Published: September 06, 2013
SWIFT has long had a commitment to supporting corporate treasurers and finance managers in their efforts to improve the security, reliability and efficiency of their financial operations. In the past, providing connectivity services has been the central pillar of this strategy, with a growing number of corporations now communicating with their banking counterparts through SWIFT, whether directly, via a service bureau, or now most commonly through Alliance Lite2, our cloud-based connectivity service. Our strategy has evolved considerably beyond connectivity, however. This article outlines some of the major ways in which we are facilitating the corporate to bank dialogue and promoting transparency, simplicity, security and standardisation.
Over the past year, we have combined our corporate connectivity team with our trade services team to deliver more integrated service offerings to benefit the corporate community. One of the primary objectives of the trade services team has been to provide legal and technology standards to enable banks to develop efficient solutions for their corporate customers, including BPO (Bank Payment Obligation), a trade finance solution based on ISO 20022 standards developed in collaboration with the International Chamber of Commerce (ICC) that is proving very successful, particularly in Asia. The BPO is an irrevocable undertaking given by one bank to another that payment will be made on a specified date after successful electronic matching of data according to an industry-wide set of enforceable ICC rules. It therefore provides the advantages of letters of credit but in an automated and secure environment, namely the TSU (Trade Services Utility) through SWIFT.
By combining the connectivity and trade services teams, we are reinforcing our ability and commitment both to support corporates directly through our connectivity services, and indirectly by assisting banks to deliver innovative, automated and standardised services for treasury and trade. eBAM (electronic bank account management) is one example of this. By replacing manual processes for opening, closing and maintaining accounts, administration for both banks and corporates is considerably reduced, and by using recognised XML-based standards, eBAM has a high degree of acceptance globally.
An important element of our strategy for corporates is that services should be available to the corporate community irrespective of whether they connect to their banks through SWIFT or another channel. For example, 3SKey, SWIFT’s personal digital signature solution is currently more commonly used by corporates to sign messages through bank proprietary solutions and non-SWIFT channels such as EBICS than through SWIFT.
As part of our combined treasury and trade strategy, we are basing our activities around a number of strategic objectives, which are aligned with the needs of the corporate community as follows:
i) Easing connectivity
Enabling corporate treasurers and finance managers to connect to their banks reliably and securely through SWIFT remains a pivotal part of our strategy. In addition to acting as a multi-bank channel, SWIFT is also a multi-service channel, supporting a growing number of financial flows: from foreign exchange to payments, documentary trade, supply chain finance, FX matching, regulatory reporting and end-of-period statements. New customers in particular are now most likely to do so through our cloud-based solution, Alliance Lite2. In addition to providing the solution direct to corporates, we are working with providers of cloud-based financial applications to deliver integrated solutions that meet corporates’ financial processing, management and connectivity requirements through a single access point. We expect to have some exciting announcements in this area shortly.
ii) Pioneering standardisation & referential integrity
With the extensive support and adoption of ISO 20022 standards across the financial community, as well as being the standard for SEPA payment instruments, SWIFT is now widely seen as the industry focus for standardisation initiatives. For example, the CGI (Common Global Implementation) Group provides a forum for banks, corporates, vendors and other industry participants to progress various corporate-to-bank implementation topics on the use of ISO 20022 messages and other payments-related activities. The aim of the CGI Group is to simplify communication between corporates and their banking partners, whether through bilateral solutions or SWIFT through greater standardisation and transparency.
MyStandards has a major role to play in this corporate-to-bank dialogue. MyStandards is a web-based repository that enables banks to publish messaging guidelines and schema so that their customers can see how each bank is implementing formats and standards. For example, legacy requirements and regional or local requirements may result in some divergence from the published standards. Corporate users can use MyStandards to search for content in a structured way, access information easily and communicate with other users to share experiences and best practices.
Another source of vital reference data for corporates is SWIFTRef, a global ISO registry of all BIC codes for financial institutions and corporates across more than 200 countries, whether connected to SWIFT or not. In addition, SWIFTRef provides national bank identification codes, bank name, address and contact details, SEPA data including routing information and IBAN validation and banks’ standard settlement instructions for treasury and wholesale payments globally. This is supplemented with country, currency and holiday information, together with credit ratings and bank hierarchy information. Like many other SWIFT-initiated projects, SWIFTRef has been developed collaboratively with a focus on pragmatism and ease of adoption. For example, by working closely with SAP, SWIFTRef data can be imported directly into SAP, ensuring referential integrity. SWIFTRef has global applicability and by ensuring that payments are correctly routed, the accuracy and timeliness of payments is assured.
There is immediate benefit for companies that need to migrate their domestic and cross-border euro payments in the Single Euro Payments Area (SEPA), as payment messages, which are based on ISO 20022 standards, must include the BIC and in some cases IBAN to be correctly routed. With a fast-approaching deadline of 1 February 2014, this will be a priority for many companies. SWIFTRef and MyStandards can play a major role in facilitating this migration and reducing project administration and risk.[[[PAGE]]]
iii) Promoting industry-wide security
Delivering robust security solutions is an essential element of SWIFT’s role as a facilitator of corporate to bank communications. 3SKey is an example of how SWIFT is developing solutions that enable banks to enhance the service they provide to their customers without the need for each bank to invest individually. Furthermore, corporates can harmonise processes and use one security token rather than having to maintain separate processes and tokens for each bank.
iv) Facilitating corporate-to-corporate trade flows
While most of SWIFT’s corporate-related efforts have focused on facilitating the corporate-to-bank dialogue in the past, we are now working with the ICC to develop new payment instruments for international trade. These will in turn allow greater payment assurance and enable banks to provide pre- and post-shipment finance. As with 3SKey and other corporate initiatives in which SWIFT is engaged, these will be available to corporates and their banks irrespective of whether they communicate through SWIFT or alternative connectivity channels.
With considerable progress already made in each of these areas, with considerably more to follow, 2013-2015 marks an exciting and dynamic period for corporates and the banks that support them. This year’s Corporate Forum which takes place at Sibos in Dubai (17-18 September 2013) is an opportunity for banks and corporates to discuss the banking services that corporates require, and how banks can best deliver them. Collaboration and standardisation are critical to the success of the bank-to-corporate dialogue to avoid the proliferation of expensive, non-interoperable proprietary solutions that ultimately conflict with corporates’ efficiency, simplification and harmonisation objectives.
These efforts can be compared with the GSM protocol in the mobile telephony industry: just as users can communicate across networks and handsets via GSM, our aim at SWIFT is to facilitate interoperability across the financial community. In the coming years, we expect 50% of multinational corporates to be connected to their banking partners via SWIFT, including those accessing SWIFT through a cloud-based treasury or payments solution. However, SWIFT’s value proposition extends considerably beyond connectivity, and we look forward to engaging corporates and banks alike, irrespective of how they communicate, on the solutions and standards of the future.
For more information on SWIFT for Corporates, please go to www.swift.com/corporates
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