Published: September 19, 2011
Advances in technology offer more opportunities than ever for companies with the requisite vision, creativity and leadership. Increasing globalisation means increasingly complex demands across all levels of business – and treasuries and finance departments are no exception. Treasurers and finance managers must address this complexity on many levels – from mitigating liquidity and foreign currency risk and securing global supply chain financing to managing a host of banking relationships with financial institutions around the world. At the same time, they must maintain their focus on key business challenges while contributing to overall efforts to increase efficiency and reduce operational risk and cost.
Banks that are 'SWIFT-ready' are listed on the SWIFT for Corporates website, as is detailed information on the offering provided by each certified bank.
Maintaining visibility across a complex array of relationships, data streams and systems is a top priority – and one where SWIFT is putting its extensive experience, collaborative approach and broad array of systems, services and solutions to work. Close to 900 individual corporate groups – representing more than 20,000 separate legal entities – now use SWIFT as a single, secured, standardised platform to communicate with their financial service providers. SWIFT is helping these valued customers to better address working capital and liquidity challenges, as well as manage risk, including currency and counterparty risk.
Almost by definition, corporates that connect to banks via SWIFT receive more accurate and timely information on their cash positions. Other benefits of using SWIFT in your corporate treasury activities include increased reliability, improved security, and higher levels of automation and straight-through processing (STP).
Of course, to get the most out of SWIFT’s services for corporates, companies need to know which financial institutions can offer the relevant SWIFT-related capabilities. Our experience is that collaborative approaches work best to solve such challenges, and we have worked with our Corporate Advisory Group (CAG) to develop the new SWIFT Bank Readiness Certification Programme, which provides corporates with a country-by-country and product-by-product guide to their banks’ capabilities on SWIFT. Banks that are ‘SWIFT-ready’ are listed on the SWIFT for Corporates website, as is detailed information on the offering provided by each certified bank. Certification makes it easier for customers to get an overview of the different bank connectivity options across the globe, particularly as corporates using SWIFT connectivity are often dealing with three or more banks around the world. Now, corporates can see the capabilities of each of their providers in whichever market that they want to do business – instead of having to contact each bank individually.
This win-win solution increases transparency and aids both corporates and the financial community. Corporates can compare at a glance the SWIFT-related offerings of their various banking partners, while banks are supported in rolling out their corporate services over SWIFT. About 25 banking groups are already participating in the programme and we are keen to add more – because the wider the range of certified banks on SWIFT, the more compelling the case for corporate access.
As more corporates join the SWIFT community, the industry continues to mature in terms of supporting SWIFT connectivity for corporates. SWIFT provides three main ways of connecting to SWIFTNet, depending on your specific business needs. ‘Direct connection’ via a customer-owned infrastructure is ideal when you have specific security requirements, or when you need complete control over your IT environment, including storage of your messaging data. This solution has been adopted by some – typically large – corporate customers that prefer to operate their own IT infrastructure. [[[PAGE]]]
If you prefer your IT environment to be fully managed by a third party, you can select a service bureau to manage your communication and security infrastructure on your behalf. Working with a service bureau helps reduce the cost and effort required both to set up and maintain the connection to SWIFT, and lets you integrate SWIFT messages with internal systems such as your ERP and TMS.
A third – and increasingly popular – connection solution for smaller corporates with lower transaction volumes is Alliance Lite, a convenient web-based alternative to full SWIFT connectivity. About 15% of corporate users now access SWIFT through Alliance Lite, enjoying the benefits of SWIFT over a system specifically tailored to the needs of low-volume users (i.e., those with fewer than 200 transactions per day). Alliance Lite represents a convenient way of rapidly accessing bank account statements and confirming treasury transactions, and some companies also extend their access to include payables and collections. Some users are smaller companies for whom the functionality of Alliance Lite is sufficient for their needs, while others see it as a first step towards more comprehensive SWIFT connectivity.
Bank certification, ease-of-connectivity and communications standardisation are all about ‘industrialising’ the process of financial communications. Standardisation leads to lower all-round costs, reduced operating risk, and increases in efficiency and STP for both corporates and financial institutions. In this context, ISO 20022 standards provide consistency in the financial messaging exchanged between counterparties. As messaging for financial transactions has evolved, different formats have emerged in each country, often with more than one standard per country. Furthermore, each bank typically uses its own variation of recognised standards, creating even greater complexity for clients, and thwarting efforts at STP and straight-through reconciliation.
About 15% of corporate users now access SWIFT through Alliance Lite, enjoying the benefits of SWIFT over a system specifically tailored to the needs of low-volume users.
The premise behind ISO 20022 is that all financial counterparties should be able to communicate using a standard format that is recognised and supported by all banks in all countries. This is not the first time that attempts have been made at standardisation, such as EDIFACT, but the climate into which ISO 20022 has been introduced has evolved significantly. Banks now recognise and embrace the benefits of collaboration in areas that have the potential to cut costs and enhance customer experience. Furthermore, as ISO 20022 is the basis of SEPA payments it will gain greater momentum as SEPA is rolled out over the coming years.
Although the profile of early adopters has tended to be companies with the most complex and geographically diverse financial messaging requirements, ISO 20022 brings benefits to companies of all sizes, including those with a single banking partner in one country. By using a standard format, integration with internal systems is easier, with richer information and greater independence from the bank should relationships change in the future.
