Chinese banks work with SWIFT gpi to accelerate their global reach

SWIFT released today the names of the ten Chinese banks that have gone live on its global payments innovation initiative (gpi) since its launch in May 2017.

The banks 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.

Seventeen 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.

“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.SWIFT gpi is seen as a key player in China’s Belt and Road Initiative (BRI).

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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 in turn leads to shorter supply cycles and faster shipping of goods on the customer end.China’s BRI currently covers over 60 countries and represents a third of the world’s trade. 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. Strengthening financial connectivity on the BRI routes is vital in ensuring its success in driving trade and stimulating economic growth across Asia.

“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.Despite initiatives to develop the RMB at an international level, China remains a largely dollarised market. As of June 2017, 98% of the payments between the United States and China are performed in US Dollars, and the RMB is used for more than 2% of payments to China in most markets, Taiwan being the only notable exception.

The improved connectivity and the enabling of more products and services dominated by the Chinese yuan will also help China with its RMB internationalisation efforts.Launched in 2017, gpi already accounts for 25% of SWIFT cross-border payment traffic. More than 165 banks, representing 80% of SWIFT’s cross-border payments traffic, and including 49 of the world’s top 50 banks, have signed up to the service. To date, 50 million gpi payments have been processed, with hundreds of thousands of payments sent daily across 350 country corridors, in more than 100 currencies.  In major corridors, such as USA-China, gpi already accounts for more than 40% of payment traffic.

In March 2018, SWIFT announced the extension of its gpi Tracker to cover all payment instructions sent across the network, enabling gpi banks to track their SWIFT payment instructions at all times, and giving them full visibility over their payments activity. As a direct result of the speed and transparency afforded by gpi, banks using the service have seen a significant reduction in frictions and as much as a 50% fall in their enquiry costs.As a next phase, SWIFT has created a work group comprised of banks from China, Australia, Singapore and Thailand to explore if the domestic legs of gpi payments can be further sped up. The work group will define a set of business rules to look into how domestic 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.

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