When SWIFT gpi was first rolled out in 2017, it was hailed as the future of payment messaging technology, and since that time, financial institutions across the globe have been steadily adopting SWIFT’s new gpi standards. Earlier this month, SWIFT went so far as to announce that it aims to make gpi the industry standard for cross-border payments by 2020 – a goal that the company seems to be on track to meet.
SWIFT has long been a trailblazer in global payments, introducing industry standards like IBAN and connecting more than 11,000 financial institutions around the world through a unified payment messaging platform. And the introduction of global payments innovation (gpi) has made cross-border payments faster, more secure, and more transparent than ever.
SWIFT gpi is a cloud-based system that still allows financial institutions to rely on existing payment infrastructure, making the upgrade to gpi standards much less costly and complex than introducing disruptive new systems. At the same time, SWIFT gpi has ushered in a new era of transparency to cross-border payments, providing both FIs and end customers with the ability to reliably track payments – thanks to the introduction of the unique end-to-end tracking reference (UETR) system.
The gpi Observer Analytics tool allows financial institutions to glean actionable insights from their gpi payment flows, in ways that can help them optimize their operations and seek out potential business opportunities, and gpi Observer Insights helps FIs monitor their adherence to the gpi SLA rulebook. Meanwhile, the gpi Directory provides comprehensive and useful information about gpi member banks, which makes it significantly easier to develop efficient payment routing.
Those outside – and even inside – the financial sector could be forgiven for thinking that SWIFT had already effectively monopolized the payment messaging industry. But in fact, in recent years, SWIFT has faced new, disruptive competition to its operations, particularly from companies making innovative use of blockchain technology. But even with game-changing innovations, these competitors have been unable to topple SWIFT’s dominance in the world of cross-border payments.
Why not? After all, the buzz around blockchain technology has grown to a deafening roar in recent years, and companies like Ripple have already introduced competitive systems that rely on this state-of-the-art technological advancement. Even SWIFT has been testing out the incorporation of blockchain into its gpi system – but the company’s experts have been hesitant to roll it out on a large scale, citing its lack of scalability and need for further development, as well as the fact that most banks across the globe don’t yet have the system infrastructure required to adopt a blockchain-based system.
While SWIFT gpi requires that banks update their back-office systems, it doesn’t require a drastic overhaul – and still delivers a significant improvement to the cross-border payment process. In fact, with the support of complementary solutions – like EastNets’ Solution for SWIFT gpi – the shift to gpi can be relatively painless, and can provide even greater functionality and benefits. Alternatively, adopting an entirely new payment platform would be significantly more expensive – and while platforms like Ripple can process cross-border payments faster, SWIFT gpi has already so far exceeded the previous industry standard that there isn’t yet widespread demand for the kind of instantaneous cross-border payments offered by blockchain systems. Is it ideal? Certainly. Is it necessary for banks to remain competitive in the market? Not at present – especially if it requires a complex and costly system upgrade. And with blockchain technology still in its infancy, SWIFT’s more measured, cautious approach to its adoption appears to be more in line with the approach being adopted by banking executives and other key decision makers.
But of course the biggest advantage of SWIFT gpi is that it relies on the strength of its existing network – the largest of its kind, by far. The tipping point for gpi’s adoption has already been reached, and for financial institutions to remain competitive in the global market, they’ll need to quickly get on board. Could blockchain still be the future of cross-border payments? Of course – but it seems quite likely that, if and when blockchain becomes the industry standard, it will be SWIFT leading the way.