Global trade, commerce and the interconnected economy depend on reliable cross-border transactions, and issues with these payments affect everyone from consumers to large corporations. Such delays in business-to-business (B2B) cash flows can cause dramatic concerns for suppliers.
Even simple banking data errors can result in holdups. Providing incorrect recipient account numbers, routing funds to closed beneficiary accounts or mismatching numbers and names are just a few potential pitfalls. Payments that don’t go through are then sent back to payees, who could face fees from banks along the payment chain as well as serious settlement delays.
These kinds of industry problems don’t occur often, but they can be extremely inconvenient when they do, according to Manish Kohli, global head of payments and receivables with Citi’s Treasury and Trade Solutions.
“It isn’t an experience we feel is fit for the 21st century,” Kohli said.
Banking error-related pains are more likely to affect complicated cross-border payments across jurisdictions, time zones and languages, he explained, and all consumers and corporations could benefit from fixes to help prevent them.
There might be an end in sight, however. Citi is among 17 banks piloting an API-based solution to alleviate banking error-related delays. The SWIFT offering is designed to pre-validate SWIFT gpi payments, allowing participating senders to confirm beneficiaries’ account information with receivers via API calls and letting them correct any errors before initiating transactions.
PYMNTS recently caught up with Kohli to discuss SWIFT’s pilot solution and how it could remove friction from the banking industry. He also explained how it can lower customers’ payment costs and spare banks the expense of investigating error-related failed payment issues.
Prepping for the pilot
Most of the FIs participating in the pilot are large banks with either global or regional focuses. Kohli said the solution will roll out to smaller banks at a later date.
The program’s first phase would test use cases such as confirming whether beneficiaries’ accounts are open and validating them, thus creating a smoother payments experience and providing certainty that disbursements will be credited as intended. It is slated to launch during the first half of 2019, although the exact date depends upon banks’ preparedness to integrate.
“We expect this will eliminate a large percentage of the current rejects and fails and, as a result, will also reduce the associated interbank investigations and manual processes, taking much of the friction out of the process,” Kohli said.
Citi expects integration with the pre-validation service to be straightforward for the banks already live on SWIFT gpi. These FIs can choose how the service is presented to their clients, and Citi intends to provide the solution within its own Citi Payment Insights real-time platform.
The pre-validation solution must be ubiquitous as well as robust if banks are going to get the most out of it, Kohli said. As such, banks of all sizes would need to adjust their technologies to access it.
While he did not expect the technological preparations to be very onerous for banks, Kohli noted that the challenge lies in encouraging already-busy FIs to prioritize adopting the solution.
As pre-validation solutions emerge and spread, they are expected to help alleviate friction and enable FIs to offer more convenient cross-border payments. These goals are critical in today’s hyper-connected digital world.