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Swift gpi the building block for Global Liquidity Innovation initiative

There is no doubt that SWIFT’s global payments innovation initiative is proving to be one of the most compelling projects in recent years for banks, corporations and technology providers alike. With cross-border payment processing prone to delays, uncertainty and lack of traceability, the promise of SWIFT gpi is to remove these obstacles and create trust, visibility and certainty. With adoption now extending to over 280 banks, the next critical stage in the development of SWIFT gpi is to enable the corporate community to take full advantage of the opportunities it presents. This will provide the platform for a much bigger initiative, the Global Liquidity Innovation initiative.

LVMH and FIS solution

Over the past 12 months, multinational luxury goods corporation LVMH has collaborated with FIS, SWIFT and six of their partner banks as part of the SWIFT gpi for Corporates pilot project. They have optimised their Payments through using FIS’s Trax Payment Factory Solution to manages their high volumes of cross-border payments: 65% of the group’s 1.5 million payments each year are cross-border.

But according to Laurent Dall’Aglio, finance project manager at LVMH, “We had no visibility over the progress of cross-border payments, and neither certainty nor control over the settlement date which could take two days or two weeks. The amount received by the beneficiary may also differ from the invoice amount once fees have been deducted. This, together with the unpredictability of payment settlement date, has a variety of implications, as we could breach contractual requirements with our counterparties, and incur reputational damage.”

So when SWIFT, in co-operation with FIS and the group’s partner banks, approached LVMH regarding the SWIFT gpi for Corporates pilot project in late 2017, not surprisingly, they were keen to join the project.

Payments processing at LVMH following the Swift gpi project now includes:

  • Trax automatically applying a unique transaction reference (UETR) which is then attached to the payment throughout its life cycle to allow for tracking, reconciliation and reporting. This applies to all cross-border payments whether in MT 101 or XML format.
  • The bank’s system automatically sending back MT199 and XML ISO PSR messages, which provide the detailed transaction status, including fees and FX rates.
  • Trax providing a payments dashboard to allow users to track payments easily without the need to raise queries with the bank. As a result, LVMH expects to reduce its payment queries dramatically, which also benefits its banks.

(Also LVMH has been able to leverage these new capabilities without the need to upgrade Trax.)

Move to real-time

LVMH is well aware of the advantages of the move to faster and real-time payments, as Dall’Aglio explains: “For corporate treasurers, the value of faster and real-time payments will be greatly enhanced when complemented with more dynamic, intraday bank balance reporting to monitor liquidity. APIs are likely to help us achieve this. Using APIs, we will be able to manage not only real-time and faster payments in Trax, but real-time bank account monitoring and liquidity management too.”

Deutsche Bank’s report on “Preparing for real-time liquidity” proposes a Global Liquidity Innovation initiative and explains how it could be done:

  • “For example, the objectives of SWIFT gpi included predictability of flows, traceability of transactions and transparency of charges. These same objectives would be relevant to the development of a GLI. There are already shoots emerging in the development of this type of solution. For example, EBA Clearing presented a proof of concept of a liquidity dashboard with SWIFT earlier this year. This dashboard provides an overview of a bank’s payment capacity and position both in EURO1 and in RT1 based on existing EURO1 and RT1 APIs.”

CTMfile take: Swift gpi + Swift GLI initiative = transformation of payments and liquidity management. AND it looks like it will happen. LVMH will not be the only corporates who welcome this.

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