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Global economies should mean faster global corporate payments. But progress has been slow and fragmented – until now. We look at what SWIFT for Corporates (g4C) is delivering for corporate clients.

Globalisation and digitalisation together fuels demand from consumers and corporates when it comes to services. Everything seems to be moving faster, from online shopping to food delivery apps. People can execute instant payments to each other using e-Wallets and other apps. The demand for instantaneousness is beginning to bleed into corporate payment processing too.

But it’s a demand which has been contentious. Fragmented and underdeveloped, global corporate payments have lagged behind other sectors. But now, the situation has changed, says Martin Bellin, CEO of BELLIN, a global leader in technology for corporate banking:

“The corporate payments process has innately required a higher element of caution and protocol to execute safely. Simply put, businesses tend to be reluctant to introduce and solutions that may hinder security. The saving grace seems to have emerged in the form of SWIFT’s new corporate offering: SWIFT gpi for Corporates.”

Corporate cross-border payments matter

A report by McKinsey and SWIFT in 2018 says: “International payments revenues total up to $200 billion globally, split roughly evenly between transaction fees and foreign exchange (FX) revenues. This equates to 27 per cent of global transaction revenues and is increasing by six per cent annually.”

“Although estimated revenue per cross-border transaction remains healthy at more than $20, evidence of changing dynamics and increasing pressure in the most established segments (such as B2B and remittances) is growing and becoming increasingly commonplace across the value chain. ”

So cross-border transactions can lead to potentially expensive and redundant spending from transaction fees and foreign exchange revenues. As a consequence, there is increased pressure in sectors like B2B payments to pivot. Says Bellin:

“Many corporations feel the 27% global yield in global transaction revenues is negligent. But with a 6% average annual increase, those same companies may be singing a different tune very quickly. Again, the issue of maintaining ample security while introducing an effective technological solution will become increasingly important to those corporations.”

The need for faster payment solutions has been driving the development of new technology worldwide. Terms such as instant payments, faster payments and real-time payments are used interchangeably. In practice, three distinct official regional systems have been established: Instant Payments for the SEPA area, Faster Payments for the UK and Real-Time Payments in the US.

Something had to change to take global corporate payments to the next level.

Real-time payments solutions

While they all contain characteristics suited to their region, what all of these payment solutions have in common is a dedicated clearing system with multiple connected financial institutions. This system requires all participants to be connected for the structure to work.

Each of these clearing networks is limited to its own infrastructure, and they end where the system stops. So none of these systems is really suited to the payments needs of global businesses who frequently make cross-border transfers.

 

So innovators have tried to find a solution to connectivity. This dilemma is where SWIFT for Corporates (g4C) comes in. In early 2018, 22 banks and corporates piloted SWIFT gpi for Corporates (g4C), which is, says SWIFT, a “standard that enables corporates to initiate and track gpi payments, to and from multiple banks, directly from their ERP and treasury management systems.”

What solutions do globally active businesses need?

Instant payments for the SEPA area, Faster Payments for the UK and Real-time Payments in the US all offer fast payment processing options but are limited to the reach of their network. There is still a small gap in which one solution can provide a quick and transparent solution for all cross-border payments.

With network restrictions in mind, the potential answer is an innovation that focuses on creating a network as vast as possible. With most global banks now connected and companies already onboarding the new SWIFT g4C solution, the SWIFT network of banks is quickly becoming a vast ocean of global connectivity and a remarkable choice for cross-border payments for corporations.

“What’s so special about this new technology,” says Bellin, “is the continuous end-to-end tracking by way of a gpi reference – the Unique End-to-End Transaction Reference (UETR).

“You can compare the UETR to the tracking number of a parcel. The UETR represents a unique and unalterable reference for every gpi payment.

“Thanks to this reference, every payment order is not only fully digitised and therefore extremely fast, but you also have a means of tracing the bank where a payment is currently located. SWIFT gpi enables speed and transparency for both cross-border payment status and fees.”

The future is global

While clearing systems such as Instant Payments, Faster Payments or Real-Time Payments present new opportunities for consumers and E-commerce, they are non-integrated solutions. They may not support cross-system and cross-border payments. The SWIFT g4C project does offer real potential for corporate treasury and payments, making cross-border payments fast, traceable and transparent.

But does the innovation end with the SWIFT system? Bellin thinks not:

“As corporates continue to select different connectivity options, we will continue to see where the industry is heading and what solutions offer the functionality that is needed.

“SWIFT has slotted itself in as a critical player in the connectivity arena with their considerable global reach and banking relationships. At the same time, other emerging technology providers are using interesting concepts like blockchain, which is opening many innovative bridges with cross-border payments.

“Here at BELLIN, we are leading the market in leveraging SWIFT’s connectivity reach, and we intend to make full use of emerging technology which transforms global corporate payments for the benefit of our clients.”