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How gpi’s UETR disrupts cross-border payments



Tim Hartford’s excellent column on the @FT this summer on IT innovation “What we get wrong about technology” https://www.ft.com/content/32c31874-610b-11e7-8814-0ac7eb84e5f1 begins with an ominous paragraph: “Forget flying cars or humanoid robots. The most disruptive inventions are often cheap, simple and easy to overlook”.

So much can be said about the UETR, SWIFT gpi’s (universally) Unique End-to-End Reference, when considering financial transactions.

For starters, the UETR in itself is cheap to produce: the references can be generated by anyone, without need for a central issuance authority. The specification for the UETR is based on a well-known Internet standard (https://en.m.wikipedia.org/wiki/Universally_unique_identifier) so if you want one you can just go to https://www.uuidgenerator.net/version4 or use the appropriate function if coding in many modern languages. Even tried and tested mainframe technology can churn out a UETR when “persuaded” the right way.

A bit more difficult is the task to actually getting the UETR into every cross-border payment message: gpi is the initiative driving this process. With its first service, gpi concentrates in ensuring the traceability and transparency of payments. For that we needed a UETR, a reference that is initiated by the first party in the transaction chain and that stays unchanged throughout the transaction’s life. While previously a transaction might have been derived, more or less successfully, from two similar-looking messages on both the incoming and outgoing sides of a financial institution, each with their own reference, now approximation leaves place to certainty and linking different legs of a transaction becomes a mechanical process.

The UETR thus becomes the pointer to the Transaction status and history which can be obtained from another innovation: gpi’s (payments) Tracker. Very similar to a blockchain reference if you ask me, but much cheaper to achieve for all parties involved.

In his article, Tim mentions that “It was only when it became possible to mass-produce paper that it made sense to search for a way to mass-produce writing too” (referring to the Gutenberg press). The UETR is not only the glue which enables cross-border payments tracking and associated business intelligence, it is the foundational layer allowing, within gpi, to trace information such as interbank deducts or amounts transferred and credited or business rules monitoring; ultimately, the UETR could simply become the new Esperanto for cross-border payment inquiries and investigations: one and the same reference used by any institution with any other counterparty in the same transaction chain.

And this is only the beginning. Gpi started in 2016 a roadmap to additional payment services, additional uses for the UETR. For example, if a UETR is now on every cross-border payment, “freezing” the UETR becomes a new, very efficient way to stop a payment anywhere it is. Conversely, what if corporates wanted to activate a “will not stop” flag as a proof of good will in a business transaction made on an open account basis? What if the invoice also had the UETR so that payments (and requests for payments) could be fully reconciled by the seller? And, for FI liquidity managers, what if the UETR was also used, with blockchain technology, to track and reconcile settlement on correspondent banking accounts in real time? It’s not difficult to see that we have only begun coming up with use cases for the UETR.

Admittedly, for this vision to be effective the UETR needs to be used by as many institutions as possible, and this is why SWIFT and the gpi community (with gpi phase 1) is very busy making sure that more financial institutions use the UETR, join the gpi already strong list of ~100 global banks supporting and implementing gpi.

With so many achievements for gpi in only 18 months, the name of the game in cross-border payments disruption is ‘collaborative innovation’; financial institutions are welcome and FinTech is too (https://innotribe.typeform.com/to/gV4GYy).

(c) Pedro Mullor, 2017


DISCLAIMER: the views expressed here are my personal opinions. Content published here is not read or approved by my employer before it is posted and does not represent the official positions, strategies or opinions of my employer.

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