It’s remarkable to consider the contradictions underlying the technological age we live in.
While contactless transactions, robotics, artificial intelligence, virtual reality and GPS have become widely standardised, large, corporate cross-border payments rely on an archaic system that has remained largely unchanged for decades.
In fact, you might be all too familiar with the expression ‘Pay & Pray’, having become something of a ubiquity in treasury offices the world over. Nails are chewed, teeth chatter, and finance professionals pace their offices, waiting anxiously for the arrival of a notification declaring a successful payment.
Historically, corporates have been subjected to a distinct lack of transparency when it comes to updates on their payments, coupled with punishing waits for money to clear that combined have provided a smear on the payments landscape.
But times are changing. In fact, they already have changed.
In January 2017, SWIFT gpi was rolled out, and to say that over the past several years it has enjoyed an enduring popularity would be something of an understatement.
The Evolution of SWIFT gpi
SWIFT – or to use its full name, the Society for Worldwide Interbank Financial Telecommunications – will be no stranger to many treasurers charged with processing international payments.
The platform has drawn various criticisms over the years, with grievances including the system being too slow, too expensive, not secure enough, and lacking transparency. SWIFT have been quick to respond to these accusations, and justifiably so, given the infrastructure supports almost instantaneous transfer of messages and data.
A standard payment message takes seconds to travel to the various SWIFT members, so why the hold-up, and where is it happening? Corporate payments have often held up for unexplained reasons, generating considerably frustration throughout finance and treasury teams.
Thankfully, SWIFT gpi directly addresses these concerns.
By shining a torch across the banking chain, the SWIFT gpi tracker illuminates the entire path of a payment for the first time, offering unprecedented transparency. It achieves full visibility of the payments process for corporates and the banks themselves, end-to-end, including the clarification of costs and the drastic reduction of payment processing times.
Such a revolutionary enhancement of the cross-border payments environment goes someway to explaining the jaw-slackening statistics SWIFT gpi boasts.
In 2019, SWIFT gpi transferred a staggering $77 trillion in cross-border payments messages – a drastic increase from 2018’s $40 trillion.
While more recent statistics aren’t available, we do know that the same year also saw 65% of cross-border payment messages sent by Swift members using gpi.
By 2019, it already covered over 200 countries, was represented in over 78% of cross-border SWIFT payments when factoring in the banks in support of gpi, and had facilitated over 16 million payments, with an average of around 160k payments daily. Not a bad set of numbers, especially when, as of February 2018, 42.51% of these payments were declared ‘complete’ within 30 minutes.
In fact, the only problem might be that the SWIFT gpi tracker offers modernisation at a faster rate than other parts of the corporate payment scene can keep up with, as 65% of banks say their legacy systems are holding back SWIFT gpi adoption.
Of course, this is where AccessPay are positioned to help, helping revolutionise other aspects of corporate banking through Payment Automation and Cash Management solutions.
The Value the SWIFT gpi Tracker Provides for Corporates
Having digested the numbers presented above, one might wonder why the value of the SWIFT gpi tracker requires further elaboration.
The reason is simple: not all corporates have grasped the potential applications of gpi payments yet, and for that reason alone, it is very much worthwhile explaining what these figures mean in real-terms for the modern corporate.
We can break this down into three key aspects.Visibility
Compounding the stress of initiating a cross-border payment is the knowledge that the money doesn’t just travel from one account to another. Typically, such a payment will be processed by three, maybe four separate banks.
During this procedure, the risk of fraud, human error, security breaches, and various other friction points are all possible.
When initiating a cross-border payment through SWIFT gpi, the instructing party is required to tag the payment with a unique end-to-end transaction reference number (UETR). They are then able to use this number to track the payment at all stages from it leaving the initiator’s account, to it landing in the receiver’s.
Think of this as comparable to when you order a product from an online vendor, and the courier service allows you to track delivery using a code emailed or texted to you. It’s exactly the same principle but applied to international payments. Simple, right?
A previously elusive aspect of payments now has an industrial strength beam shone directly at it, allowing every element contained within to be clearly seen. Imagine being able to give your suppliers and payable receivers complete certainty on where their funds are, when they will arrive, and exactly how much they will receive.
This newly acquired visibility presents another compelling benefit for corporates: a much more competitive international banking landscape.
Treasurers will quickly begin to learn which banks in the chain are the slowest, the cheapest, and which implement the most hidden charges. They will be able to change banks accordingly, as too will the banks their own practices and services levels to remain competitive with their peers.Speed
Cross-border corporate payments have always been infamously slow.
Often the reason for this has been that banks within the chain have held onto the money for internal operational reasons, such as liquidity management or compliance checking, before passing it on. This has led to payments taking hours, even days to process. For the initiating and receiving party there has been little they could do, with the process having been shrouded in darkness.
With the journey of gpi payments exposed, banks can no longer hold onto money unnecessarily.
Indeed, it is now a time for SWIFT gpi SLAs to be in place which dictate the maximum length of time a bank can hold onto a payment, providing access to an “observer” to serve as a leaderboard for the best and worst. It is this that primarily accounts for the drastic acceleration of payments many of which take minutes to complete, some even seconds.Better forecasting
Not knowing when a payment is going to complete presents obvious forecasting problems for both the initiating and receiving parties.
Key decision-making is slowed, urgent payments are delayed, and a real-time overview of current finances is next to impossible. With payments processing within minutes through SWIFT gpi, these corporate pain-points are all but eradicated.
Of course, it remains unideal if your payment is delayed by a day or two, which could still be the case for some gpi payments – but having knowledge of this delay in real-time provides treasury teams opportunities to seek alternative financing and positioning of their cash.
Watch the Video
Still after more information on SWIFT gpi? Listen to specialists James Higgins & Andy Howarth explain the benefits of SWIFT gpi for corporates.