Are you ready for real-time tracking of your cross-border payments with gpi?

Treasurers have been told time and again that the payment industry will be rapidly transformed with the entrance of non-bank digital players to the game.

McKinsey & Company warned in 2015 that while most start-ups have generally not been able to gain a solid footing in payments compared to the banking industry in the past, the payments dynamic is ripe for change.

This is no more so the case than in business-to-business cross-border payments, a generally complex and sometimes frustrating process to manage. Pain points for corporate treasurers include slow processing times, a lack of transparency around the payments process and pricing, and funds traceability.

Given the FX rate margins and transaction fees involved, it is not unreasonable for corporate treasurers to expect more accountability from their banks around the practice of cross-border payments. 

There is now something new, but not just from the start-ups, as widely predicted, but from a bank-wide initiative spearheaded by SWIFT – the global payments innovation (gpi) initiative. With more than 110 banks signed up, 19 live banks on gpi including DBS as at August 2017, covering 224 countries and approximately 75% of cross-border payments over SWIFT, gpi promises to raise the bar in terms of the customer standards that have long been expected.

In essence, gpi commits banks to improve their service to deliver payments to the beneficiary based on committed service-level of four hours (subject to banks’ cut-off timings etc.), provide full transparency of fees and charges involved in the process, traceability of the funds as they funnel through the system, and improved reconciliation functionality.

Navinder Duggal, group head of cash product management, DBS Bank said: “The banking industry has achieved a major milestone with SWIFT gpi in Asia. It sees gpi as an important step toward making customer experience more effective for cross-border payments. We are pleased to make banking more expedient for our corporate and SME customers.”

This gpi initiative has been live since early 2017, but how does it work?

Transparency Is Key
At the centre of the gpi scheme is a multilateral service level agreement rulebook – a mutually agreed set of rules banks must abide by. A key tenet of that rulebook is transparency, offering customers full transparency on the fees that come their way.

This means banks must disclose their fee structure and highlight any fees that may have previously been less than visible. This will go some way in allowing treasurers to better manage their transactions and assess the value of their banking relationships.

In conjunction with this, SWIFT has developed a cloud-based database that allows banks to track their funds from the initial remittance to confirmation of credit to the beneficiary’s account.

This offers greater visibility on the status of a payment via a unique reference number, much like you would receive when sending packages through global courier companies to ascertain when the payment was sent, received and finally cleared. It is expected this level of traceability will aid in reducing the cost and resources for investigating late payments.

More importantly as far as the corporate treasurer is concerned, the service will typically be made available via a bank’s contact-centre and electronic banking portal. With  banks’ readiness, the corporate treasurer can conveniently track the cross-border payments using the unique reference number.

The benefits of gpi extend to payments reconciliation.  Within a SWIFT payments message is the payment-details (140 characters) used by the remitting corporate to provide the invoice information etc. In the past, this data may have not have made it through to the other end of the payment chain, but under gpi, banks are committing to ensuring that this remittance data is carried all the way through to the beneficiary bank and the beneficiary, who can easily reconcile and close the invoice off.

Reactions from corporates have been positive. HTL International, one of the world’s leading manufacturers of leather sofas and leather upholstery and with a presence in over 52 countries, makes cross-border payments on a daily basis. With this new service, HTL is now able to make these payments faster and track them. 

Serene Wong, treasury controller, HTL said: “SWIFT gpi enables us to know where our telegraphic transfer funds are across different banks across the globe. This provides transparency and visibility to our cross-border payments.”

Wong added: “We are looking forward to more banks quickly joining SWIFT gpi, so that we can then track all our TT payments using the power of gpi.  We bank with partners like DBS, which are at the forefront of innovation, to meet our cash management requirements.”

Speeding It Up

Cross-border payments are sometimes a lethargic affair. Depending on where the payment is being made and where it is heading to, it is not common for a series of correspondent banks to be in the middle of the chain, all with varying processing practices and standards and different clearing systems in place. Unexpected delays are therefore an operational hazard, notwithstanding the extra fees that creep into the system.

Under gpi, all participating banks agree to commit to standardised service-level agreements, thereby accelerating cross-border payments.

Atul Bhuchar, group payments product head, global transaction services, DBS Bank said: “SWIFT gpi provides a quantum leap in our corporate customers’ experience for cross-border payments by rewriting the rules for these payments across the banking industry. DBS continues to focus on providing future-ready payments solutions to our clients and being the first bank in Singapore and Hong Kong to go-live on gpi is another milestone in this journey.”  

The experience of managing cross-border payments has just become a lot more effective with gpi. gpi will continue to evolve with new features on the roadmap such as stop payment, recall of funds and the ability to transmit additional structured data. As more and more banks adopt  gpi, its benefits to businesses will only increase in size and scale.