turn, this will change processes and the way treasurers work.
Treasurers should take note:
- With liquid funds easier to locate and timely confirmations by beneficiary banks, treasurers must adjust their liquidity plans
- Transparent fees are a solid basis for negotiating with banks, something that might influence a company’s banking strategy
- Quicker access to funds (same-day payments) enables efficiency gains
- Treasurers may be able to say goodbye to delayed payments and any ensuing difficulties
- Increased payment security requirements may mean that this newly found dynamic and transparent nature of cross-border payments will become the benchmark for all other treasury disciplines
Thanks to the SWIFT and BELLIN solutions, treasures are ready for any changes to cross-border payments coming their way. The future is now, let us take you there.