Travelling Safely at Speed: Embracing SWIFT gpi at IATA
By Eleanor Hill, Editor
At its core, SWIFT gpi is all about speed, efficiency and transparency – but its success rests on support and collaboration too. Early adopters are shaping the way forward for this fundamental change to cross-border payments and co-creation is now the order of the day, as banks and corporates team up to help build a brave new world.
SWIFT’s global payments innovation (gpi) initiative marks a fundamental reshaping of the cross-border payments landscape. With over 150 banks having already signed up for inclusion since the first phase of gpi went live in January 2017, corporates can now expect faster international transactions, improved fee transparency, and end-to-end payment tracking.
Given that the corporate need for speed and transparency in cross-border payments is only set to increase, it is easy to understand why many in the industry see gpi as the future. After all, markets are implementing new distribution channels, business structures are changing accordingly, world-stage competition is intensifying and, ultimately, every business is looking to optimise its own cash and liquidity positions.
Pioneering the way
As with every great leap forward, however, success is dependent upon pioneers - those with the conviction to get involved from the start, helping to shape the way others use the solution in the future. Both BNP Paribas and the International Air Transport Association (IATA) are gpi trailblazers, working in partnership to conduct one of the first successful gpi pilots.
The reasoning for the bank’s involvement in this pilot is simple, says Wim Grosemans, Global Head of Product Development- Payments and Receivables, BNP Paribas Cash Management. “SWIFT has not changed significantly since its first international transfer 40 years ago. As a result, many corporates are struggling with rejected payments and unexpected fees on cross-border payments, as well as a general lack of transparency. SWIFT gpi is a way to enable the whole industry to be able to address these issues and BNP Paribas is keen to innovate in tandem with our clients.”
IATA, too, has good reason to collaborate. As the trade association of the world’s airlines, with a membership consisting of some 280 mostly major carriers based in some 117 countries, IATA helps to set standards to enable a globally integrated air transportation network. It also operates the industry’s Billing and Settlement Plan (BSP) and Cargo Account Settlement System (CASS), which facilitates and simplifies the selling, reporting, and remittance procedures of IATA-accredited travel agents and cargo agents. Last year the BSP and CASS processed more than $290bn in settlements in 180 countries.
Another activity is the IATA Currency Clearance Services. ICCS offers global cash management that enables airline treasurers to control and repatriate their worldwide sales funds through a central location in London. This effectively means that the vast majority of transactions are cross-border, with smaller volumes of transaction traffic made at a local level, and therefore SWIFT gpi will bring a lot of value in this service.
For Javier Orejas, Head of Banking Management EMEA and the Americas, IATA, SWIFT gpi is about “a future which is going to bring transparency into our transactional services – both for IATA and for our members”. This is particularly critical from an airline’s perspective because, he says, “it is that flow of information which is going to impact their cash forecasting.” And since the volumes being processed via IATA systems on their behalf are huge, it is indeed critical for all members to have visibility over these funds, including where they are located at any given time.
According to Orejas, the benefits of SWIFT gpi do not stop there. Through the BSP, for example, IATA receives remittances of ticket sales made by travel agencies around the world. Strict policies and procedures are in place for meeting the deadline for remittances, he explains. In the case of payment delays (over 24 hours) or non-payment, the ticketing authority of the particular travel agent might be withdrawn.
The challenge is that sometimes these delays are the fault of the system, rather than the entities involved. There have been situations where the transfer has been initiated by the travel agent, but for some reason has not been received by IATA. This could be as a result of a blockage by an intermediary, or because funds have not been posted to the bank account in time. Fortunately, with gpi, transaction transparency will minimise or even eliminate these kinds of occurrences.
Taking the plunge
Against this backdrop, it’s easy to see why both IATA and BNP Paribas were – and continue to be – keen to be involved in a SWIFT gpi project together. In terms of process, the work kicked off with internal testing by the bank to confirm that all of the necessary gpi requirements were in place. Then, IATA officially joined the bank’s pilot with the objective of incorporating the technology into its own operations by the end of 2017.
Today, IATA’s transactions from seven Eurozone countries - France, Slovenia, Slovakia, Lithuania, Latvia, Estonia and Finland - are being processed using gpi technology. These flows are consolidated at a BNP Paribas account in Amsterdam. And thanks to the use of the Unique End-to-End Transaction Reference (UETR), which is a significant feature of SWIFT gpi, IATA now has real-time tracking over these flows, providing an end-to-end view of each payment’s lifecycle.