How the gpi came to be

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) was founded in 1973 as a way for banks to standardise the exchange of financial transactions. Its shared data processing system and worldwide communications network form today the backbone of the financial system.

In the last two decades, information technology has developed tremendously, and with it, the expectations of consumers. Social media, digital experiences and the sharing economy are re-shaping domestic markets. Disruption is there the key word: technology start-ups are being created on an ongoing basis, trying to provide simpler, fully digital experiences by disrupting the established business models, often helped by regulators which are trying to spur innovation and competition. Banks are not insensitive to this context and domestic banking, under pressure for a decade now, has seen a fundamental reshape towards self-service and digital, integrated experiences.

Cross-border payments have for a long time remained one of the few areas in the payments space still dominated by financial institutions. The complexities associated with different standards, business practices legal and regulatory frameworks adopted by thousands of financial institutions have acted as a deterrent towards harmonisation and simplification, the task enormous. Until recently, just knowing where a transaction was required considerable effort.

The cross-border payments business is also a highly competitive space, where a set of "correspondent banks" fight to service the payments and transactions business of domestic banks that need to provide their corporates with access to international business. Therefore, in this context, the incentives for collaboration have historically been minimal, reduced to reciprocal bilateral agreements.

It is in this context that the gpi was born, as a way for participating banks to become smarter together, as a new business-focused dimension to a bank-owned cooperative historically anchored on IT and Standards.

The spark

In Sibos 2015, a set of the most important global transaction banks and SWIFT came to the realisation that the time had come to provide a new experience for cross-border payments.

Against the previously mentioned context, banks felt that it was still possible to fix the corporate and cross border payment markets and that their current capabilities were up to the task, they just needed a vehicle to demonstrate that; "My systems already process payments on a real time basis" mentioned one banker. Recent and more established Fintechs were making inroads into corporate cross-border solutions so it was of the utmost importance to bring significant results, in a short period of time.

Because of this short window, we set course for using the existing cross-border payment rails to start with, other technologies would be explored along a roadmap.

Already secure, resilient, scalable, compliant and ubiquitous, the major paint points to fix were the speed and transparency of cross border payments.

Changing the existing is not easy. It requires a perfect storm just to be able to start thinking about a different future. And when there is agreement on why to change, the what and the how needs to be very clear and carefully thought through before change happens.

The approach we used for the gpi was one of pragmatic co-creation and progressive decision making: starting with the beginning, what the gpi framework would look like, then moving to defining the pillars of the to-be experience for cross-border payments, then drafting a rulebook with the use cases, business rules and technical specifications, and concluding with organising the pilot and go live phases.

Value first

Yes, if you're not in the ICO business, you first need value.

Through the existing "swift payments" experience, it was not uncommon for bank customers to experience delays of several days before payments reached the beneficiary. And when such a thing happened, the payment sender was not informed. Nothing to do with SWIFT, there could have been a fiber optic network between its participant banks, the banks simply were not working in a coordinated manner and their back offices were not providing this information to other banks. In a world where 5 seconds to load a website is considered slow, and where QR-enabled mobile payment experiences were just about the norm, such payment experience was similar to "throwing the money over the wall and hoping for the best", to quote a corporate banker.

"What would be valuable to a corporate customer, the knowledge that the transaction arrived to the beneficiary bank ?", asked the program manager to me at one point in time when we were defining the value proposition. "No – I replied-, the knowledge that the funds have been credited to the beneficiary’s account".

And that was it really. On top of that simple yet powerful value proposition we added transaction tracking, from one bank to the next, we added speed rules (same day credit in beneficiary’s timezone), we added transparency of fees and FX by intermediaries and a last rule for unaltered remittance information to ensure the beneficiary could still reconcile the payment when arrived.

Landing the rulebook

Between October 2015 and January 2016, 3 global workshops were organised, participated by 15 of the biggest global transaction banks. Each time, together with my colleagues in Standards, I presented an updated proposal and each time we were moving forward, building on what we had collectively agreed the last time. By end January 2016 we had a set of business rules and technical specifications supporting the four pillars of the gpi payments rulebook: same day use of funds, transparency of fees, end-to-end payments tracking and remittance information transferred unaltered.

Innovation was in the gpi since the beginning; in designing the new experience, we came up with three brand new things:

• a unique end-to-end transaction reference, the UETR, used to track payments and payments statuses end to end,
  
  
• a new product, a payments Tracker in the SWIFT cloud to provide a real-time view of a cross-border transaction status and
  
  
• a service level Observer, a "wall of shame" as some banks call it, which shows every gpi banks’ compliance against the gpi SLA on an ongoing basis. Showing the compliance levels with a simple green, orange and red color range, banks have today teams looking at every change in the compliance rating: no one wants to be in red! Yet they all asked for it and really like it as it demonstrates quality in an impartial way.

Execution is as important as the best marketing plan

Now that the rulebook was finished, the pilot phase started in February, after a selection process to identify which banks would have the readiness for a go-live early 2017 as well as the compatibility of business flows with other pilot banks. Through that selection process, every pilot bank would be assured that other pilots were in with the same objective of taking pragmatic decisions and moving towards the Sibos and live milestones.

SWIFT presented the early pilot results in Sibos 2016 to general acclaim, proving that the rulebook worked, and the service went live with 12 banks in February 2017, made available the Tracker in May 2017 and the 2 major US market infrastructures (Fedwire Funds and CHIPS) were ready by November 2017.

 
Today, one in four SWIFT payments is gpi, more than 165 banks have signed and, with over $100bn a day now flowing securely over gpi, it is becoming the "new normal" for cross-border payments that all banks requested.

...that’s not the end of it though.

First,without committed people, an initiative is nothing.

At the banks' side we had the community behind; they made gpi a priority on a daily basis while the pilot lasted and they really helped us push the agenda, shaping our "stake in the ground" proposal and often asking for more, better, faster, easier for them to do or integrate.

At the SWIFT side, the initiative was founded and led by four persons in Marketing (including myself), in collaboration with three more in Standards, producing content and ideas with breath-taking speed, working in a start-up approach for 2 years and sacrificing a good portion of our personal lives in that time, all because we believe in what we are doing, because we have the community behind us.

Also, the gpi is by far not a one-shot act.

Since the gpi pilot started, I have been responsible for future-proofing the gpi from a business architecture point of view. I started in Q1 2016 an agile innovation process with ~50 gpi banks around the world and the first fruits of these are planned to see the light in November this year. Since 2016 I am very proud of the innovation pipeline we have developed, including a wealth of initiatives at different stages of maturity.

The gpi future is about both reducing the TCO for banks while providing a stream of value-generation services, is about helping the banks cooperate, become nimble and efficient on the mutualised elements of cross-border payments, to better compete on the value-added and user experience sides where a fierce war is being fought these days.

(c) Pedro Mullor, 2018.

Parts of this article might be reproduced so long as the name of the author is quoted.

Additional information on the gpi's value generation initiatives as well as on the more strategic questions on the gpi objectives and vision can be found in the "gpi Transaction Management Services Overview" document in the initiative's website at SWIFT.com/gpi.

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.