by Helen Sanders, Editor
On Day One of the SWIFT Corporate Forum at Sibos, the key theme was the value proposition of SWIFT for corporates and how to move from decision to implementation. In this summary, we outline the key points from one of the panel sessions.
Panel:
Hervé Postic, Director at Utsit and Founder of Universwiftnet
Wim Raymaekers, Senior Market Manager, SWIFT
Dave Robertson, Partner, Treasury Strategies
Brian Wedge, VP Treasury Services, JP Morgan Chase
Dave Robertson, Treasury Strategies
Dave emphasised the increasingly cross-functional role which treasury plays within the company. In particular, relationships both inside and outside the organisation are becoming more significant and complex, which requires a more collaborative approach than treasury has had in the past. He outlined some of the key responsibilities which treasury departments needed to manage:
- Treasury has an obligation to safeguard dollars in every transaction, not just treasury payments;
- Treasury increasingly has close connections with Tax and Legal departments, particularly as the company becomes more global, with new payment and banking requirements;
- As global risk becomes more complex, treasury is becoming involved in managing a broader array of risks, including commodities and non-insurable risk;
- Treasury is expanding its scope into new areas such as payments and financial supply chain management as these become more strategic.
However, with most treasuries employing fewer than 10 FTEs, treasury can only evolve its role by automating its day-to-day processes. Key to success in these expanding responsibilities is transparent, accurate information. Consequently, there is new technology spend amongst corporates, not only investing in treasury management systems but also in risk and liquidity management tools. [[[PAGE]]]
Brian Wedge, JP Morgan Chase
Brian described how services available through SWIFT have extended over the course of the year, but corporates may still experience some disappointments. In particular, he characterised the corporate experience of SWIFT as Commitment, Confusion and Competition.
A global risk becomes more complex, treasury is becoming involved in managing a broader array of of risks, including commodities and non-insurable risk.
Commitment - Corporates can expect to speak to a knowledgeable person when they approach their bank about SWIFT, as most of the major banks have now embraced SWIFT for corporates and changed the way they manage their product suite accordingly.
Confusion –corporates should have access to a core set of cash management capabilities from their banks via SWIFT, namely payments (including cross-border), basic end of day statements and confirmations for money market and FX transactions. However, even within the basic services, there are still anomalies between banks. For example, while some banks will provide an end-of-day statement in MT940 format, others will use MT950 while others again will support both. While banks are committed to a core level of capability via SWIFT, there tends to be confusion when moving beyond these basic functions. For example, there is more variability between banks, and between branches of banks, in services such as MT210 (advice to receive) and MT104 (direct debit messages). Similarly, for reporting, some, but not all banks can deliver intraday statements using SCORE.
Corporates considering SWIFT should also look at the frequency of file transmission and how this information will be integrated with core systems; for example, with banks providing information periodically, on every account movement or on request, there is the potential for confusion.
Competition – Competition is strongest in the FileAct space, which corporates are more likely to use than the banks between themselves. There are a range of improvements to FileAct taking place in which corporates have been actively participating, such as ISO 20022 standards.
Wim Raymaekers, SWIFT
Wim summarised the key benefits of SWIFT connectivity for corporates, namely:
- Increased visibility of statement information;
- Cost savings by rationalising the number of proprietary connections, increasing productivity and improving straight-through-processing (STP) rates;
- Enhanced control, security and reliability of banking communications, such as payment initiation, particularly when these processes are decentralised;
- Better compliance, including reduced administration time to document and manage different bank communication processes.
He explained that the ‘80/20’ rule could be applied to the potential costs of a SWIFT project, with 20% of project costs directly relating to SWIFT (e.g. joining SWIFT, traffic and infrastructure costs) and 80% non-SWIFT costs (e.g. project, infrastructure and operations, application integration). The single greatest cost is back-office integration, in which corporates are investing significantly. A typical return on investment for a SWIFT project is 200-300% of project costs, depending on the scope of implementation (see Fig 1) – however, the broader the implementation, the greater the benefit, both in absolute and proportional terms.
Alliance Lite represents a new proposition for corporates seeking to access SWIFT, at a cost of €850 per month including up to 200 messages per day. It is browser-based, requiring only a USB connector to use. [[[PAGE]]]
Hervé Postic, Utsit
Hervé described the different perspectives which often exist within a company: the treasurer’s view on one hand, and the IT view on the other. Treasury, for example, often thinks that SWIFT is a simple, single connection. IT, on the other hand, look at a SWIFT project as the SWIFT package, SWIFT network, middleware and integration. SWIFT connectivity projects should not be underestimated. While each project inevitably has a different scope, some typical profiles include those outlined in Fig 2.
Examples 2 to 4 in Fig 2 will generally require middleware and tend to become more complex as the number of banking partners and global reach extends.
In the most complex situation, namely the eBanking factory, the project timeline could be 6 to 12 months, from business case through to rollout (Fig 3).
Some recommendations which Hervé gave to corporates looking to move their SWIFT ahead included:
- Choose the bank carefully with which you will do the pilot project;
- Consider a service bureau or member/concentrator for connectivity;
- Make sure the bank is giving you the information you need, rather than simply the ‘story of SWIFT’ which you will probably already know.