How Innovations in Cross-Border Payments Are Improving Global Trade

Author: Kalli Heupel, Director, Foreign Exchange

Friction and delays can disrupt the cross-border payment experience for many businesses, leading to reduced cash flow and increased costs. Fortunately, the global payment landscape is evolving. Emerging innovations are poised to streamline processes, enhance transparency and mitigate risks. With new bank-provided tools, businesses will be able to make international transactions with greater ease, confidence and efficiency.

Improving Payment Speed and Transparency with SWIFT’s Global Payment Innovation (GPI)

SWIFT’s Global Payment Innovation (GPI) represents the future of cross-border payments, bringing greater speed, traceability and transparency to the transactions. Similar to FedEx package tracking, Swift’s GPI tracker makes it easy to trace payments as money moves across borders. A Unique End to End Tracking Reference Number (UETR) assigned to a transaction allows a business to see in real-time where a payment is, what banks it passed through, where fees were levied from the wire amount and where a currency conversion occurred, to name a few of the possibilities. One major benefit of the GPI tracker is the ability to stop and recall payments. As long as a wire isn’t fully processed and credited to the beneficiary account, a stop and recall can be initiated. Funds are then returned through the chain. This technology helps resolve fraudulent payments by improving the visibility of transactions as they cross borders. Another component of the SWIFT GPI Tracker is Case Resolution, a tool that handles queries or investigations when payment information is missing or invalid. For example, if a wire passes through three different banks, historically an investigation would need to be carried out by each institution. With Case Resolution, missing information can be found through GPI Tracker, so only the affected banks need to respond.

Standardizing Data with ISO 20022

ISO 20022 is an internationally recognized standard specifically designed for exchanging electronic data between financial institutions. Unlike older formats that rely on cryptic codes and limited information, ISO 20022 provides clear descriptions of transaction details, including names of the invested parties and types of goods or services involved. ISO 20022 standardizes data formats when exchanging payment details, creating consistency as funds move from one party to another. The recipient address field is one area where it is easy to recognize the value of standardized data in action. When using SWIFT MT103 wire format—the predecessor to ISO 20022—the beneficiary account number, name and address all occupy one unstructured block within the wire message. The order and structure of the address can differ from one system or country to another, making it difficult to decipher the information accompanying the transaction. Under the new ISO 20022 standards, data in the address field is structured into a universal format, making it simpler to isolate specific components.

Nearly 76% of small and mid-sized businesses expect cross-border payments to be completed within an hour or less. Demand for faster payments requires banks to send clean and complete data to facilitate smoother automation, screening and reporting. ISO 20022 supports this environment by delivering a higher level of data integrity. ISO 20022 is being phased in as payment systems across countries evolve to the new standard. Once adopted by all payment systems, the benefits from data standardization could be exponential.

Artificial Intelligence Supports Speed and Efficiency

The increasing emphasis on payment speed creates increasing concerns around compliance. In the past, if an international wire took two to three days to pass from sender to recipient, there was sufficient time for each bank within the chain to screen the transaction, perform its due diligence, and stop the payment if fraud or suspicious activity was confirmed. As payments become nearly instantaneous, compliance teams need to employ more proactive and preventative programs rather than rely on reactive recovery. Fortunately, new artificial intelligence-enabled innovations are emerging to combat the risks organizations face. Some AI-powered screening systems can instantly analyze transactions against continuously updated watch lists to not only ensure adherence with cross-border regulations but also identify fraud. These innovations empower businesses to navigate the fast-paced world of international payments with greater confidence and reduced risk.

Leading Banks Facilitate the Future of Cross-Border Payments

When it comes to innovations in cross-border payments, leading banks will be at the forefront, offering cutting-edge solutions such as SWIFT GPI and ISO 20022. These innovations streamline communication, expedite transactions and provide real-time tracking, making it easier and more secure to make and receive international payments. By embracing these advancements, banks are effectively equipping businesses of all sizes with the tools they need to compete on a global stage. Learn more about new cross-border payment options by contacting a member of FNBO’s Global Banking team.

About the Author
Kalli is Director of Foreign Exchange at FNBO where she leads the team of FX professionals. She assists corporate and financial institution customers with foreign exchange transactions, international treasury solutions, FX risk management, and cross-border payment digitalization strategies.