SWIFT gpi and SEPA Instant Payment: how will companies benefit?

17 October 2018

Payment processes today are seeing some major developments, with new tools appearing such as SWIFT’s gpi and SEPA’s Instant Payment. These innovations are responding to demands from companies for speed, transparency and traceability of payments. Let’s take a look at what these innovations will deliver…

Three experts in this field offer us their views on the subject: Christian Gnanou from Société Générale, Sébastien de Gasquet from SWIFT and Thierry Cohen from Exalog (payment handling and cash management software) explain the challenges for which SEPA Instant Payment and SWIFT gpi were designed.

Christian Gnanou
Christian Gnanou
Sébastien De Gasquet
Sébastien De Gasquet
Thierry Cohen
Thierry Cohen

Note: the article was published in October 2018 when the maximum amount per SEPA instant transaction was set at €15,000. As of 1 July 2020, the limit is set at €100,000.

SEPA Instant Payment SEPA, a European initiative

A SEPA Instant Payment is a payment in euros that is made and credited in less than 10 seconds within the SEPA zone (34 member states). The funds are immediately cleared for reuse on receipt of the payment confirmation.

Rolled out with the highest security standards, a SEPA Instant Payment cannot be recalled. This system was launched in 2015 by European payment authorities, who recommend a ceiling of €15,000 on transactions, but leave it up to the parties involved if they want to raise this amount or remove the ceiling altogether*.

The idea of an instant payment is nothing new: today, there are no fewer than 40 national real-time payment systems worldwide already, 10 of which are in Europe. “Our behaviour is increasingly driven by the need for instant reactions. Everyone involved wants their day-to-day work to run fast and more simply, and that includes payments”, says Christian Gnanou, Director of Payment Products at Société Générale.

The success of the more advanced national instant payment systems (in Sweden, Denmark and the United Kingdom) confirms the potential for a European offering, on the P2P markets initially, followed by B2B and C2B.

Thierry Cohen

“The SEPA Instant Payment fills a gap in existing payment methods, and could become an alternative to cash, cheques and potentially bank payment cards in some cases”, says Thierry Cohen, Sales Director at Exalog.

Compared to the latter, it has the advantage of not depending on numerous intermediaries who affect the value chain, such as the payment card giants Visa and Mastercard. Given that cheques are a method of payment that is old-fashioned, less secure and expensive, the benefits of a replacement system are obvious.

Banks are not required to offer the SEPA Instant Payment service to their customers, but many of them are already doing so or have committed to do so. This is true in France, where the BPCE group has been providing it in mainland France since July 2018, with Crédit Mutuel Arkéa hot on their heels. BNP Paribas and Société Générale both plan to launch in November 2018.

This is also true of payment services providers (PSPs) in the wider sense. Today, 25% of the European PSPs have signed up to Instant Payment, and this could reach 100% between now and mid-2019. “The Instant Payment project needs to get the majority of PSPs on board to make the journey simple and flexible for customers”, explains Thierry Cohen (Exalog).

Christian Gnanou

“The quality and simplicity of the journey for customers will be the critical factor when it comes to adopting instant payments ”, adds Christian Gnanou (Société Générale), “If it is to be used more widely, the customer experience needs to match what the market is hoping for, and that will depend largely on the number of payment providers who sign up to the project. When entering an instant transfer, if the beneficiary bank cannot process the instant payment, the customer will be diverted to a classic SCT system, which is really far from ideal in terms of user experience!”.

With Instant Payment, the SEPA zone seems to have found the perfect solution to making payments more flexible and simpler between its member states. But what is going on beyond its borders?

* Right now, two messaging services exist for instant payments: TIPS (European Central Bank) and RT1 (created by EBA Clearing). As of now, only RT1, the more widely-used service, applies the limit of €15,000 per transaction.

SWIFT gpi, a catch-all product

SWIFT gpi, which stands for global payment innovation, is a service offered by SWIFT to make international payments faster and to be able to track their status in real time, from the moment the funds are sent to when they arrive. It allows you to track the payment closely, to know when exactly the beneficiary is credited and, above all, to get a breakdown of the fees that are collected by the intermediary banks.

For Sébastien de Gasquet, Senior Account Manager at SWIFT, the concepts of speed, traceability and transparency are at the heart of what the banking cooperative sets out to achieve:

Sébastien De Gasquet

“Customers face time constraints and want information about the payments they are making. With SWIFT gpi, we can ensure that payments arrive faster, that they are traceable and that customers know exactly what fees have been applied, and by whom. The information accompanies the payment from end to end.”

Launched in January 2017, the SWIFT gpi system is still in a pilot phase, with the aim of getting as many banks signed up as possible. At present, 250 banking companies covering 200 countries around the world have committed to installing SWIFT gpi. This would represent over 80% of SWIFT cross-border transactions. Of these banks, 72 are already operational, four of whom are in France.

