Currencycloud Blog July 5, 2021

Predicting the future of global payments with SWIFT gpi

When you think of sending money internationally, what comes to mind?

If you imagine a frustrating, opaque experience in which your money takes days to arrive with no clear explanation of deductions, pit stops or delays, think again. SWIFT gpi has changed all that.

Well, it’s not quite that universal. But that’s the promise of this technology, and SWIFT global payments innovation (gpi) has pushed standards for speed, transparency and user experience sky-high in cross-border transactions. It’s why we’ve been members since June 2019 and offer access to our customers as an API using our Payment Tracking solution.

So what’s next? How has the industry truly changed — and where will it go from here?

We spoke with industry insiders David Birch and Piers Marais to get their takes. For Piers, Currencycloud’s Product Director, SWIFT gpi represents a dramatically enhanced customer experience in global payments that opens the industry to new players. Meanwhile, David — one of Fintech’s top 100 most influential leaders — is looking further ahead: SWIFT gpi is both the start and end of an era.

The nature and impact of SWIFT global payments innovation

As a key global financial organization, SWIFT helps manage the messaging and correspondent banking network that moves money internationally. SWIFT global payments innovation is the next level of that service.

SWIFT gpi is what Piers describes as the “Amazon parcel tracking service” of the financial world: by introducing tracking and speed on an enormous scale, it has introduced unprecedented visibility, reduced transaction times dramatically and elevated the standard of service in cross-border payments.

Here’s how it works, per Piers:

“Every SWIFT wire payment gets allocated a unique ID — the UETR, unique end-to-end transaction reference — and SWIFT has effectively created a data lake. When payments travel through the correspondent banking network, that UETR is used to record different events across that payment which SWIFT gpi members can then see.”

SWIFT gpi members — that is, banks and non-bank financial institutions who have elected to join SWIFT gpi — also have to adhere to service-level agreements in terms of processing speeds. And, since November 2020, even non-gpi members must report receiving SWIFT messages to the SWIFT tracker “data lake” within a certain timeframe. As a result, the world’s financial system is starting to be truly centralized.

That means that cross-border transactions are no longer a mysterious labyrinth in which money inexplicably moves slowly. Now, money lands in minutes, not days, with clear visibility of the money’s location, journey, fees deducted, and arrival at the destination.

As David puts it, “ has had quite an impact because one of the frustrations that a lot of people have in the Fintech world is, ‘how can be so complicated and time-consuming?’ but that’s actually not really true anymore.”

Why SWIFT gpi opens the door for new global payments models

“ is great, it’s fantastic, it works really well and will vastly improve most people’s global payment experiences. But will it be there a generation from now? I’ve got a feeling if we’re talking longer term, it won’t be.”

David Birch, on the future of SWIFT gpi

Now that SWIFT gpi has seen substantial global adoption, the industry is full of questions about both the immediate impact and long-term trajectory of the technology.

Some, like David, see it as a stepping stone to a new financial order. Others, like Piers, are more focused on the near-term need to digitally enable businesses and embed financial technology in new industries — which will likely involve a reshuffling of how we think about global finances and the journey of money.

So what impact will SWIFT gpi have and what does the future hold? Here are the top three themes we’ve identified:

  1. Modernizing and digitizing global payments to meet new standards
  2. Accelerating embedded finance
  3. Empowering customers and smaller banks

Modernizing and Digitizing

By introducing speed and visibility, SWIFT gpi has raised both customer expectations and the accepted standards for international payments. It has impacted the entire industry, beyond traditional financial services: SWIFT gpi is also available for international corporations and non-banking payment organizations like Currencycloud.

Now, even non-SWIFT gpi members are being forced to digitize their offerings. At the same time, new financial offerings that work outside the correspondent banking system are appearing.

The potential of these faster services is broad. Piers puts it this way: “You can now start to see information about a payment before it has even landed in your bank account. For me, that starts to become a really powerful next step in this cross-border payments space.”

For businesses, this unlocks options such as inbound tracking and earlier delivery of goods, optimizing working capital. When a company is able to track a payment before it lands in an account, they have the ability to release goods or services before the funds technically arrive.

A next step, or a final innovation?

David, however, thinks there’s an apt comparison to be made here. Is SWIFT gpi modern finance’s equivalent to the Cutty Sark sailing ship?

The Cutty Sark was the world’s fastest sailing ship, launched just as steam propulsion was invented. It was the peak of design for a transportation method that was made obsolete by the evolution of technology. David describes it by saying, “The fact that steamships had arrived stimulated one last technological burst of innovation that got the last bits of efficiency out of the old system. But in the long run, the steamships still won.”

SWIFT gpi may represent the same thing, which is why David asks:

“Is this the last technological squeeze out of the existing correspondent banking infrastructure and messaging systems and everything that goes with it, or does it represent a step in a new direction?”

As for what’s next? Piers highlighted embedded transactions, unprecedented data exchange via APIs, and competition in the banking sector. 

Looking further, David proposed that if we imagine SWIFT gpi as the Cutty Sark, things like central bank digital currencies become inevitable — or even a broader range of digital assets to be traded across the same rails: 

“I wonder if the long-term future of SWIFT isn’t switching money at all, but switching identity? Because if I’m sending over instantaneous wallet-to-wallet rails, I’ve still got to do the KYC … and there doesn’t seem to be an obvious reason why I can’t send over a global coordinated network.” 

Accelerating embedded finance

Regardless of its long-term potential, SWIFT gpi is changing the nature of financial systems right now by streamlining the path forward for embedded finance. The transparency afforded by SWIFT gpi and the cross-functionality afforded by embedded services unlock enormous potential use cases: In the future, for instance, it’s possible that a small business owner could conduct cross-border payments directly through accounting software such as Quickbooks.

Piers emphasizes the importance of this change: “The future will be about embedding the financial transaction within something else. You’re not often or usually starting your journey from within your banking application.” 

Empowering users

In the same vein, SWIFT gpi:

  • Opens the door to a far wider user base, and
  • Removes the inequity of existing financial power structures.

Because Fintechs like Currencycloud provide access to SWIFT gpi via an API integration, they enable businesses and regional banks to instantly implement the functionality of modern global payments. They also provide direct insights for the businesses and consumers using those services.

That empowerment is one of the most impactful aspects of SWIFT gpi.

The long-term future of the technology is still in flux, but the reality of the present is clear: SWIFT gpi is changing the structure and power balance of the international finance system.

As an early adopter and established member of SWIFT gpi, we’re constantly exploring the nature and potential of the technology. Download this whitepaper to learn how SWIFT gpi and related APIs are transforming cross-border transactions — and why SWIFT gpi will benefit both banks and customers.

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