One of the most complicated facets of banking is cross-border payment. Most of the early solutions lacked two crucial things: transparency and speed. The former led to virtually zero visibility and traceability of the payment status, while the latter affected business efficiency.
Thankfully, technology has led to the rapid evolution of payment systems. Financial institutions can now provide accurate information almost instantly and comply with increasingly high customer expectations.
New payment modernization efforts also include the emergence of consumer-focused regulations that offer enhanced protection and greater competition that help usher in better service.
Changes are also expected in the payment chain, thanks to SWIFT GPI Universal Confirmations. This innovation is designed to enhance the cross-border payment experience in the following ways:
- providing end-to-end tracking
- providing real-time updates
- improving transparency
- Preventing or minimizing disputes
Financial institutions also have a solid foundation for developing more value-add payment services with payment confirmations in place.
That said, here are some things to keep in mind to help your organization adapt to the changes that SWIFT GPI Universal Confirmation will bring about:
What Is Universal Confirmation, and Why Do We Need It?
Many elements of commerce depend on banks being able to provide real-time payment confirmation. For example, retailers need to know when a customer has already paid to prepare the goods for release. On the side of banking and finance, real-time payment confirmation allows all parties to stay updated so that transactions (e.g., automatic debit payments) can push through without issues.
Universal Confirmation simply aims to ensure that funds have been credited to the beneficiary account. In line with this, SWIFT introduced the UETR or Unique End-to-End Transaction Reference in 2018. In addition, in November 2020, it was made mandatory for all FIN users in the SUPE and PSPA categories to confirm when the payment has been credited to the beneficiary account, put on hold, or transferred outside of the SWIFT network.
What Is a Payment Confirmation?
In simple terms, payment confirmation is a kind of message or alert that lets all the parties involved in a transaction know that a payment has successfully pushed through. These parties involve the following:
- the originating bank
- the receiving account
- the owner of the account from the originating bank
Again, payment confirmations are an important part of daily trade and commerce. Without timely updates, every transaction in the world will grind to a halt. In addition, payment confirmations can boost trust in the system and increase customer satisfaction.
Why Did SWIFT Make Payment Confirmations Mandatory?
Banks are major facilitators of the exchange of money, which is one of the driving forces of modern trade. If the exchange doesn’t push through, then the trade of goods also doesn’t push through. In the same vein, the sooner the exchange of money happens, the sooner the transaction can be completed. As such, payment confirmations are all but necessary to ensure that the money has been properly debited from and credited to the correct accounts.
In short, payment confirmations ensure that the supply chain moves as smoothly as possible. As a bonus, they improve the end-to-end customer experience by offering certainty. Payment confirmations can also help future-proof a financial institution.
What Do Existing GPI Members Need to Do?
All customer payments (MT 103 on FIN) will require a payment confirmation by the end of 2020. This means that members whose branches—including all country corridors—aren’t all signed up to SWIFT GPI yet still need to provide confirmations.
How Can I Comply?
It’s understood that not all banks have taken the same steps towards modernization. Thus, some institutions may only need to add another layer to their existing system. Meanwhile, others might need to invest in a one-time big-bang replacement to meet various compliance requirements. Smaller banks that don’t cater to multiple countries will also need a different core system than ones that do.
Fortunately, plenty of banking software providers offer multiple types of solutions that meet unique needs. The key is to look for agile, resilient products that are easy to implement and align with the SWIFT GPI roadmap for real-time universal confirmations. In addition, remember to pick a payment solution that’s ISO 20022-compliant.
Other key features you should look for include automated updates and built-in GPI payment flows. Ideally, the solutions should also be compliant with the SWIFT Rulebook 2020 and have been SWIFT GPI-attested since 2019. For future-proofing, consider blockchain adapters as well, given SWIFT’s recent push for modernization.
Your Universal Confirmations compliance will be visible starting June 1, 2021, with a traffic light system indicating your level of compliance. Green means fully compliant; orange means there’s one week of non-compliance, and the institution is given 12 weeks to achieve the green rating, and red means non-compliant and unable to meet the 12-week cut-off.
If your bank isn’t preparing for SWIFT GPI Universal Confirmations, now is the time to get started. Considering all the long-term benefits, it would be unwise not to adapt.