Citigroup is using tracking and transparency to push back against rivals that paint traditional bank-powered international payments as a costly, time-consuming relic.
The bank's Citi Payment Insights offering, announced Monday, is designed to allow real-time payments visibility and the ability to handle on-demand payments through CitiDirect BE, Citi's e-banking platform. Institutional clients can view the transaction lifecycle within Citi's global network and the correspondent banking ecosystem by using Swift's Global Payments Innovation tracker.
Citi Payment Insight is not related to any blockchain or cryptocurrency project, but goes after the same pain points that blockchain-based startups target.
"It removes the needs for alternative payments that come with challenges such as not being integrated with banks and not having a network," said Manish Kohli, global head of payments and receivables at Citigroup. "Swift has taken many years to build a network of 10,000 banks. If we build superior products and solutions on that network, it is infinitely more powerful than building a competing network based on technology and solutions that are not widely used."
Correspondent banks have become almost like swear words for parts of the fintech community that favor blockchain, the cloud or other alternative forms of local collaboration. Correspondent banks, which are used to perform currency conversion and other parts of processing, are targeted for adding time and expense to cross-border payments.
Citi hopes the visibility it provides will create competitive pressure to cut time and cost from international B2B payments, since businesses will know more about their payments and where various fees come from.
"Among other capabilities, Citi Payment Insights delivers Swift's gpi capabilities to our customers, and gpi is like embedding a package delivery chip on each payment," Kohli said. "As the payment goes from one bank to another, gpi gives clients the ability to track where in the payment chain that payment is and if there have been any charges along the way."
Since all Swift banks are required to adopt the latest gpi tracking technology in the cloud by 2020, there will quickly be more information available on cost and time for cross-border B2B payments.
Citi's pilot partner, Royal Dutch Shell, reported payment execution in a few clicks rather than a few days, adding it can reduce payment inquiries by 75% over time as the digitization of its cash management strategy matures over the next two years.
Citi hopes that by banks building solutions to deliver gpi to corporations, it can cut about 70% to 80% of the cost out of cross-border B2B payments over time, since the transparency will create pressure on banks to improve performance.
"The payments are visible, so banks will make more investment in real-time or straight through processing to take cost out of the equation more and more," Kohli said.
Citi Payment Insights' features include payment tracking, a view of incoming funds before a credit is posted into clients' accounts, on-demand proof of payments, grant/deny authority and return of funds.
Cross-border transactions are still a pain point in payments at both the consumer and business level, with high fees and more crucially low levels of visibility on where that transaction is, said Gilles Ubaghs, a senior analyst at Aite Group, adding there's been an explosion of third parties and startups getting into the cross-border space, and that includes a lot of major established payment processors and fintech vendors moving into cross border payments.
"From a bank perspective there is still a window to push back on the cross-border space, but they should be investigating and developing their options now," Ubaghs said. "The market is highly competitive and advancing quickly and a wait and see approach is not realistic."
The fragmentation in the market today likely isn’t sustainable, and there will be a few larger solutions squeeze out some of the smaller ones, Ubaghs said
"The most interesting in my eyes are both Ripple and the Swift gpi initiative," Ubaghs said. "Both of them take a very bank centric approach compared to a lot of fintech entrants, with a focus on speed and real-time data rich capabilities. They both have their advantages and weaknesses, but ultimately their competitiveness is a great driver for the market."
