SWIFT gpi – from obligation to opportunity

For November of 2020, the SWIFT release does not require any format changes for payment transactions for once. These were postponed until next year because of COVID-19. Still, the requirement for the so-called "universal confirmation" as part of SWIFT gpi remains. In simplified terms this means: for the credit in the MT103 format on the account of the beneficiary all FIN participants must send a response to SWIFT, specifically to the tracker. Rejections must also be reported, however, this does not replace the actual return. Thus, the payment sector once more has to cope with a (regulatory) mandatory project, which results in less resources for customer projects. But does it have to be like that? To answer this question, let us first look at what SWIFT gpi means.

Since 2016 the topic SWIFT gpi (global payment innovation) has become increasingly important. The core is a unique end-to-end reference, the UETR, which is given to the payment at the beginning of the correspondent banking chain and is maintained throughout all stages. This enables the tracking & tracing of payments, which had long been demanded for cross-border payments. The information is collected in the tracker. The tracker is a central database in the FIN cloud at SWIFT, which automatically reads the necessary information for each payment in FIN and is completed by further messages from the gpi financial institutions.

At first, UETR existed only within the CUG (closed user group) of the financial institutions participating in the gpi initiative, and only for customer payments (MT103). The standard service is also called gCCT (gpi for Customer Credit Transfer), which was soon completed by gCOV (gpi for Cover Payments). As of 2018, all FIN financial institutions are required to support the UETR, in addition to customer payments (MT103), for all bank-to-bank payments (MT202/205) – i.e. for all payments. First positive effects can be reported. With the UETR it is now possible to make statements such as "40 % of all gpi payments are final within 5 minutes" or "75 % of all gpi payments are final within 6 hours". Previously, there were only examples of payments that arrived very late (or not at all) or with no remittance information, but with high deductions for fees (including OUR), which led to many complaints with corresponding enquiries. A somewhat unexpected effect of the introduction of gpi was the drastic reduction in investigations.

If possible, a gpi financial institution undertakes to process the data on the same day, to waive the deduction of fees for OUR, to pass on the remittance information in full and unchanged (analogous to SEPA) – which should all go without saying – and of course to exchange information with the tracker (as soon as possible) not only on the status but also on fees and exchange rates. This information is then available to the payer bank as gpi bank. In this way, a further shortcoming of the cross-border payments – the lack of fee transparency – can be reduced. These benefits and in particular this information can then be communicated to the payer.

And then there is the issue of recalls. If need be, it should be possible to stop payments along the executing bank chain. However, same as the payment along the chain, the recall message is processed step-by-step by each involved financial institution. This is where the gpi additional service gSRP (gpi Stop and Recall Payments) comes in. The recall is reported to the tracker and the next attempt to transfer a payment to FIN with the relevant UETR is rejected. The long chain is skipped.

Now, with the "universal confirmation" the transparency is completed. This means that the payer bank not only receives the information "payment arrived at the last bank in the FIN chain", but also the status "payment arrived at the recipient". An acknowledgement was an integral part of the definition of SEPA instant payments from the beginning, but that was almost 50 years after the first SWIFT messages.

The FIN financial institutions are now required to report a "universal confirmation". This only applies to customer payments (MT103) and not to all payment receipts (M202/205). Reports must also be submitted for TARGET2 incomings, as these are transported via FINCopy. A "goodie" is the (manual) web access to this tracker, which was previously only available to gpi financial institutions.

The financial institution has up to 2 working days to report the "universal confirmation" (own public holidays are therefore excluded). This SLA will also be measured and the conduct of other financial institutions will be reported, but this will not start until mid-2021. Web access to the tracker is also made dependent on good behaviour.

Financial institutions with the smallest volume could consider manual reporting in the tracker. For automated solutions the payments platform should, for example, support one of the routes offered by SWIFT (MT199 or API). In addition, there is a so-called CSV solution in which corresponding messages are then generated to the tracker from a specific CSV report in the SWIFT interface.

Thus, a non-gpi bank must meet almost all the requirements that a gpi bank must fulfil. The missing step is no longer a big one, but the benefit for your own customers can be enormous. And with the options for gpi bank-to-bank payments (MT202/205 – called gFIT, which stands for Financial Institution Transfer service, an option for gpi banks), the financial institution's internal departments like treasury or money trading can also be given the security that the "payment has arrived".

However, for a financial institution it is not as important to receive the status messages from the tracker for sent payments, but rather to provide the customer with added value – in the best case the receipt "Payments received" (including information on fees and exchange rate). The service levels that a financial institution can offer range from the minimal version of manual access to the tracker via an own (corporate customer) hotline, to self-service offers in the online banking portal, to active information through notification with status reports to the corporate customer. And this is actually only possible by taking the step from the "universal confirmation" to the gpi standard service and opting for gpi. In the future, financial institutions with corporate banking will have to measure themselves against this.

Cross-departmental cooperation is required here; the services cannot be provided by the central administration department alone or even only by IT itself, as is often expected in "regulatory" projects during a SWIFT release. This can be achieved with a consultation that focuses on the overall process.

In summary, one can therefore state that it is not a long road from the mandatory requirements to enormous opportunities, and the prospects for additional services for corporate customers and also for internal bank departments are exiting.



Author: Mario Reichel
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