Published: September 22, 2008
PacNet Services was founded in 1994 by an international team of banking experts in Vancouver, Canada. The company received instant recognition as the world’s leading processor of foreign currency cheques.
For the past 14 years, PacNet Services has maintained an average growth rate of 20% or higher. PacNet’s global staff, now numbering close to 120 people, are intensely loyal and dedicated to the business of its clients’ international success.
Today, PacNet Services is recognised for much more than processing foreign currency checks, it has developed a reputation for the provision of cutting edge electronic payment processing solutions around the globe. Companies from a wide variety of industries rely solely on PacNet Services to handle all of their international payment needs.
Through offices in Canada and Ireland, PacNet Services enjoys working with clients in North America, Europe, South America, Asia, Africa and Australia, many of whom rely solely on PacNet to meet their payment processing needs both at home and abroad
Question how much freedom your path affords you. Be utterly ruthless about it. It’s your freedom that will get you to where you want to go.
Hugh MacLeod, How to be Creative, 11, 08.22.04
As a provider of payment services to clients globally, the ability to connect to SWIFTNet, historically the network through which banks communicate between themselves, presented substantial opportunities. Firstly, we saw SWIFT as a means of making payments more efficiently, and we would also be able to provide high quality, timely information to customers on the status of their payments together with balance and transaction reporting. We saw the potential to scale our business beyond what was possible using traditional electronic banking systems, and across more geographic locations.
One of the reasons for implementing SWIFT was to rationalise our vast array of EB systems by replacing these with a single 'pipe' to our banks.
Like many readers of this article, we had read a number of case studies and attended presentations by corporates which had implemented SWIFT, but we found it difficult to get beyond arbitrary return on investment (ROI) figures and see how their experiences applied to our own situation. In this article, we aim to provide a practical view of SWIFTNet and share our experiences and advice with other organisations contemplating the same path or who have already embarked upon it.
We had a variety of business challenges, many of which will be familiar to any international company with banking services in different locations. While we believed instinctively that SWIFT corporate access would be beneficial to PacNet, we recognised that by addressing some issues, others were created, which had to be taken into account during the project.
PacNet has over 170 different bank relationships and more than 400 bank accounts globally. This has resulted in a multitude of electronic banking (EB) systems - currently, we have approximately 111. Maintaining these systems was becoming extremely difficult, as each has its own security requirements and access arrangements (smart cards, readers, digital certificates, secure ID tokens, remote devices etc.) User IDs, access rights and passwords had to be managed on each system, so with about 25 users on each system, and the occasional need to add or remove users, the administrative overhead was substantial. One of the reasons for implementing SWIFT was therefore to rationalise our vast array of EB systems by replacing these with a single ‘pipe’ to our banks.
Our main business is processing data for our customers’ consumer receivables worldwide, as well as processing the incoming payments/collections themselves. With each EB supporting a slightly different format, we had to deal with constant development requests to support different banks’ EB formats. SWIFT gave us the opportunity to receive and parse a common format for receivables from all our banks (MT940). [[[PAGE]]]
PacNet relied on traditional EB and internet banking to retrieve bank statements, which were accessed by users from different parts of the group. If we migrated to SWIFT, we had the challenge of how to convert the MT940 messages into a human-readable format. If we still needed to rely on legacy EB and internet banking systems in addition to SWIFT reporting, we would effectively be doubling our bank charges by paying for statements both through SWIFT and through internet/EB banking systems. Furthermore, we would not achieve our objective of retiring our legacy systems.
Addressing this issue initially proved rather a challenge; however, the result greatly exceeded our expectations!
We found that most banks do not provide disaster recovery tools for their EB/internet banking solutions, such as spare cards, readers etc. This means that any loss of business continuity would potentially paralyse our core business which relies on these systems. SWIFT has exceptional reliability and the service bureau we selected, SMA, provides multi-channel connectivity and continuity in the event of business disruption.
We were not sure where to start in defining a cost benefit analysis, due to the number of different dimensions involved. We were fortunate that our partner bank Barclays worked closely and consultatively with us to produce a detailed cost benefit analysis. Accessing SWIFT directly was prohibitively expensive, so we chose SMA as a service bureau based on their reputation and references from other customers. In early 2006, our cost benefit analysis and proposed solution was accepted by senior management. We commenced our implementation in February 2006 and with support from Barclays and SMA, the project went smoothly and we went ‘live’ on time in September 2006.
