“The basic idea of ‘gpi’ is the combination of the end-to-end tracking of international payments with strong SLA”

Here is this week’s new #CFOBrain interview (check out the other pieces from this series) with the awesome Marc Delbaere, Global Head of Corporates and Supply Chain at SWIFT.

Arturo: So, Marc, could you tell us a little bit about your background and your role at SWIFT?

Marc: My background is mostly in industry-level solutions for the financial services industry, large-scale transformation initiatives with a technology component. I’ve been working for many years at IBM, where I was in charge of the Industry Models portfolio. This is a set of reference models used for all kinds of transformations in banks and insurance companies. This is how I got into standardisation and joined SWIFT to define the strategy around industry standards. More recently, I have launched, very much as an internal start-up, an industry platform called MyStandards to solve standards discrepancy issues.

Currently, I’m responsible for the corporate and trade business globally at SWIFT, and my role is twofold. On the one hand, I work with corporate treasurers to shape our different initiatives to their needs. On the other hand, I am working with banks and partners to foster collaboration and make sure we have the right support to achieve the industry solutions that the corporates would need.

There has been a lot of hype in the last weeks around SWIFT’s new project called Global Payments Innovation (gpi). Could you tell us which are the basic principles of this project?

The basic idea of gpi is the combination of the end-to-end tracking of international payments with strong Service Level Agreements (SLA) that is actually improving the overall level of service of the chain.

The first idea of traceability is pretty simple, so instead of looking at individual payments between banks, which are the main players in the payments arena, we need to look at the whole payment chain, from initiation to end-beneficiaries account, as a whole, with continuous tracking of what is going on. This would be very much like tracking a package that you send by a carrier service like DHL, for example.

Then we thought that once we had more visibility on the whole end-to-end payment chain, we could start to enforce a better level of service between the different banks. So, we actually could tell banks that if they wanted to be part of this gpi initiative, we expect them to both make same-day payments to the next bank in the chain, as well as being completely transparent about their commission schemes and so on. And that’s how we came up with a list of rules or SLA which all the banks in the chain would need to agree on to meet the participation criteria.

You compared this traceability of payments to the shipment of a physical package. However, payments are mainly a matter of data transfer. Why couldn’t international payments be as easy as sending an email?

The way that payments are sent internationally is by networks of correspondent banks. Effectively, the payment only goes in one direction. So, you are going from the initiator of the payment to the bank; then from this sender bank to the first correspondent bank; then to the second correspondent; and then to the beneficiary bank account.

Each bank in the chain needs to do quite a lot of processing, comply with all kinds of regulation and compliance checks. That’s why it’s not such an easy process. Besides, the level of service between these banks has not been specified enough in the past to be able to perform better.

You mentioned that the core ideas of the projects are pretty simple. Why implementing the project in 2017 instead of 1997 then?

Until now, there was not a global vision of making it work at this global level. So, if I was receiving and passing the payment to the next player, I was doing my job. Now the world is certainly more concerned about understanding where each player fits in the chain.

Some of the ideas for gpi have been around for a very long time (the whole idea of making payments more traceable, has been around for maybe 15 or 20 years). But it was never the right time, because there was no incentive to move to that scenario. What has happened is that there was a conjunction of elements that created a ‘perfect storm’. Especially, banks got pressured by the corporates, probably linked partially to the pressure of the Fintech, to overall deliver a better level of service.

So, although the solution was kind of already ready in concept, we still needed a willingness for collaboration and agreement between the banks, and we only now have such incentives, derived from higher corporate expectations, which will keep increasing.

You brought the initiative live in less than two years. What could you tell us about the dynamics of the project?

The dynamics are phenomenal. I’ve been involved in quite a lot of industry transformation projects, and I know how hard this can be. You need to do a lot of pushing and pulling. But in this case, due to the above-mentioned reasons, there is so much alignment that everybody is willing to play along.

