- David Watson
- Head of Client Access, Global Transaction Banking, Deutsche Bank and Leif Simon, Head of Client Access for Cash Management and Client Integration, Deutsche Bank
by David Watson, Head of Client Access, Global Transaction Banking, Deutsche Bank and Leif Simon, Head of Client Systems Integration Product Management, Global Transaction Banking, Deutsche Bank
SWIFT’s decision to enable corporates to connect to SWIFTNet 10 years ago marked a major change in the way that companies exchange financial information with their banks, and the degree of standardisation, efficiency and integration that can be achieved. Some banks that are members of SWIFT were initially concerned that inviting non-financial institutions to communicate with their banking partners through SWIFTNet would erode their competitive advantage derived from their proprietary web-based or host-to-host electronic banking systems. Today, however, most forward-looking banks that place their clients’ needs at the heart of their business recognise that SWIFT connectivity is an important part of their client communication portfolio, particularly when it comes to serving the needs of larger, more complex organisations.
Supporting multi-bank connectivity
Today, around 800 corporations are registered with SWIFT; however, the ability to connect to multiple banks through SWIFTNet, a single, secure and robust channel, is still relatively new. Most corporates registered so far are large multinational corporations that have multiple banking partners globally. These organisations welcome the ability to connect to all of their banks through a single channel, reducing their reliance on individual banks and their systems. While many proprietary banking systems provide excellent automation, control and richness of data, it can be challenging to maintain a number of systems that have different integration requirements, file formats, and security controls.
Achieving bank neutrality, standardisation, industry-leading security and resilience were among the initial business drivers for corporates selecting SWIFT as their bank communication channel 10 years ago and continue to be the primary factors for corporates making their decisions today. However, the range of services from which corporates can benefit has developed since that time, and continues to evolve. For example, originally corporates typically exchanged FIN messages such as MT 101and 940 (payments and bank statements) primarily for treasury or other urgent payments. This practice inevitably limited the use of SWIFTNet to treasury, whilst other parts of the business that needed to exchange information with the bank, such as accounts payable, still needed to rely on proprietary bank technology. The introduction of FileAct, which provided an ’envelope’ into which any type of file or data can be included, provided significant momentum in corporates’ adoption of SWIFTNet as all types of payment, as well as other financial messaging, could be exchanged with banks through SWIFTNet. [[[PAGE]]]
The growth in corporate influence
The corporate experience of SWIFTNet is changing in other ways too. No longer is SWIFT solely the domain of banks in terms of strategic direction and product priority, with corporates merely considered as the banks’ clients. Now corporates play an active and vital role and, in fact, help to push the take-up for new product and service development initiatives. The Corporate Advisory Group (CAG), formed by SWIFT, engages member banks in collaborating for the benefits of corporates and the banks themselves, working on initiatives to drive corporate membership and is a pivotal body for defining and prioritising new services through SWIFT. The CAG has also been supplemented with SWIFT-driven groups of corporates themselves who get together to engage in direct dialogue with like-minded peers and SWIFT to pro-actively further the service offering going forward. These developments have been essential in ensuring that new solutions meet corporate needs and address their business priorities.
Facilitating easier access to SWIFT
Another key change we have seen in the way that corporates interact with SWIFT is how they manage the physical connection. Early users, and indeed some companies today that may be averse to outsourcing or have specialist IT capabilities, built their own dedicated infrastructure for connecting to SWIFTNet. This was not a feasible option for many corporates with lean IT resources, and most companies now choose to work with service bureaus and take advantage of shared infrastructure to enable more rapid and cost-effective connection to SWIFTNet. SWIFT has also introduced Alliance Lite, a web-based, quick-start tool for access to SWIFTNet, suitable for a limited volume of transactions.
Differentiation through standardisation
Despite the fact that SWIFTNet permits corporate users to connect to multiple banks through a single channel, the experience of connecting to each bank is different. Banks have different degrees of expertise and resources to support SWIFT for Corporates services and SWIFT may be a greater or lesser component in their portfolio of client communication tools. Consequently, it is important to seek the support of the right banks during the first phase of a SWIFT project, and then roll out to other banks once the initial implementation is complete. Information about banks offering corporate services and their functional coverage can be taken from the ‘Bank Readiness’ section on the SWIFT homepage.
Most forward-looking banks recognise that SWIFT connectivity is an important part of their client communication portfolio.
Deutsche Bank has been a pioneer of SWIFT corporate access since the early days, and we have been proactive in supporting and promoting new initiatives that benefit our corporate clients. We have built up considerable expertise and resources to ensure that our clients have a smooth implementation experience, including a ‘SWIFT for Corporates Specialist’ certification of our implementation staff, and are able to leverage the full potential for integration, standardisation and automation of financial processes. We are active members of the CAG and engage in frequent and in-depth dialogue with our clients that use SWIFT or are considering their connectivity options. We are also pioneers of ISO 20022 for format standardisation, not only through SWIFT but also through the bank’s proprietary channels.
System and process integration
The options for corporates seeking to connect to their banking partners have changed substantially over the past decade, and we envisage that this evolution will continue. Integration continues to be a major theme, firstly from the point of view of the connection between disparate systems. For example, we are working closely with ERP vendors such as SAP to create ’plug and play’ bank connectivity from our clients’ internal systems. Integration also extends to the flow of data between systems and financial counterparties. ISO 20022 is a key enabler for the exchange of standard formats, but, in addition, enriched data allows for greater automation of financial processes, such as reconciliation.
Managing risk, maximising automation
Over time, we expect to see the number and range of corporates attracted to SWIFT connectivity continue to increase. Companies of all sizes recognise the importance of managing risk of all types, and bank-neutral connectivity through a secure network mitigates operational and bank risk significantly by reducing reliance on any single third party. Furthermore, accessing information on cash and liquidity across all of a company’s banks is a powerful tool in managing liquidity and counterparty risk - an ever important aspect in the complex financial economies and regulatory environments in which corporates are working in today. Real-time access to services is becoming a prerequisite in treasurers’ and finance managers’ pursuit of a highly-efficient cash and risk management enterprise, and SWIFT will increasingly become a mechanism by which companies can achieve this requirement.