Published: January 01, 2000
Since 2008, SWIFT for corporates has experienced tremendous growth — the number of corporations choosing to connect to SWIFT has grown from around 400 to more than 1,100 – and this trend shows no signs of slowing.
However, while corporate adoption of SWIFT is rising in all industries, adoption levels are growing more quickly in some regions than in others. SWIFT connectivity is a well-trodden path for European corporations, but that’s not the case in other regions where awareness of SWIFT as a corporate solution is lacking. Moreover, some regions lack the same mature ecosystem of SWIFT advisors and service bureaus that corporations can tap into as they embark upon their connectivity projects.
In Asia, as in other regions, the benefits offered by corporate connectivity to SWIFT are very attractive. SWIFT offers companies the ability to connect with multiple banks in a standardised way, thereby reducing costs, increasing efficiency and making it easier to integrate with banks. However, while many Asian companies are interested in SWIFT connectivity, the numbers are not growing as quickly as expected.
Setting up a connection to SWIFT has certain particulars in any part of the world. In Asia, however, there are certain obstacles which are specific to the region. While not insurmountable, these challenges have played a role in creating a more cautious SWIFT adoption. In particular, companies looking to connect to SWIFT must first overcome the following five issues.
1. Awareness.
Many corporations in Asia have a good understanding of SWIFT and the benefits that can be achieved by connecting to the network – but many others lack awareness of how a SWIFT connection can benefit their businesses. At the same time, there are certain misconceptions which may stand in the way of corporate adoption.
Before 2006, companies connecting to SWIFT had to do so via a Member Administered Closed User Group (MA-CUG). Under this model, companies wishing to connect to multiple banks via SWIFT had to do so by joining each of those banks’ MA-CUGs. In 2006, SWIFT launched the Standardised Corporate Environment (SCORE) model, allowing corporates to connect to multiple banks by joining a single user group – but when this model was first introduced, it was only offered to companies listed on a stock exchange in a Financial Action Task Force (FATF) country. This stipulation meant that many companies operating in Asia were not eligible to join SWIFT.
While this restriction was lifted in 2009, many companies in Asia still are not aware that the situation has changed. Having initially learned that they were not eligible for SWIFT membership, many put the topic of SWIFT connectivity on the back burner – where it has remained ever since.
This obstacle can be overcome by educating corporations more effectively about SWIFT connectivity. In addition to SWIFT’s efforts to achieve this goal, global banks which operate in Asia are working to promote awareness of SWIFT among their corporate clients.
2. Advisory.
Being aware of SWIFT and its benefits is one thing – but having the knowledge and resources needed to set up a connection is another challenge entirely. Companies interested in connecting to SWIFT may struggle to find suitable advisory services within the region.
In comparison to the UK, Europe and the US, which have a mature ecosystem of consulting firms and service bureaus specialising in SWIFT, Asia has fewer dedicated SWIFT advisors. This can make the process of setting up a connection more daunting – particularly for companies with no previous experience of SWIFT connectivity. Companies may find that they need to be more proactive in Asia than in other regions when looking to increase their knowledge of this topic.
Companies are increasingly looking to tap the knowledge of their global banks in order to gain a better understanding of SWIFT. The introduction of SWIFT’s Certification Programme is a welcome development in this area: bank employees sit for a formal examination to demonstrate their level of SWIFT knowledge and expertise. For companies in Asia looking to their banks for expertise in this area, the SWIFT certification of a bank’s employees indicates that they have the required level of knowledge.
As well as offering advice on every aspect of the connectivity process, banks may also be able to help corporate clients improve their knowledge of this area by initiating knowledge sharing exercises. For example, Bank of America Merrill Lynch periodically hosts roundtables with corporate clients who are at varying stages of SWIFT implementation. This enables clients to share their experiences of different elements of the process, from choosing the right connectivity method to lessons learned during the implementation. Knowledge sharing can also be achieved remotely using other formats such as webinars.
3. Connectivity options.
Selecting a connectivity route is an important part of the SWIFT adoption process, regardless of the region in which a company operates. In Asia, however, the limited availability of SWIFT resources can make this task more challenging.
When looking to connect to SWIFT, companies can choose from three different connectivity methods: setting up a direct connection themselves, outsourcing the connection by appointing a SWIFT service bureau, or using Alliance Lite2, SWIFT’s cloud-based connectivity solution.
Although in-house investment for SWIFT connectivity is a choice, this option is technically challenging and requires significant technical SWIFT expertise. Alliance Lite2 is one possibility for companies wishing to connect to SWIFT without establishing a direct connection, but with its limited capabilities, this is more typically used as a back-up solution in case the service bureau connection is disrupted.[[[PAGE]]]
In Asia, as in other regions, the most attractive option is typically to use a SWIFT service bureau. Service bureaus allow companies to outsource the technical infrastructure while providing dedicated support services – and they also tend to offer a range of other value added services such as data conversion, implementation support, co-ordinating with bank partners, and testing of file formats which cannot be accessed using Lite2.
However, there are currently very few service bureaus operating in Asia and as a result, companies in the region will often need to work with a service bureau based in Europe or the US – which can be an obstacle, particularly for a company looking to connect to SWIFT for the first time. Companies may be reluctant to work with a service bureau based in a different region and may be concerned about the ability to access support at the right time, although service bureaus do tend to operate 24 hours a day.
4. Local bank capabilities.
Once a company has overcome the first three hurdles and decided upon its SWIFT adoption method, further complications may arise. The fourth potential obstacle relates to the capabilities offered by the company’s local banks.
When companies are looking to connect to SWIFT they are typically looking to achieve a standard way of communicating to their banks. However, local regulations in Asia may require the company to use local banks for certain types of tax or customs payments – and those banks may not have the SWIFT capabilities that the company needs in order to create a homogenous infrastructure. Even if they have achieved basic ‘Bank readiness certification’, local banks may not be fully compliant with all the features/services offered by SWIFT – like FileAct, FX confirmation, and support for ISO XML file formats, for example.
As a result, companies operating in the region may need to accept that a small percentage of transactions will need to be processed using proprietary banking channels.
5. Local language requirements.
The lack of local language support can represent a further obstacle for companies in Asia. SWIFT’s FIN messages have character set restrictions, meaning that they cannot be used in local language in markets such as China, Japan, Korea and Taiwan. However, local language instructions can still be sent via FileAct – which companies may not necessarily realise. To return to the first of the five challenges, improved awareness and understanding of SWIFT across the region will help companies to understand that the local language issue is one that can be overcome.
Companies may face a number of obstacles when implementing SWIFT in Asia, but no challenge is insurmountable. It is also important to note that the obstacles do not apply in equal measure across the region. Take up of SWIFT tends to be most widespread in treasury centres such as Singapore, Australia and Hong Kong, which are often used as local treasury centres.
Companies looking to explore this topic in more detail can begin the process today by picking up the phone and talking to their banks. Increasingly, global banks are able to offer the SWIFT advice that companies are looking for in the region, which can be demonstrated by their ability to offer SWIFT certified employees, and by their history of successful SWIFT implementations and membership in industry workgroups related to SWIFT standards.
As SWIFT adoption becomes more widespread in Asia, many of the obstacles outlined above will naturally subside. But for now, the most important step for companies interested in adopting SWIFT is to educate themselves by accessing the necessary advice and expertise.
“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation.
Lending, derivatives and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered as broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Ouvidoria Bank of America Merrill Lynch1 | DDG: 0800 886 2000 | e-mail: [email protected]
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