Olivier Grandval, treasurer at Louis Dreyfus Company, discusses how SWIFT gpi simplifies the daily work of the treasury team of his group that trades in agricultural commodities. For him, improving the traceability of cross-border payments opens up new opportunities for bank relations and cash flow forecasts.
– How long have you been issuing SWIFT gpi cross-border payments? What are the advantages of doing so?
– Louis Dreyfus Company’s treasury has been issuing SWIFT gpi payments since January 2019. This service meets our dual requirements of traceability and speed of payment. Louis Dreyfus Company operates in an industry that requires a lot of transparency and responsiveness. Every day, as part of our agricultural commodities trading activities we issue very large payments in almost every country in the world. A payment that is not received could result in a vessel not sailing. The financial consequences can be significant!
We also spend a lot of time reassuring our suppliers that funds will arrive soon. The traditional method is to ask our banks for MT103 messages proving that we have made the payment. Not only is the SWIFT gpi process faster, it also simplifies this way of operating. We have the ability to track each payment based on the UETR (unique end-to-end reference) and know where the funds are in real time. We can also share this reference with the beneficiary. In the end, we are able to provide more information than with a MT103, which is the benchmark in our business, and this gives our counterparties more confidence.
– How did you launch the service?
– At the end of 2018, we were asked by one of our banks to become one of the first users of SWIFT gpi. In two months, our vendor was able to work with SWIFT and provide the support to deliver the ability to generate and track UETRs in our treasury/banking communication tool.
Currently, only our EMEA regional team issues SWIFT gpi payments, which are mainly in U.S. dollars. We will soon have a second bank using the service, with a third following early in 2020.
– What have you learned about the payment process so far?
– SWIFT gpi enables us to see the bank routing used by our payments. Previously, it was a mystery which network of correspondent banks was being used to route a payment. Now we know which routing our bank uses from France to the destination of our payment. We also know if our bank will use the most common, the most traceable or the lowest cost routing for a given destination country! Businesses cannot choose which correspondent banks, their remitting bank uses. However, SWIFT gpi’s transparency will increase pressure on banks to use the best correspondent networks for cross-corder payments. This transparency will enable us over time to compare the correspondent bank used and the costs charged by them for the same destination. We can then channel them through the most efficient and cost effective networks.
– How do you monitor the progress of your SWIFT gpi transfers?
– We take an industrial approach to cross border payments. We would not have been candidates for SWIFT gpi if we had to connect to our bank’s on-line banking systems to track the progress of each payment. They are issued directly from our treasury system that retrieves all the information downstream of the issuance.
We have already issued more than 10,000 gpi payments. We can see the number of gpi payments issued per bank, per currency and per status (credited, rejected, etc.). However, we do not yet have the appropriate reporting tools to exploit information on the fees and gpi connectivity of the routing (that is, all the banks involved in the payment chain). We need an effective system for reporting the explicit costs charged at each step of the transaction, from issue to receipt, including the costs charged by the correspondent banks. This system also needs to report on the implicit costs generated, for example, when a a payment is converted into an account that is not in the currency of the payment. We are also interested in the type of fees. We see that some correspondent banks are changing the charging instructions from OUR to SHARE.
Having such reports will be a second phase of the project and it will take time to build a fully-fledged tool capable of reporting these issues and providing analysis to management.
– Other than reporting, what future developments do you expect with SWIFT gpi?
– We are very interested in the order pre-validation API, which will enable us to reduce returns and rejections on our payments. However, this API requires an update of our banking communication tool.
We are also working with our vendor to receive advance information on incoming payments so we can integrate them in our forecasts. This service, called gpi inbound, will be available to pilot from early 2020.