What's Next for SWIFT gpi and Cross-Border Real-Time Payments?
Recently, I wrote about the potential benefits of SWIFT gpi for banks. Like any technology, the rate of change is accelerating, making it critical that banks keep pace with the market and with their competition. In 2018, as domestic real-time payments schemes reach near-ubiquity thanks to a combination of regulatory and customer demand drivers, we have seen an accelerated parallel trajectory for cross-border real-time gross settlement (RTGS) payments.
SWIFT gpi has been gaining ground amongst the largest banks, for whom the added value lies in effectively leveraging the enriched data available as part of the new format, and proactively making that information available to customers.
Corporate customers, in particular, are underserved by current cross-border payments, which have historically been shrouded in mystery when it comes to payment status, delivery dates and final settlement value – thanks to FX fluctuations and the fees chain in the correspondent banking model. All of this has added up to a lack of certainty in cross-border payments, preventing corporates from making informed business decisions.
Evolving SWIFT gpi to 2.0
To turn speed into customer value, banks are looking at how they can take the next step – beyond what the SWIFT product set provides. This is centered around creating more channels for data delivery and aggregation, which deliver clarity and certainty to the end customer. This is similar to real-time payment schemes in that the value is in the overlay services, such as Request to Pay in UK Faster Payments. This certainty drives customer experience and in turn creates increased customer stickiness.
The ability to create high value for customers (and by extension revenues) is more obvious in corporate banking, where certainty in payments supports logistics and liquidity. Certainty in funds received allows corporates to release goods and transact more quickly with their distributors. Certainty in payments made allows corporates to receive operational resources quickly and keep their business profitable. It always has huge benefits in relation to liquidity, and the informed investment decisions corporates can make with that liquidity.
These overlay services – centered on certainty – will help the industry move into the ‘SWIFT gpi 2.0’ era. What the industry will see next, and I believe we’ll see it in the near future, are the first movers identifying real use cases for this evolution of SWIFT gpi. Up until now, the industry has focused on the power of the product rules, but the 2.0-era use cases are now emerging.
There’s a strong use case to be developed around reducing the number of inbound queries received by the bank in relation to in-flight information for cross-border payments, which would improve efficiency and margins. But more importantly, there’s an even stronger case to be made for proactively providing that information to customers to improve their experience. That may be in the form of a portal, but augmented with real-time push notifications and alerts to the customer regarding approvals, successful payments, fraud queries, etc. All with the goal of ensuring the customer is equipped with the right information, at the right time, to be able to make the right business decision.
Direct participation in SWIFT gpi isn’t a priority for some banks because of their customer demographic. However, this does provide an interesting opportunity for those who have invested in their overlay services for cross-border real-time, to package and sell them to their affiliate or correspondent banks. Leveraging the open APIs to extend the enriched data and the value-added services to these banks too is a potential future model.
These future use cases – amongst others – are being actively discussed within our industry, as banking moves toward open payments. We should see viable use cases emerge soon, as the leading banks race to be first to market with new customer propositions based on real-time payments.
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