We originally went live on FIN payments with Barclays, and in March 2008, we joined Danske Bank’s MA-CUG. The benefits have been substantial, addressing most of our original objectives, but also including pay-offs which we did not envisage in our cost-benefit analysis, such as:
As with any project of this scale and complexity, particularly with multiple parties involved, there have inevitably been some challenges along the way:
Support for MT 942 messages
MT942 message (intraday statements) are less commonly supported by our banks than we had originally envisaged, which means that we have not been able to migrate from as many of our legacy EB systems as we would have liked.
Format standardisation
Although SWIFTNet is a common ‘pipe’, banks do not use consistent message formats, so some of the benefits of standardisation have not yet materialised. We understand that there are industry developments, such as ISO200022, which will be the basis for SEPA payment messages, to address these issues.
Bank familiarity with SWIFT
Another issue was that many of the relationship contacts at our banks were not familiar with their corporate SWIFT offering, including even the basic provision of MT940 services, nor did they know who within the bank would deal with such a request. This led to our MT940 and MT101 authorisation letters disappearing completely within the bank at times, which we had to chase repeatedly. [[[PAGE]]]
Reconciliation of costs
We found it difficult to track our actual costs against those we had originally estimated as the banks use different pricing points and methodologies.
What to ask?
We were fortunate in working with Barclays and later Danske, as these banks have experience in SWIFT connectivity for corporates and have made a strategic commitment to supporting their corporate customers looking to connect through SWIFT. However, not all banks share the same level of expertise nor have they positioned SWIFT for corporates as a strategic proposition. It is not always easy to discover this from an initial conversation with a bank, however. As a result of our experiences, we now know the questions to ask a potential MA-CUG provider, outlined in Fig 1.While the specific questions will differ slightly according to a company’s priorities, we have found that working with a clear checklist of questions which deal with the priorities and potential challenges which may emerge has enabled us to determine quickly which banks are in a position to support our needs.
[[[PAGE]]]
One of the challenges we envisaged was the difficulty in converting MT 940 and MT 942 messages into a human readable format for use within PacNet and for transmission to our customers. We had looked for a third-party application but found that existing solutions were not ‘off the shelf’ and were not priced at a level which could be supported by a medium-sized enterprise. We decided initially to work with a business partner who would develop a statement reporting solution, but this project was terminated. Consequently, our development team, DeepCove Labs in Vancouver, Canada developed a new, cutting-edge solution specifically for our needs. Although the system, known as Panorama, has been developed for our own use, it has met with considerable interest from our banking partners.
Panorama is an online statement viewing system that converts SWIFT messages to provide a consolidated view of all bank accounts worldwide. In particular, we have found the system has brought the following advantages to our electronic banking framework:
It required rapid, innovative design and development by DeepCove Labs to resolve the challenges we faced and the system which resulted, Panorama, achieves this with slick functionality and an easy to use interface.
Working with a clear checklist of questions which deal with the priorities and potential challenges which may emerge has enabled us to determine quickly which banks are in a position to support our needs.
Our electronic banking transformation project, which includes SWIFT connectivity to the Barclays and Danske MA-CUGs through our service bureau, SMA, plus our own software Panorama, has acted as a catalyst for transforming our payments and information business. A more efficient, scaleable payments infrastructure means that we can provide a more diverse and robust solution to our customers, and the quality, transparency and timeliness of customer reporting has been substantially improved. Although we are a modestly-sized organisation compared with many of those currently accessing SWIFT, we are now amongst the top 10 SWIFT corporates in the world for FIN message traffic and we foresee our SWIFT activities continuing to grow in the future.
For example, we are currently preparing to join two more MA-CUGs and we are also positioning ourselves for high volume UK Faster Payments processing with Barclays through SWIFT FileAct, in which we envisage being the first to market in our industry. We are planning also to use FileAct for electronic cheque presentment. Cheque scanning is a major part of the business and PacNet is the largest presenter of cheques in Germany.
Our achievements to date have not come without challenge and difficulty, and we found that not all banks we approached were at the same level in terms of delivery of SWIFT services to their corporate customers. However, we recognised that connecting to our banks via SWIFTNet was an investment we needed to make to create competitive advantage and position our business for the future. As Hugh MacLeod expresses it:
Good ideas alter the power balance in relationships; that is why good ideas are always initially resisted. Good ideas come with a heavy burden. Which is why so few people have them. So few people can handle it.
Hugh MacLeod, How To Be Creative, 11, 08.22.2004
For more information on the Panorama solution developed by DeepCove Labs, please contact:
Joerg Beekman, DeepCove Labs
[email protected]
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
