Posted on FinExtra: 



Just over one year on from the launch of the service, SWIFT has announced that more than 160 global banks have adopted its Global Payments Initiative, SWIFT gpi, allowing them to make high-speed, cross-border payments timed in minutes, or even seconds. This all sounds very positive – and while strong momentum is building, a crucial factor in the success of the service is gaining critical mass and full ubiquity of the service.

SWIFT gpi connects all intermediaries in a payment chain through the cloud, giving corporate treasurers greater transparency over transaction fees, foreign exchange rates and, most importantly, the same-day availability of funds. While some banks are fast-moving, others are taking much longer to get on board. This prevents the service from realising its full potential.

When launching the service, SWIFT published a five-year time frame through to 2020 for banks to implement its Standard Payment release. The timescale was chosen because SWIFT recognized the change may have far-reaching consequences for banks’ payment processing systems.

By 2020 SWIFT predicts that gpi will be the standard for all cross-border payments. But why should corporate customers have to wait that long? In the digital economy shouldn’t things be done differently? Shouldn’t banks be able to move faster to deliver on the full potential of initiatives like SWIFT gpi?

The truth is that in many cases banks’ legacy technology doesn’t allow them to adapt quickly to change – without throwing huge resources and investment at the problem. Just keeping their payment systems up to date can be a challenge – since banks have typically undertaken significant bespoke development. This makes it difficult and time-consuming to incorporate even the most basic system upgrades. In fact it’s not unusual, in my experience, to come across banks using customised IT packages that have failed to make any system upgrades for 6-8 years. The cost, complexity and risk involved in carrying this out has been prohibitive, and in some cases more expensive than implementing a new system.

With mandatory changes to SWIFT FIN messages now required as part of the upcoming SWIFT 2018 and 2019 releases and a requirement to meet the unique end-to-end transaction reference (UETR) in readiness for SWIFT gpi, many banks find themselves facing an expensive headache – and have large ongoing development and implementation projects underway to meet existing and future requirements. This includes the second phase of gpi which allows for capabilities such as the ‘Stop and Recall Payment’ and ‘Cover’ services to be introduced in November this year, and phase 3 that looks to leverage distributed ledger technology (DLT) for nostro reconciliation.

For the large global banks, for whom correspondent banking and cross-border payments are key services, building the business case to invest in SWIFT gpi may not be as challenging as it is for the smaller, regional banks. But irrespective of size, all banks going forward should be looking to work with vendors that can offer system upgrades and SWIFT updates as a standard part of their annual maintenance services, with no need for bespoke development.

Banks can future-proof themselves by implementing a modern banking platform with a payment processor, offering rich functionality, that is flexible and adaptable, highly-parameterized, object-oriented and rules-based. Rolling out the platform as a standard, packaged system, country by country without creating any special version of the source code will pay dividends in the long run. Such an approach allows subsequent system upgrades and SWIFT updates to be quickly and easily incorporated and tested on a fully automated basis – so that initiatives like SWIFT’s gpi can be rolled out with ease.

Knowing this is possible, corporate customers are right to ask – ‘why wait till 2020?’ – let’s realise the full benefits of SWIFT gpi as soon as we can!