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Outsource and collaborate for streamlined SWIFT gpi migration

Outsource and collaborate for streamlined SWIFT gpi migration

SWIFT’s universal confirmation of payment deadline set for November 2020 means that firms have a clear window of opportunity to refine and implement SWIFT’s global payment initiative (gpi) for cross-border payments.

Over 50% of gpi payments are credited within 30 minutes of initiation, this speed means that firms are presented with opportunities to provide value-added services around this unparalleled USP, including pre-validation of payments, case resolution services, and improved liquidity management. gpi also provides a natural first step in the direction of cross-border instant payments.

Firms seeking to keep pace with the cross-border payments evolution must identify which approach best suits the specifics of their firms’ objectives while juggling the real-world pressures of cost, competition and cumbersome legacy systems.

To outsource or to collaborate are two leading approaches examined in a recent Impact Study by Finextra Research and Volante Technologies, “How to Adopt SWIFT gpi by the 2020 Deadline - Build, Buy, Outsource or Collaborate?” The following is an extract from the study.

Outsourcing to a gpi service provider, particularly one that offers a cloud-based service, reduces implementation effort and cost while optimising bank resource usage. Adopting cloud-based processing services can reduce total cost of ownership by more than 40% in many areas of financial services, and SWIFT gpi will likely fit this profile.

Cost can be managed through volume as institutions need not invest directly in hardware or software. Outsourced services are typically priced on a per-transaction basis rather than as licensed software, so that upfront costs are minimal, and ongoing costs scale smoothly with the number of transactions. This is important given the question mark surrounding future gpi volumes. While it is clear that transaction counts will go up as more and more institutions adopt gpi, it is difficult for any given institution to forecast the size or number of corporates which will be willing to pay the premium for gpi speed.

Another benefit of outsourcing is the opportunity to simplify the systems integration complexities that typically plague software projects, particularly in payments. Outsourced services offer a ‘plug and play’ model for integrating banks and their corporate customers, based on simplified onboarding rather than lengthy implementation.

This improves time to value, and with gpi, time to compliance. With deadlines looming, institutions feeling the pressure to comply with gpi will do well to take a close look at outsourced, service-based options.

While compliance is certainly an important result, the true benefit of the outsourced approach is the opportunity it affords banks to transition to the future of financial services: consuming payment processing as a service. New initiatives like gpi are ideal places to start, as evidenced by SWIFT’s own cloud-based tracking service providing end-to-end visibility on payment status.

The one factor that every possible approach has in common, is that they can only succeed with the involvement of fintech vendors or their technology. With around 70% of banks using third-party vendors’ offerings to provide payments services to their customers, there is clear momentum toward collaboration across the financial services technology ecosystem.

The reason is simple: collaborating with fintechs drives down the cost of technology adoption, with the greatest benefit delivered through payments as a service models for gpi.

Lisa Robins, global head of transaction banking, Standard Chartered, told Finextra Research: “Because of fintechs and technology companies, we have been pointed in the direction of what we need to do to really change and be ready for the future. We get more value when we collaborate because one dollar goes a lot further, and with collaboration we all bring different things to the table. No one institution can do everything, we each have something special. When we bring these all together, we get something that’s bigger than the sum of its parts.”

Superior resiliency is another compelling factor in favouring collaborative approaches to gpi adoption. This can be attributed to the specialised focus of fintechs or payments-as-a-service firms, which prioritise reliability and business continuity - a particularly important consideration in a global environment where the ability of financial institutions to maintain business continuity is under extreme pressure.

Collaboration with fintech providers removes the tyranny of stand-alone systems, and guarantees that an institution’s ability to participate in the benefits of SWIFT gpi will not be limited by its size, physical location, or technology capabilities.

It is telling that SWIFT itself has called on the payments community to drive progress within cross-border payments through collaboration, agreeing that the strength of gpi is directly tied to the universality of its uptake.

SWIFT comments that: “Cooperation by all players in the community is important, because the openness and universality of the envisioned system are unique; the more widely adopted the convention for moving value, the easier the circulation of value - and the more the convention will be used. Banks are key in this.”

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