SWIFT and ECB test instant cross-border payments in Europe

SWIFT gpi, which manages over $300bn worth of cross-border payments, is working with a group of banks and the European Central Bank (ECB) to trial instant gpi cross-border payments in Europe using the TARGET Instant Payments Settlement (TIPS) platform.

Seven banks from France, Germany, Italy, Luxembourg and Spain are involved in the testing of real-time gpi cross-border payments through the Eurosystem’s TIPS, an extension of the ECB’s real-time gross settlement system, Target-2.

A spokesperson from SWIFT said that banks will carry the cross-border legs of the payments, which they will then settle through TIPS, allowing for instant crediting of accounts at ultimate beneficiary banks across Europe.

The ability to process gpi cross-border payments instantly, even when the final legs of the payments have to be cleared on arrival within the destination country, is key to ensuring ubiquitous availability of real-time cross-border payments.

SWIFT gpi was created with the aim of increasing the speed and transparency of payments. Since its launch in 2017, Swift says that gpi is ensuring that, on average, 40% of Swift gpi payments are credited to end beneficiaries within five minutes.

Banque Internationale à Luxembourg, BBVA, Deutsche Bank, Natixis, Santander, Sberbank and UniCredit will participate in the cross-border payments pilot

Increasing adoption of SWIFT gpi had resulted in over $40trn being transferred over the service in 2018. As a result, the share of cross-border messages using gpi soared from 15% at the start of 2018, to 56% by the end of the year.

Round the clock availability

While payment messages cross the Swift network in real-time, the settlement and receipt of funds in the beneficiary account can lag by several days when entering national domestic clearing system, when the final legs need to be cleared within the recipient country.

With the advent of real-time, 24/7 payment systems and longer ‘credit windows’ enabled by the continuous availability of central bank money settlement, such as that offered by TIPS, these frictions can be removed, ensuring that payments can be credited in seconds.

Mehdi Manaa, Deputy Director General – Market Infrastructures and Payments at the European Central Bank, said: “The support of the ECB to this initiative is in line with our strategic objective of ensuring that our TARGET Services keep pace with the evolving needs and requests of banks in the payment landscape. By facilitating gpi, TIPS proves its flexibility to cater for additional use cases. This shows how the 24/7 availability of central bank money provided by TIPS can open new possibilities for the market.”

Extend the scope globally

A similar arrangement was successfully trialed by SWIFT in 2018 with Australia’s domestic instant payment system, the New Payments Platform (NPP), and a group of banks from Australia, China, Singapore and Thailand. The trial successfully demonstrated that by enabling gpi in real-time domestic systems, cross-border payments can be effected almost instantly, even when they involve domestic settlement and non-gpi banks.

SWIFT is now working with its community to extend the scope of this initiative to other real-time systems around the world.

Alain Raes, Chief Executive EMEA and Asia Pacific at SWIFT, said: “This trial is another critical step in extending the reach and utility of our cross-border instant payments service. By linking SWIFT gpi and TIPS, our customers will be able to leverage their existing investments to deliver a superior service to their clients. The support we have from major European banks demonstrates their commitment to partnering with SWIFT to deliver a fast, secure and seamless cross-border real-time payment service that scales globally. We look forward to sharing the results of the pilot at Sibos in London in September.”