- On October 23, 2018
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Unlike domestic payments, which have been under pressure from regulation and competition, cross border payments have retained a relatively free hand until recent fintech innovations threatened to remove banks from payments altogether, and the compliance environment became more and more expensive.
In 2015, McKinsey estimated cross border payments to account for 20% of the volume of banks’ payments transactions but up to 50% of their payments revenues. B2B cross-border payments accounted for almost 80% of all cross border revenues, and this segment is expected to grow in line with the growth of SMEs in the region. A study by Traxpay in the same year demonstrated that 60% of cross border B2B payments required manual intervention resulting in 15 – 20 minutes of extra time taken per transaction.
“Over 90 percent of the resulting costs are incurred in banks’ efforts to manage counter-party bank relationships in the back office, rather than in the technologies and networks that handle the value transfers between banks”
The compliance requirements in the correspondent banking network are advantageous in that they enable a truly global network which is safe and can be used by anyone with a bank account; but the corollary is that this type of network is also very expensive to maintain. During 2013 and 2014, one leading U.S.-based global bank stated that it had cut ties with 500 network banks, mostly in the Middle East.
Speed, Transparency, Predictability
A solution to the above problems in cross border payments is the SWIFT Global Payments Protocol (SWIFT gpi). The new messaging standards offer:
Same Day Settlements. View incoming payments before a credit is posted to a client’s account.
End to End visibility through the chain, with insight into charges and FX rates
Payment Tracking and instant access to payment status including rejects and returns.
SWIFT gpi is currently in use by over 270 financial institutions worldwide, posting more than $100 billion in SWIFT gpi messages per day, with half of all gpi payments fully credited to beneficiaries within 30 minutes.
For small banks looking to gain market share, enabling SWIFT gpi offers the ability to compete with larger more mature banks, by bringing speed, transparency and predictability to cross border payments. Corporate clients can benefit from same day settlements and an end to end view of all fees, surcharges and fx fees along the payment route, enabling better cash forecasting and quicker supplier fulfilment. Banks can cut investigation time in half with the ability to access data from multiple parties in one easy to use dashboard.
Unlike other payment innovations which require costly custom integrations with existing legacy software, upgrading to SWIFT gpi only requires that the bank has access to SWIFT rails, there’s no need for dedicated SWIFT in house IT resources. Turnkey payment solutions vendors such as FinConnect can offer out of the box solutions to enable gpi readiness for banks within 25 days with minimal integration, along with automatic access to gpi Observer. After sales maintenance includes development of any new SWIFT gpi protocols so you can stay ahead of the market. FinConnect also provides banks with growth marketing tools and guidance to help banks generate better ROI.
How does FinConnect work with Banks?:
We nurture banks from initial subscription to SWIFT gpi, through compliance testing and launching of the solution. FinConnect also trains bank staff on gpi business rules and how to maximize gpi usage for better cash management.
No need to allocate IT resources for gpi development or integration, we do all the heavy lifting for you!
FinConnect gpi Features:
- Adaptation of gpi rules for your business requirements
- Seamless integration with Core Banking systems and the SWIFT network
- Immediate full automation of payments (Outgoing / Incoming)
- Execution of all SWIFT mandated testing scenarios for compliance
- Access to gpi Observer: view gpi compliance of banks around the world.
Learn how your bank can compete in 2019 by booking a free FinConnect gpi demo today