this month, the Society for Worldwide Interbank
Financial Telecommunication (SWIFT) announced that 10 Chinese banks that have
gone live on its global
payments innovation initiative (gpi) since its launch in 2017, while 17 other Chinese banks are in the process of going live.
“By affirming their commitment to come onboard SWIFT gpi,
the 27 Chinese banks that have signed up so far are sending a strong message to
the rest of the world. The seamless connectivity, optimised financial products
and services, and presence of ongoing community engagement and standards
afforded by SWIFT and its gpi platform, are crucial in facilitating business
between China and the rest of the world, and in doing so, set a new precedent
for cross-border payments globally,” said Alain Raes, Chief Executive of EMEA and APAC, SWIFT.
The 10 Chinese banks which joined the initiative are: Bank of
China, Industrial and Commercial Bank of China, Bank of Communications, China
Minsheng Bank, China Guangfa Bank, China Construction Bank, Bank of Jiangsu,
Shanghai Pudong Development Bank, China Citic Bank, and China Zheshang Bank.
SWIFT is a
global member-owned cooperative, headquartered in Belgium. Its messaging platform,
products and services connect more than 11,000 banking and securities
organisations, market infrastructures and corporate customers in over 200
countries and territories. Its network which enables financial institutions
around the world to securely transmit and receive standardised messages on
financial transactions and hence, make cross-border payments.
In a recent
feature interview, OpenGov learned that gpi provides an agreed
common set of service outcomes, in terms of same day payments, end-to-end
tracking, transparency and information. Banks can then layer their own
innovations on top of this underlying service.
17 other Chinese banks have committed to SWIFT gpi in
China and are in the process of going live. Together, these banks represent an
estimated 86% of cross-border payment traffic conducted by Chinese banks in
mainland China. In addition, a number of foreign banks with mainland presence
are already on the SWIFT gpi network.
China’s Belt and Road Initiative (BRI) currently covers over
60 countries and represents a third of the world’s trade. However, the
discrepancy in standards and regulation across the BRI introduces a number of
challenges, such as the absence of a unified communications framework and
compliance issues. Thus, strengthening financial connectivity on the BRI routes
is vital in ensuring its success in driving trade and stimulating economic
growth across Asia.
SWIFT gpi is seen as a key player in China’s Belt and Road
Initiative (BRI) since it is designed to improve the customer experience in
correspondent banking by increasing the speed, transparency and predictability
of cross-border payments.
The service offers Chinese banks faster transactions, and
also improves the overall banking experience by creating predictable settlement
times, transparent bank fees and FX rates, and clear statuses. This is turn leads
to shorter supply cycles and faster shipping of goods on the customer end.
“The financial industry has an important role to play in
realising the full potential of the Belt and Road Initiative, from building and
maintaining effective infrastructures and processes to support capital flows;
to working towards common standards and mitigating risks. At SWIFT, we are
committed to working with Chinese banks to help shape the future of
correspondent banking in China and beyond,” added Mr Raes.
As a next phase, SWIFT has created a work group comprised of
banks from China, Australia, Singapore and Thailand to explore if these
payments can be further sped up. The work group will define a set of business
rules to look into how business process frictions can be overcome to facilitate
faster or close to real-time payments. The working group will also identify
domestic real-time payment systems that will carry the gpi information and
unique end-to-end transaction references (UETRs), to allow the reach of the gpi
service to extend into domestic payment system environments.