Gpi stands for global payments initiative. Think: the Amazon parcel tracking equivalent in the international payments space.
Is SWIFT gpi going to revolutionize payments tracking? That’s what we’re here today to debate.
In this episode of Payments Innovation, host Richard Arundel, Co-founder & Chief Evangelist at Currencycloud catches up with David Birch, author and Fintech thought leader, and Piers Marais, Product Director at Currencycloud.
Richard, David, and Piers discuss…
- The 4 benefits SWIFT gpi affords to end-users
- Why SWIFT gpi might actually be the Cutty Sark
- How Fintech will look in the near future
“Is SWIFT gpi the last gasp of the old order, if you see what I mean? Or is it the first step in the new direction? You could see it either way…” — Dave Birch
Global payments initiative works like this: Every SWIFT wire payment is allocated a UETR (unique end-to-end transaction reference), which records different events across that payment that allow gpi members to track those events.
This affords 4 benefits to end-users:
- Speed. Gpi members have to adhere to certain service level agreements in processing speed.
- Payment visibility. GPI members can see exactly where a payment is at any point in the network at any point in time.
- Charges transparency. GPI members can know who has deducted what amount from the principal at what point in time.
- Payment certainty. GPI members can see that a payment is actually credited to the beneficiary bank account.
“The combination of those four things is contributing to what we’re calling that revolution, or perhaps evolution, of cross border payments,” Piers said.
Let’s not knock SWIFT gpi. Yes, it may have taken a while to coordinate, but at this moment, it’s working quite successfully.
People underestimate the complexity of Fintech payments and don’t realize why it is so complicated, expensive, and time-consuming. SWIFT gpi payments are taking minutes now, not days, which is a staggering improvement.
SWIFT & the Cutty Sark
Quick sidebar on Cutty Sark so that you don’t have to google:
The Cutty Sark was the world’s fastest and most beautifully designed clipper ship…constructed right before steam propulsion came out. It was the peak of design for a transportation method that was made obsolete by the evolution of technology.
“Is SWIFT gpi the last gasp of the old order, if you see what I mean? Or is it the first step in a new direction?” Dave asked. “Depending on your views, you can see it in either way.”
The Cutty Sark was built after the first steamships came onto the scene. They quickly beat the sailing ship’s best records — in fact, economists call this “the steamship effect.”
Dave leans toward viewing SWIFT as the clipper ship in an incipient era of steam engines. “This is the last burst of innovation from the existing. For the next few years, it’s going to vastly improve most people’s global international payment experiences. But will it be there a generation from now?”
For now, SWIFT gpi is setting the records. But what’s coming up behind it?
“You can now start to see information about a payment before it’s even landed in your bank account. For me, that starts to become a really powerful next step in this cross border payments space.” — Piers Marais
Benefit to customer
Before we get into potential solutions, let’s start with the user problems that SWIFT solves.
Here are 2 of them:
1 — Payments frustration
All of that opaqueness that payment tracking solves has dogged the reputation of gpi — the lack of clarity about what was happening.
Alternative ways of sending money have started to emerge around the world to avoid these (and will maybe evolve like steamships in our Cutty Sark metaphor). How do I send an instant payment in Singapore when I’m actually based in the UK?
Various Fintechs, including SWIFT gpi, have helped to shape our perception of what a cross border payment actually is.
2 — Confirmation of credit
Since the change in SWIFT standards in November 2020, every institution that receives a SWIFT message now must report to the SWIFT tracker, that central data lake, regardless of whether they’re a gpi member or not. This is termed confirmation of credit.
A gpi member must report in 2-4 hours, a non-member within about 2 days.
This latest change began to close some of the holes in the process that alleviated a lot of the opaqueness about a payment.
In the near future, we’re likely to see 3 innovations from gpi:
- Inbound tracking. This would show information about a payment before it’s even landed in an account and could even free up a release of goods or services before the funds have even arrived.
- Embedded finance. A small business owner could conduct cross-border payments directly through QuickBooks, for example.
- Data-driven liquidity. If you’ve got the data with the appropriate levels of trust, (in other words, if the bank can see 3 months of your accounts,) you can make more confident, transparent, and rapid business decisions.
Where do you see Fintech in 5 years?
Piers: 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. As a result, we will probably start to see quite a lot of consolidation within the banking space. For me, over the next 3 to 5 years, it’s really going to be about consolidation of some of the less technically enabled institutions.
Dave: Let’s imagine that gpi is the Cutty Sark, so something else is going to come along. In the 3 to 5 year horizon, there’s an inevitability about central bank digital currency because of the international ramifications of it. If I was looking a bit further, I might be tempted to say that a broader range of digital assets will be traded over those networks, which is very good news for Currencycloud. If you want a crazy Cutty Sark style prediction, in the long run, SWIFT will be switching identity, not money.
Until next time!