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SWIFT – A Powerful Proposition For many corporates, SWIFT is an ideal solution for their cash management needs, but it is not the only solution and will not suit all companies. Moreover, there are many options for connecting via SWIFT that need to be considered. Wilco Dado outlines some of these options, provides insight into the history of SWIFT and corporates, and looks at the benefits of choosing SWIFT Corporate Access.

SWIFT – A Powerful Proposition

by Wilco Dado, Head of Global Payments, RBS

When the Brussels-based financial messaging co-operative SWIFT opened its doors to the corporate community in 1997 (albeit in a very limited fashion), corporate interest in the network was slow to take off. However, adoption rates of the SWIFT for Corporates set of connectivity solutions in the past few years have been impressive, driven by the credit crunch and economic crisis. By the end of Q2 2010, 642 corporates had access to SWIFT’s network and between Q2 2009 and Q2 2010 corporate traffic had grown by 40.3%. 

In the current economic climate, corporate treasurers are seeking to improve efficiencies and gain better visibility and control over their global cash positions at any time of the day and anywhere in the world. Increasingly, treasurers are also looking to centralise payments and receivables through automation and standardisation. Before the crisis, corporates were looking to concentrate services into one bank in order to achieve simplicity, now they are more likely to retain multiple banking relationships in order to be able to switch accounts if problems arise. SWIFT represents a non-proprietary, multi-bank solution that offers a secure channel for corporate-to-bank messaging.

For many corporates, SWIFT is an ideal solution for their cash management needs, but it is not the only solution and will not suit all companies. Moreover, there are many options for connecting via SWIFT that need to be considered. 

A brief history of SWIFT and corporates

The opening up of SWIFT to the corporate community has not been without controversy – many of SWIFT’s financial institution members felt corporate access would disintermediate banks – if corporates could communicate with each other across the network they could perhaps cut financial institutions out of the loop. That is why corporate access has been developed in a measured way by SWIFT and its member banks. Even today, a significant number of banks still take a defensive approach towards offering corporate services through SWIFT. 

SWIFT represents a non-proprietary, multi-bank solution that offers a secure channel for corporate-to-bank messaging.

The first step to bring corporates on to SWIFT was the introduction of treasury confirmation messages in 1997, which allowed for limited activity from corporates, without enabling payments to be initiated through SWIFT or statements to be received.

In 2002 SWIFT created the Member Administered Closer User Group (MA-CUG) category, which enabled corporates to exchange SWIFT messages with their main banks. The MA-CUG is a user group of companies that do business with a specific bank over the SWIFT network. The companies can communicate with the bank, but not with each other. A company can join as many MA-CUGs as it has banking relationships; the bank that created the MA-CUG administers it.

This category was improved with the introduction in 2006 of the Standardised Corporate Environment (SCORE), a closed user group administered by SWIFT, where corporates can interact with financial institutions. SCORE also improved standardisation for the various messaging services within the corporate offering. As SWIFT’s corporate offering matured, banks have been moving away from developing proprietary solutions and have adapted solutions to extend them to their corporate clients who want to use SWIFT. 

FIN and FileAct

There are two main offerings on the SWIFT Corporate Access channel – FIN and FileAct. FIN is a SWIFT standard for sending SWIFT-designed message formats through the SWIFTNet network, a secure, IP-based communications channel. FIN messages are most often used for treasury cash management.FileAct is a means of exchanging any type of file across the SWIFT network and is commonly used for bulk file transfer.

FileAct has proved particularly suitable for large corporates, including those looking to move their European payments volumes onto Single Euro Payments Area (SEPA) credit transfer and direct debit instruments. This is because FileAct has become closely associated with the adoption of ISO20022 XML standards, on which the SEPA instruments are based. SWIFT acts as the registration authority for ISO20022 messages and supports the creation of message types based on this standard.

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