It started off as a bank-to-bank concept, but as SWIFT begins its roll-out of gpi for corporates, are the banks involved in setting the rules getting it right?
SWIFT developments are prone to glacial progress but gpi has moved unexpectedly quickly. It has gone from a useful bank-to-bank solution towards one from which corporates can directly and hugely benefit. SWIFT for Corporates (G4C) is the Society’s fastest ever implementation, taking just a few months to agree on its essential standards and structure.
“Everybody wants to move forward because everyone sees an interest,” comments Eric Bayle, Head of Global Transaction Banking UK at Societe Generale. G4C is in pilot mode but soon to head out into the wide world.
Societe Generale – one of the original gpi signatories – is currently testing the mechanism with its corporate clients, LVMH and Borealis. LVMH has already publicly stated that it will implement gpi with all its banks in all its currency corridors. “It wants to make sure when a payment is initiated that within a few minutes its ERP will record that payment as having been credited to its payee’s account,” explains Bayle.
Societe Generale’s gpi reach is extending and now covers France, Monaco, Germany, Belgium, Spain, Italy, the Netherlands, the UK, Switzerland, Hong Kong and Singapore. By the end of the year US and Russia are expected to come on-stream.
The norm
The energy required by all participants has been significant, says Bayle. “We still see gpi as a top priority investment.” Indeed, he adds, the Societe Generale view is that gpi is going to “become the norm”. Just as consumers expect to track goods purchased online, corporates and other participants in the payments chain will, through gpi, expect to track their payments, accurately and in real-time.
Becoming the norm “will take a few years”, Bayle accepts. In its current phase, it is becoming a differentiating factor between providers. “But any bank that is not able to offer gpi at some point will be out of the race, at least for very large corporates.”
To date, some 450 banks worldwide have signed the adoption agreement, and 125 are live for a least one country and one currency. Gpi now covers 11 countries and 200 currency corridors. Although this represents 80% of all international payments, the SWIFT network is made up of 9,000 banks. Greater uptake is needed for ‘the norm’ to prevail.
This year will see all SWIFT FIs compulsorily using the gpi tracker. With a final push, by the end of 2020, it will be mandatory for all FIs receiving cross-border payments (MT 103s) to confirm to the gpi tracker when a payment has been credited to the account of the beneficiary.
Once that happens, the roll-out of G4C is expected to leap ahead.
Step forwards
So far, there are three planned G4C development stages. The first has already seen gpi-enabled banks offering the service, enabling corporate clients to more easily check payment receipt by beneficiaries. This can only be done through the bank. But, instead of having to follow a payment’s progress step by step until the payment is located and its status established – as is the current norm – banks are able to send clients, on request, a confirmatory snapshot of tracked payment progress, in near real-time.
The second stage will be for banks to offer direct client access to track data, either in real-time or as a reconstructed progress report. This will include, for example, core information on staged timings, fees and rates.
The third planned step will offer corporate clients immediate access to detailed gpi-related Payment Statutory Reports (PSRs). These will give the exact status of each payment, from confirmation of payment creation, through to beneficiary receipt, and logging every new action as it happens.
Societe Generale anticipates delivery of PSRs via host-to-host in summer 2019, having worked with LVMH on its development. By the end of the year, the bank anticipates that its tracker will go fully self-service, made available to clients through its banking platform.
Further steps will see services such as ‘stop and recall’, allowing a corporate to cancel a payment at any point providing it has not yet reached the beneficiary. However, processing via faster payments systems may deny this service in practice.
Today, around 50% of payments are credited to the beneficiary within five minutes. Banks wish to drive this up to 80%. “Five minutes to realise that an error has been made is challenging,” admits Bayle. “There is no solution other than a thorough in-house payment checking and approval process.” For the corporate, stepping up due diligence is no bad thing.
Another planned G4C development is pre-validation. Bayle explains that this is a security feature enabling corporates to check the validity of a bank account through SWIFT when creating new supplier records.
Related to the G4C infrastructure is request-to-pay. The UK’s Faster Payments organisation says it will be launching its version in Q2 2019. It is currently still in development. The challenge here, notes Bayle, is that following a request, there needs to be a way of delivering XML-formatted request messages into the appropriate interface – a mobile device or web banking platform, for example.
From here, it is intended that the customer can accept or reject a request, part-pay or query directly with the vendor. “But there is a big question mark around practically how to do this,” he notes. “Most participants agree request-to-pay is a good concept, but all the burden of development is currently on the beneficiary bank; cost is becoming a problem, especially as there is no real business case to develop it.”
Compete or collaborate?
SWIFT gpi is not the only contender in this space. Blockchain-powered Ripple is trying to establish a user base. But as Bayle points out, SWIFT’s 9,000-bank global reach easily outguns any competitor. But the relative newness of an offering has never been a reason not to explore it, he agrees. Indeed, with the fintech community quick to develop what the market wants, he suggests that “perhaps they can be complementary”.
“Blockchain has a proven use case in documentary trade, particularly in facilitating and securing Smart Document flows, yet how it deals with high volume, low value payments is yet to be established and clearly explained,” he comments. “Corporates will then want to know what the cost benefit to them is.”
In light of this, Ripple may struggle to earn corporate appeal, he says. But its blockchain-enabled speed and security may yet work for banks, in either a correspondent banking or bank treasury setting. Treasury cut-off times could indeed benefit here. Indeed, with many banks still to sign up to gpi, largely because it requires a lot of effort to improve their own payment processing speeds, perhaps a solution such as Ripple will fill in the gaps.
In the meantime, G4C seems to be making good progress. “When a corporate initiates an investigation into a payment, it takes just a few minutes to have 100% certainty where the payment is, and why it is not progressing,” says Bayle. “It’s a cost- and time-saving exercise that means better customer service for banks and for corporates.”
