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Faster payments are driving progress, but global reach has been the tricky piece in the payments puzzle

23/11/2018

Marc Recker, Deutsche Bank’s Global Head of Cash Market Management, identifies global reach as the crucial piece of the payments puzzle – citing SWIFT gpi adoption as a major step towards plugging the gap.

Around the world, faster domestic payment schemes are taking shape. Initiatives such as the UK’s Faster Payments Service (FPS), Singapore’s FAST, and more recently, continental Europe’s SCT Inst – launched on the 21st November 2017 – have all seen considerable success. With the ability to process euro transfers in under 10 seconds, SCT Inst passed the 1 million transaction mark after just five months.

Instant or real-time payments systems such as these play a central role in the broader phase of digitalisation that is sweeping the payments industry, and have done much to improve the speed, efficiency, and transparency of payments.

However, there is always one tricky piece in a puzzle, and in the case of cross-border payments, that concerns global reach. Payments schemes – even new, real-time ones – are still fragmented across countries and regions. This means the industry must continue to focus its efforts on developing and modernising its existing correspondent banking infrastructure, which at least for the foreseeable future, remains the only viable means of establishing an effective cross-border payments network.

Perhaps the most promising initiative in this respect is SWIFT gpi. Typically settling cross-border transactions in under 30 minutes, this initiative went live in February 2017 and already counts over 280 banks worldwide as members. It offers corporates a faster and more far more transparent payments service, enabling banks to provide corporate treasurers with a real-time, end-to-end view of the status of a payment, wherever it is in the correspondent banking chain, along with final confirmation that funds have been credited to the beneficiary account. This gives treasurers reassurance that their funds have been safely transferred, along with associated remittance data, such as invoice references.

A lot has been achieved in the short space of time since gpi was launched. Indeed, large transaction banks can already offer customers a view of the status of a SWIFT gpi payment – in Deutsche Bank’s case, through our proprietary Autobahn app using Cash Inquiry.

However, there is still work to be done and it is up to the larger transaction banks to drive the initiative to the next level, bringing about further efficiencies. For example, treasurers would really appreciate the ability to take advantage of a bank-agnostic central platform instead of having to access multiple systems to track and reconcile a payment.

With this in mind, SWIFT – along with 11 multinational corporates and 12 gpi banks – have been participating in the so-called SWIFT gpi for Corporates pilot (g4C). The scheme enables a corporate to generate its own SWIFT gpi tracking code, i.e. the Unique End-to-end Tracking Reference (UETR) and monitor the status of payments initiated with multiple banks, all within their Enterprise Resource Planning (ERP) software, or Treasury Management System (TMS). The majority of corporates and banks in the pilot are now “live” on g4C with others planning to go live by the end of this year. Those that are up and running have already reported immediate benefits such as the ability to monitor the status of all payments in the system using the UETR, reduced time spent dealing with queries, and a complete overview of deductions made along the chain.

The g4C initiative is just another small step in the cross-border payments evolution, but a vitally important one. It standardises gpi flows between banks and corporates, provides a “single” gpi experience for multi-banked corporates and demonstrates efficiencies in corporate payment processing.

Looking to the future, banks, corporates and other maket participants must draw together – encouraging industry-wide adoption of SWIFT gpi and SWIFT gpi for corporates, as well as other refinements to the correspondent banking landscape. These upgrades are essential to helping cross-border payments keep pace with the heightened needs of end users and helping to make sure there are no tricky pieces in the global payments puzzle.

Marc Recker, Global Head of Cash Market Management, Deutsche Bank

Author: Kate Nelson