Corporates voice frustration at slow Swift gpi uptake
Swift’s global payments innovation (gpi) has received a strong endorsement from multinational Swiss corporates, which have called for greater take up by the banks to solve many of their cash management issues.
A group of multinational Swiss corporates, including Nestlé and Swiss Re, has published an open letter, calling on more banks to adopt Swift’s gpi. The letter specifically points to looking forward to a pick-up in adoption by both large and smaller regional banks.
“We appreciate Swift gpi as it is targeting a long-overdue issue,” the corporates state in the letter. “It provides an essential improvement of the customer needs for higher cross-border payment speed, transparency and end-to-end tracking.”
After a year-long pilot, the gpi was formally launched earlier this year in a bid to improve Swift’s messaging systems. An initial group of 12 banks adopted it at launch in February; since then the number of banks using it has risen to 110 across the world.
Wim Raymaekers, head of banking market and Swift gpi, says: “There are already a lot of smaller and regional banks as customers, and they are an important part of Swift’s gpi strategy.
"It is really promising to see these smaller banks using the system, in addition to the larger, international banks.”
The information included in each gpi message is more detailed than the existing standard, and can be tracked at each step of the process, giving greater transparency on cash management.
The Swiss corporates say the previous system had several weaknesses.
“Treasurers and finance managers have little visibility of when and why a payment has been rejected, and the investigation process can be time-consuming and costly," they state. "It is also not always clear which party should initiate an investigation.
“This can cause problems with suppliers or end-customers, not to mention increasing financial risks resulting from payment delays or even fraudulent actions.”
Although there is an impressive number of banks internationally using gpi, the corporates’ letter indicates they feel there are still blind spots, despite Swift’s happiness at seeing some smaller banks implementing it.
A source familiar with gpi tells Euromoney there is some reluctance to join from smaller correspondent banks, adding: “Gpi needs the banks, meaning regional banks, not just huge international banks, but the smaller players will only do something when they see the money.”
There are a number of reasons why the smaller banks might not be moving as quickly.
Says the source: “Globals can move unilaterally, but correspondents have to move at a slower pace as they do not have the resources.”
Swift has attempted to overcome this issue with efforts to make the migration process as simple as possible to increase adoption.
“To speed up on-boarding, we've built gpi to ensure there is seamless back-office integration,” says Raymaekers. “Having this ease of adoption is very important; the key back-office applications should be gpi by default.”
Another issue for the smaller banks is that some might perceive transaction banking as only a small part of their business, making adoption a bigger task and harder to justify.
Raymaekers acknowledges this, asking: “What is the value of adopting gpi from a bank’s point of view? It comes down to whether or not the bank is a transaction bank.”
He says that it is an obvious step for some, but not so much for others, adding: “An investment bank or purely domestic relationship bank will have different business needs and objectives. For these banks, gpi may not be necessary.”
In any case, some smaller correspondent banks might not already even be using Swift. Moving on to the platform would bring about additional costs. There is also greater transparency on the fees being charged at each stage of the transaction. In all, this could be squeezing profit margins.
The source familiar with gpi tells Euromoney: "They need to do things faster, but for less money. There is the unbalance between asking these correspondent banks to do more, but to earn less.”
However, over time, it could be a case of these banks finding they are running the risk of losing out on international business. A feeling of being left behind could prove a tipping point for some.
This is where steps such as the letter from the Swiss corporates take on significance. Any push is more likely to come from the companies the correspondent banks work with, rather than the larger banks further up the chain.
“Correspondent banks will move for the corporates, but not for the banks,” adds the source.
Raymaekers believes the pre-gpi issues identified in the letter are just the tip of the iceberg.
“The pain points listed [by the Swiss corporations] are problems that are shared globally," he says. "There are likely to be many others that experience similar problems, but have not said so. The letter will surely encourage others to speak up.”
Raymaekers sees it as a positive step for the gpi that these companies are willing to be so outspoken on how it can work for them, concluding: “It is really encouraging to hear directly from large corporates that they need gpi to address the problems they face around cross-border payments.”