Asia Pacific continues to push the boundaries of technology. The region is fast becoming a hotbed for fintech innovation, including new payments initiatives rolled out by both the public and private sector. McKinsey predicts that by 2020, the global payments industry will generate an estimated US$2.2trn in revenue, over US$400bn more than the figure for 2015 (US$1trn).
While it all seems promising, unfortunately, historically there has been a lack of solutions for today’s corporates that address the issues of speed and transparency when it comes to payments. Today, customers are demanding not only faster settlement, but also improved customer service around their international transfers. It’s often difficult to track and trace cross-border payments as there is no confirmation or receipt of payment by the beneficiary, and most of the time they are not reflected real-time.
Banks are starting to address this issue by offering an enhanced cross-border payments experience to their corporate customers. Recently, DBS became the first bank in Singapore and Hong Kong to execute cross-border payments with end-to-end corporate payments tracking in these two markets, leveraging on the SWIFT global payments innovation (gpi) service. Gpi is a solution that resulted from a collaboration between SWIFT and the global banking community, which has rapidly become the new standard in cross-border payments. Since January 2017, more than 120 leading transaction banks have signed up, 30 of which are already live and performing real transactions using the service. To-date, over three and a half million payments have been processed using SWIFT gpi.
In the past, corporates and SMEs have struggled to track cross-border payments, as these transactions are routed through multiple banks, with different processing times that can take up to five days. Gpi payments are credited within 24 hours from initiation – mostly within a few hours and even minutes – which means corporates can now track their payments in real-time and get confirmation of that credit directly from their banks. This is made possible by an innovative payments tracker that comes with gpi. The Tracker is a cloud-based application accessible via APIs, and banks are using these APIs to embed the gpi Tracker information into their payments flow applications and front-end platforms.
While the current first phase of gpi focuses on business-to-business payments and helping corporates grow their international business, the second phase will include additional digital services to further transform the cross-border payment experience, such as the ability to immediately stop and recall a payment, no matter where it is in the correspondence banking chain.
The financial industry is facing unprecedented changes, driven by regulation, customer demand and technology evolution. Globalisation and digitalisation have encouraged companies of all sizes and sectors to internationalise their businesses. However, under the current correspondent banking model, banks need to monitor their overseas accounts via debit and credit updates and end-of-day statements, causing inefficiencies and significant costs along the way. Already, gpi banks are exploring how distributed ledger technology could help speed up the reconciliation of their nostro accounts. Innovation is an ongoing process, but to start with, corporates need to be equipped with the right solutions to enable better cash flow management and increased speed and visibility on critical payments.