Insight & Analysis

SWIFT pilots new cross-border payments service for SMEs

Published: Nov 2020

SWIFT gpi has already made considerable headway in reducing the pain points associated with cross-border payments – and a new service announced last month is expected to bring further benefits for SMEs and consumers.

A race track

Cross-border payments have long been a headache for treasurers. Tracking the status of payments that are handled by a chain of correspondent banks is notoriously difficult, and such payments can also be opaque when it comes to fees and deductions. In addition, payment data can sometimes be altered along the way, resulting in challenges where reconciliation is concerned.

In January, Treasury Today outlined the inefficiencies associated with the correspondent banking model. In addition, the pain points associated with cross-border payments were detailed in April by Zarine Swamy, Head of Treasury at SOTC Travel, who cited challenges ranging from lengthy delays to disagreements about how to split charges.

In light of these difficulties, the arrival of SWIFT global payments innovation (SWIFT gpi) has been heralded as something of a game-changer. The service, which was launched in 2017, enables banks to track the status of cross-border transactions using a Unique End-to-End Transaction Reference (UETR), and also enables remittance information to be transmitted without truncation or alteration.

Since then, SWIFT has continued to develop the service, which is used to send over US$300bn every day. Banks have increasingly integrated SWIFT gpi tracking into their portals – and last year saw the launch of SWIFT gpi for corporates, which enables corporations working with multiple banks to initiate and track payments directly from their treasury and payment systems.

Supporting low-value payments

In the latest development, last month SWIFT announced plans for a new low-value cross-border payments service, which is designed to support small and medium-sized enterprises (SMEs) and consumers. The service, which will use the high-speed rails already developed for SWIFT gpi, is expected to be available to gpi financial institutions in 2021, and is being supported by banks including Bank of China, Barclays, BNP Paribas, BNY Mellon, Deutsche Bank, KEB Hana Bank, MYbank, National Australia Bank, SMBC, Standard Bank, StoneX, UniCredit and Wells Fargo.

The intended benefits of the service range from a simple and streamlined user experience to predictable and competitive processing fees, agreed bilaterally between financial institutions. As Joanne Strobel, Head of Technical Solutions and Network Management for Wells Fargo’s CIB Global Payment Services, said in a press release: “SWIFT’s initiative for low-value cross-border payments provides upfront predictability for retail and small to medium sized business payments in an open network with global reach.”

“In recent years, the domestic payment experience for SMEs and consumers has significantly improved and they expect the same level of speed and predictability for their cross-border payments, with costs and processing times known up front,” comments Carlo Palmers, Head of Payments Solutions at SWIFT. “This new service reflects our ambition as outlined in our new strategy to enable instant, frictionless transactions from one account to any other account anywhere in the world, including in the SME and consumer markets.”

Next steps

Beyond the new service, Palmer says that further developments are in the pipeline for SWIFT gpi, adding that “we continuously enhance gpi with more features designed to reduce friction and deliver more value for financial institutions and their customers.”

Looking ahead, Palmer says these features will be incorporated into the new SWIFT platform that was announced in September as part of the organisation’s strategy to drive instant and frictionless payments across the SWIFT network. “The new platform will centrally manage and orchestrate transactions, bringing transaction data and common compliance and validation services together in one place, improving end-to-end efficiency and reducing total costs for SWIFT’s 11,000 financial institutions,” Palmer explains.

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