How does this solution work? The file is sent to the bank by the person initiating the payment, regardless of its format (XML, MT101 or CFONB). Once the file has been received, the bank – if signed up to gpi – adds a tracking reference to this payment, known as the UETR (unique end-to-end transaction reference). This reference will enable the payment to be tracked on its journey through the different banks and the information to be retrieved.

For now, only the banks have access to the information relating to payments sent by the gpi tracker. They can view this information on a dedicated SWIFT interface and pass it onto their customers on request.

Currently, 14 banks pass this information onto their customers via their web portals. In the future, management software will be able to include this tracking information and give companies direct access to the data. Sébastien de Gasquet confirms this: “We are already working with the companies involved in the pilot project, as well as with the ERP and TMS software publishers, to enable them to receive and integrate the information about gpi payments directly.”

Today, 50% of the SWIFT gpi payments are credited within 30 minutes and 100% in less than 24 hours, compared to three to five days for standard international payments.

The deployment of SWIFT gpi will reach a new milestone in November 2018. All the banks connected to the network, whether they sign up for gpi or not, will have to transmit the UETR tracking reference. Other developments are also in the pipeline, such as a ‘stop and recall’ service that would allow instant suspension of a payment in the event of fraud or an error. For Sébastien de Gasquet, “the aim is for gpi to become a standard, and over time for every bank connected to SWIFT to transfer and provide access to the information on gpi payments, confirm receipt of funds and communicate the fees”.

Are companies the winners?

SWIFT gpi and Instant Payment certainly provide benefits to companies.

Firstly, we have seen that the SEPA Instant Payment can replace bank card or cheque payments. For companies working B2C, this is an opportunity to improve their collections: reducing the processing time for cheques, securing payments, removing the intermediary costs for payment cards, and more.

In addition, Instant Payment allows transfers to be sent and received instantly all year round, compared to 24 to 48 hours as is the case now. The positive effect on cash management for companies is easy to see, especially in getting rid of the ‘cut-offs’, managing cash flows in real time or even for controlling cash management on a daily basis. Delays in payment and the risk of non-payment may decrease, and deliveries on receipt of payment will arrive faster.

Finally, as a pan-European system, one could also imagine that the Instant Payment will simplify and therefore increase trade between countries in the SEPA area.

However, the ceiling of €15,000 per instant payment transaction may deter corporates, although this should quickly change as some countries within the zone are already planning to remove this barrier. For the software publisher Exalog, B2B instant payments are still in the development stage, but their importance is clear as Thierry Cohen, Sales Director, explains:

Thierry Cohen

“It is a payment method for companies which you need to keep an eye on, as it will definitely grow in importance. Once the limits on Instant Payment have been lifted, companies will start using it a lot more. For the time being it is better suited to B2C, but that will change.”

Today, the payment providers are still deciding how to structure their new services involving Instant Payment. As soon as the market becomes a bit more mature, companies should be able to gain plenty of benefits by using it to pay salaries, suppliers, etc.

As for SWIFT gpi, the benefits of a fast payment outlined above apply just as much, especially the improvement in cash management. Companies will also benefit from a real-time overview of the status of their transactions. In this way, cash managers will know exactly when their suppliers receive their payments, and the excuse of a late receipt of payment will no longer be available to delay dispatching goods, which should improve delivery times.

Let’s also not forget that this system provides visibility in terms of the fees applied by each intermediary bank. Thanks to this information, a company that wants to reduce its costs will be able to ask its own bank to stop working with a certain banking partner that is ‘too greedy’. This transparency also applies to processing times which will now be visible to everyone, for every step of the payment, and this will encourage all those involved to reduce the time they hold onto the funds.

Finally, thanks to SWIFT gpi and the information provided by the tracking reference, cash managers will no longer need to contact their bank to find out where their payments have got to. This represents a time saving and a reduction in tracking and investigation costs for both the companies and the banks they work with.

However, companies will have to wait a little longer before enjoying all the benefits of SWIFT gpi. For the time being, information about payments can only be viewed on certain banks’ portals. Meanwhile, the publication of end-to-end gpi movements, including their tracking information, in ERP systems is still in the pilot phase. Last but not least, SWIFT needs to convince more banks to join the project, especially in South America, Africa and South-East Asia, where cover is still embryonic. “The so-called ‘exotic’ countries make life complicated for cash managers who want to make cross-border payments. In these countries, the benefits of having gpi are compounded”, explains Thierry Cohen of Exalog.

One thing is sure – the SWIFT gpi and Instant Payment services both offer clear and significant benefits for payments within Europe and internationally. We will see over the next few months where the market positions these two innovations. Watch this space…


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