And what is really part of the magic is that, at the individual level, i.e. at the level of one single bank or one single corporate, this is an easy project since this is not complex technology. The complexity is coming from the fact that is the whole industry doing it. But at the individual level it is simple

Besides, regarding adoption, you don’t need all the players to be part of it. You mainly need as many intermediary banks as possible. And if you look at the overall corresponding banks, we are talking about probably 300 institutions worldwide, which is not a huge number. And we already have 100 out of the 300 that have signed up to implement this by the end of next year at the latest, and today these represent more than 75% of the international payments traffic. So, the critical mass is there.

What would you say are the most important use cases from the corporate standpoint?

From the initiation of the payment perspective, a big use case is getting the notification that the money has been deposited on the end-beneficiary account. So, effectively saying ‘this payment is off my to-do list’. This is all about exception and investigation, so, if something is blocked, trying to understand why it’s blocked, being able to inform the beneficiary that the case is under control. There will be full visibility on the value date and the amount that the beneficiary is going to get -which is not always the case today-.

Besides, in the case of fraud, the beneficiary can stop a payment instantaneously. We don’t need to care about where that payment is at, trying to chase the payment, and trying to find the next bank in the chain that is responsible for the execution. So, it’s about the ability to send an easy proof of payments to your beneficiary since you are getting it from the system itself.

On the beneficiary side, it is all about being able to see incoming payments, for better forecasting, which is quite a major feature.

Moreover, from the SWIFT standpoint, we are working with the community to work on multibank solutions, which is not available yet, but we aim at providing a multibank experience for SWIFT connected customers, to be able to access and track directly from SWIFT in a consistent fashion across all the banks.

Beyond SWIFT gpi, what do you consider the most relevant trends in transaction banking?

Maybe due to my background, I’m very interested in Open Banking in general, and in the emergence of APIs in this industry. I think this is something widely transformative since I’ve seen that happening in other industries before. The whole notion of organisations starting to focus on how to package their capabilities through interfaces, for others to assemble and deliver end-value is certainly something which I think is going to have quite a lot of implications in the future. Besides, I believe that the whole emergence of platforms is certainly something which is having and will continue to have a significant impact.

It is true that we are in a highly regulated industry, and some of these changes are not as quick as we sometimes would like. But it is important to realise that a lot of the controls, a lot of regulations, as painful as they might be are all there for a reason. And we cannot just start from a blank sheet of paper saying ‘let’s reinvent the whole thing’ and then realise that it did not work for all kinds of practical reasons. So you need to be really pragmatic in terms of what’s achievable, but also have your eyes very open concerning all of these new technology possibilities.

I’m seeing how fast organisations that are heavily tapping into third-party capabilities can go in establishing a global business. If you look at a company like Uber, the fact that they could go so fast is because they basically tapped into Google Localization Services, into payments services, into pretty much all of these things which are just built around, and then the assembly of their business was not very hard.

So again, I believe that organisations -including banks- with core capabilities will have to be able to package them in a way that will be easy to consume by innovative third parties to include in better end-to-end value propositions.

We cannot end the interview without mentioning how Blockchain or Blockchain-related technology fits in this scenario. I’ve seen that SWIFT is also working in a proof-of-concept…

Regarding Blockchain, I can see a lot of use cases on reconciliation. If you look at what we’ve done in the Nostro-Vostro reconciliation exercises, it is looking very promising as it solves a real business problem and taps into real strengths of the blockchain technology. For the payments transactions themselves, I have more mixed feelings at this stage about the maturity of the blockchain technology for this usage. From what I have seen so far, the technology is not yet at the maturity level that would be required for us to consider it in production but this could evolve fast and we are monitoring this very closely.

I’m also in charge of trade finance within SWIFT, and we also see a series of use cases around trade flows because a lot of the information there is about documents as well as processing data. So, this whole notion of having very clear central proof of certain things and key life-cycle events of trade in a world where there is not one single central player holding everything is quite interesting as well.

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Originally published at www.kantox.com on June 29, 2017.