- On October 23, 2018
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Tracking things has never been easier, whether its health indicators, shipments, satellites, taxis, you name it, if it moves we can track it. But when it comes to visibility in cross border payments, companies have traditionally found it almost impossible to track where their payment is at any given time along the chain; and what fees are being applied at each stage.
Let’s say you’re a contractor in Lebanon and you’re buying material from China. At some point you’ll have to send money to China to settle the bill. How long will it take to get there? How much will your supplier eventually receive after all the fees are added and the foreign exchange rates are applied? Your CFO ends up spending far too much time on the phone with the bank chasing these details up. Why can’t payments be instantaneous and settled immediately?
There are a number of Fintech organisations that have launched projects to improve cross border payments already. Western Union being one of the oldest, and Ripple being one of the newest. Western Union and its peers typically target a very different audience than banks; and Ripple is hardly ubiquitous. The SWIFT messaging system however, is already used by thousands of banks and corporates around the world; which is why adoption of its latest cross border payments innovation has been so…swift.
Fast Payments, Even Faster Business
SWIFT gpi is an upgrade to the existing SWIFT messaging system used by financial institutions all over the world. The improvements enhance cross border payments by allowing same day access to funds rather than waiting several days for them to clear by including up to 140 characters of additional remittance information. Fees are predictable and transparent, so businesses know in advance how much wire transfers will cost and reconciliation times are greatly reduced.
SWIFT GPI QUICK FACTS:
Since its launch in January 2017, SWIFT gpi has been rapidly adopted by over 270 financial institutions, with more than USD100 billion in SWIFT gpi messages sent every day. Half of SWIFT gpi payments are credited to end beneficiaries in less than 30 minutes, many in seconds, and almost 100% of gpi payments are credited within 24 hours. Over 30% of all SWIFT customer payments are now sent on gpi. By the end of 2020, SWIFT will extend the benefits of its gpi service to all 10,000 banks on its global network
65% of merchants globally have stated a clear demand for faster payments and real time tracking
Banks who implement SWIFT gpi for their customers will be the most competitive. 65% of merchants globally have stated a clear demand for faster payments and real time tracking. But more importantly, one of the key benefactors of efficiencies in payments are SMEs. In fact, “43% of SMEs agree that being able to send and receive payments in real-time would be ‘essential’ to the success of their business”.
As the corporate banking sector tries to increase its customer footprint by looking to the SMEs for growth, lower lending portfolios could be countered with improved services such as SWIFT gpi. These SMEs will be valuable customers in the future for lending products where they might have fallen under the threshold previously. Faster payments for SMEs means faster growth and better risk management.
The SWIFT official list of banks committed to gpi in Lebanon suggests 20% of local banks have expressed support but as at the time of writing (end October 2018) only Blom Bank has gone live. The full benefits of gpi are only felt when every bank in the chain is enabled, but to mitigate against this, SWIFT has a deadline of November 2018 for every bank to be able to receive SWIFT gpi messages (including the UETR) and to be able to forward that UETR to the next bank. In essence, even if the bank isn’t fully gpi compliant, it can still record and relay the right information so it can be tracked by others. This way, the chain remains unbroken.
When we talk about banking disruption and the digital imperative, the move to faster payments is a great case in point. Deutsche Bank said; “We are entering a stage of Digital Darwinism. Players in the market will need to satisfy changing corporate expectations quickly through technology solutions, those who are unable to do so will find themselves struggling to remain in existence”.
“Banks are now not only competing with each other but with new non banking entrants for a greater share of the corporate pie.”
Keeping payment systems up to date is no easy task as many banks have opted for custom development which can be complex to upgrade, and legacy technology means some systems could be too expensive to overhaul fully. In order to become gpi compliant banks will have to use their own IT departments where available or outsource to 3rd party payment vendors. In order to justify the investment, business use cases have to be drawn up and ROI’s calculated.
Turnkey payment solutions vendors such as FinConnect can offer out of the box solutions to enable gpi readiness for banks within 40 days with minimal integration, along with automatic access to gpi Observer. After sales maintenance includes development of any new SWIFT gpi protocols to ensure banks remain competitive. 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.
Want to learn more?
Book a free demo today and learn how Fast Payments lead to even Faster Business