As it becomes even easier for corporates to use SWIFT for communications with their banking partners, the range of services that corporate treasurers and finance managers are able to access via SWIFT is also increasing. Here again we are engaging with the corporate and financial communities to deliver unique, standards-based solutions to industry challenges. Areas of particular interest include trade and supply chain and digital identity management
A striking feature of globalisation has been the ever-increasing length of supply chains – and the related challenge of providing for truly global supply chain finance. This often means doing business with companies – and banks – that are located on the other side of the world. As the volume and value of international trade has grown, we have seen a significant shift away from traditional trade instruments such as letters of credit, in favour of open account trading. SWIFT’s Trade for Corporates services address this complexity – and the changing demands of supply chain finance.
SWIFT supports Trade for Corporates in a number of ways. The Trade for Corporates MT798 standard provides a set of 43 messaging flows for corporates looking for automating letter of credit and guarantee / standby flows in a multi-bank environment. Such SWIFT industry standards provide corporates with a safer and better choice of multi-banking trade finance solutions. In addition, SWIFT has worked with financial services providers to design and develop the Trade Services Utility (TSU) and the bank payment obligation (BPO), both of which provide additional flexibility in supply chain financing. The TSU is a data matching application whereby banks can match key data elements extracted from a relevant range of trade documents. Corporates can enjoy increased automation and integration – reducing operational risk and cost – as well as a legal framework for supply chain finance. The BPO delivers equivalent business benefits to those previously obtained through a letter of credit, while eliminating the drawbacks and risks of the kinds of manual processing associated with traditional trade finance practices. As such, the BPO strengthens relationships between corporate buyers and sellers and aids corporate treasurers by reducing the risks of late or non-payments and by increasing supply chain financing flexibility. [[[PAGE]]]
Another noteworthy example of financial messaging standards that is receiving considerable corporate support is EBAM, which combines the use of ISO 20022 XML compliant standards with SWIFT’s messaging platform. With EBAM, banks and corporates will be able to streamline the process of bank account management. To facilitate the implementation of this business flow, SWIFT is looking at providing a centralised application (i.e., EBAM Hub), which will provide validation of messages on SWIFT between corporates and their banks. The benefits of the EBAM Hub will not be limited to corporates who are SWIFT users, since it will provide any corporate (both SWIFT and non-SWIFT users) with online access to a central application that lets them consult the status of account details, such as the identity of mandate holders, and the average balance over the month. Such information was previously typically only collated by treasury staff on a manual basis.
The new 3SKey multi-bank personal digital identity solution is yet another collaborative initiative that has been embraced by the industry. Developed by SWIFT in partnership with the banking community as a response to the authentication challenge that corporates and banks face owing to the growing number of digital transactions, 3SKey allows corporate clients to sign financial messages and files sent to their banks, using a single signing device. With companies typically doing business with different banks in different parts of the world, the need to maintain different digital identities for each banking relationship is a big impediment to efficient treasury management. 3SKey enhances efficiency by freeing banks and corporate clients from the use and maintenance of a wide variety of personal signing mechanisms and provides a cost-effective way to implement secure authentication on electronic banking services using a shared, reliable and trusted Public Key Infrastructure (PKI). This innovative system uses the latest cryptographic technology to dramatically reduce the risks associated with authentication. In addition to lowering costs, it stimulates interoperability among banks as they maintain the registration process under their own control, and encourages standardisation through the use of commonly used industry standards
The number of Accord users among the top 500 corporations worldwide is growing quickly.
The 3SKey initiative has been welcomed by the corporate community and is experiencing wide levels of interest, with over 16,000 tokens distributed to banks, and 18 participating banking groups and more than 35 application providers having ordered the integration toolkits.
In response to increasing volatility in the financial markets, a growing number of corporate treasuries are using Accord matching to confirm FX transactions. Settlement failure due to discrepancies in trade details and standing settlement instructions (SSIs) represents a major source of operational risk in currency operations. Accord addresses this by automatically identifying such discrepancies and notifying users, providing time to resolve issues before the settlement deadline. Not surprisingly, the number of Accord users among the top 500 corporations worldwide is growing quickly, as companies use Accord to enable STP, and reduce operational cost and risk.
Accord enables optimal operator efficiency via its GUI, which provides extensive functionality for expert use as well as easy access functions for occasional users, and its reporting and exception handling application is designed for use by virtual teams spread across multiple locations. You can connect to Accord through your regular SWIFT connection – whether it is your own or you use a service bureau.
We anticipate that SWIFT adoption amongst corporate clients will continue to accelerate, in terms of both the number of companies that use SWIFT, and the range of services that SWIFT can offer. In addition, SWIFTNet could play an increasingly important role in enhancing the level of interactivity that banks can offer to their corporate customers, including new self-service capabilities. Both corporates and banks can be expected to support such developments, as it is in everyone’s interest that corporates’ experience of SWIFT and of their banks is as positive as possible. SWIFT will continue to work hand in hand with corporates and banks to help corporate customers maximise the benefits of using SWIFT. All parties will continue to benefit, as SWIFT’s products and services will help corporates save money and work more efficiently, while banks will be able to provide better service to their corporate customers.
In today’s environment, cutting through complexity is more important than ever. SWIFT for Corporates helps companies streamline a complex environment into a simpler one.
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