Driving Payments Innovation through SWIFT gpi Universal Confirmations

Shriyanka Hore
Director Product Strategy, Oracle

An Important Milestone and First Step to Payments Modernization

The cross-border payment experience is set to transform as SWIFT gpi’s Universal Confirmations becomes mandatory in November 2020 after a two-year phase-in period. The deadline will mark an important milestone in the journey to make cross-border payments as seamless as domestic payments. Despite the changes happening in today’s economic environment, Corporate Treasurers still need to leverage this mandatory change as a springboard to innovation.

For decades, corporates endured and accepted a slow and arcane cross-border payment process that proved deficient in several ways. First, it lacked transparency. The correspondent bank was primarily a black box in terms of visibility into and traceability of payment status. Speed was also an issue, with corporates waiting days and longer for payments to clear.

Times and expectations have changed dramatically in recent years—reshaped by elevated customer expectations and digital norms that mandate immediate access to accurate information. Non-traditional payment providers are also challenging incumbents, using new technology to disrupt traditional models and exert new cost pressures. Finally, we’ve seen the emergence of a new generation of regulations focused on protecting end-customers, fostering greater competition, and improving overall liquidity and risk management.

SWIFT, the world’s leading international payment network and financial messaging system, understood these forces at work, and in 2017, launched its global payments innovation initiative, known as SWIFT gpi. By connecting every party in a payment chain via a cloud solution, SWIFT gpi is intended to improve the speed, transparency, and traceability of payments. It is also designed to deliver significant time and cost savings for banks over the longer term.

SWIFT Universal Confirmations is intended to enhance the customer experience in several ways. Credit confirmations provide transparency and finality on transactions for financial institutions and their customers. The process also prevents frustrating disputes over the status of payments. Finally, it supports integrated business processes that increasingly rely on payment confirmations.

SWIFT Universal Confirmations is also a foundation for future value-add payment services that financial institutions can leverage as a competitive advantage.

Strong Momentum

SWIFT gpi continues to gain strength and momentum in the international payments arena. In 2019, cross-border transfers over SWIFT’s gpi exceeded $77 trillion, nearly double the 2018 figure. And, almost 65% of SWIFT’s cross-border payments were sent using gpi. As a testament to the network’s speed, an average of 40% of SWIFT gpi payments are credited to end beneficiaries within five minutes, half are credited within 30 minutes, 75% within six hours, and almost 100% within 24 hours.

In November, the move to Universal Confirmations will culminate when all participants in the payments chain needs to confirm status when an incoming payment is received. A common misconception is that only gpi banks will need to confirm payments. All financial institutions involved in cross-border transactions need to be sure that their systems can support this crucial change. It’s a matter of regulatory compliance. As necessary, the move is a significant step toward innovation that can bolster a financial institution’s position well into the future.

Removing Hurdles

As financial institutions work to enable Universal Confirmations and accommodate future requirements and opportunities for innovation (including the roll-out of the ISO20022 payments messaging standard in the U.S.), they confront several challenges.

First, they require a payment processing solution that can adapt to and continue to keep pace with an ever-evolving set of standards and requirements. Besides, financial institutions must be prepared to navigate invasive changes to payments data and messaging layers that impact multiple downstream interfaces. Finally, they must work to mitigate additional costs to the correspondent banking function and overall payments cost center.

With different banks in different stages of modernization, the approach to meeting the deadline differs vastly. Some financial institutions require a tactical agile layer to meet changes in time for rapidly approaching deadlines while chalking out a more substantial multi-year strategic transformation. At the same time, some banks will strive for a big-bang replacement of the existing cluttered payments topology with a strategic enterprise-scale platform to support their modernization journey.

Oracle Banking Payments for gpi is designed to be deployed as an active layer to meet gpi needs on top of an existing core banking solution or payments hub. Alternately, banks can move the complete payments into one enterprise-level solution that caters to multiple countries, multiple underlying core banking systems for SWIFT gpi, and local payments.

Oracle Banking Payments, an ISO20022-native universal payments hub, is designed to meet the multi-dimensional needs of agile modernization, high resilience, and continuous digital innovation with a simplified plug-and-play deployment approach in retail and corporate payments landscapes. The solution has built-in real-time domestic payments support and strongly aligns to the SWIFT gpi roadmap with a vision of enabling real-time cross-border payments.

Oracle’s solution supports SWIFT gpi’s Universal Confirmations requirements by:

  • acting as the primary processing layer to enable banks to send seamlessly, receive, and relay payments into the gpi ecosystem
  • providing seamless automated updates to the gpi tracker for mandated and optional status changes via FIN, API, and MX channels
  • offering built-in gpi payment flows for gCCT, gSRP, and gCOV

Additionally, Oracle Banking Payments for gpi:

  • is compliant with the SWIFT Rulebook 2020 and has been SWIFT gpi attested since 2019
  • ensures accelerated go to market with new features, including additional gpi preferences around bilateral agreements and smart match of incoming gpi confirmations against outbound/pass through and queue-based workflows for investigations and exceptions
  • provides an early-adopter advantage and lower total cost of ownership with a solution that supports ISO20022 rich data and APIs for digital overlays
  • has a blockchain adapter to future-proof the bank for SWIFT’s ambitious modernization plans

To learn more about the SWIFT gpi Universal Confirmations rule and opportunities for financial institutions to jumpstart innovation, check out our on-demand webinar. Register here.

To learn more, feel free to message me to explore more, or have a conversation.

For more information, please visit:
Oracle Corporate Banking Solutions: oracle.com/corporatebanking
Oracle Financial Services: oracle.com/financial-services

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