Published: September 19, 2011
With a number of connection methods offered by a variety of institutions, SWIFT for Corporates is more accessible than ever. What are the main factors corporates should weigh up when considering SWIFT connectivity, and how can they best overcome the challenges of implementation?
As there is a standard method behind SWIFT for Corporates, which is defined by SWIFT themselves in their terms and conditions, the method itself is not the area that corporates should be concentrating on when thinking about implementation. Instead, value can be found by focusing on the quality of the bank the corporate is dealing with, and the ability of that bank to get SWIFT operating for them. A basic initial checklist should include questions such as:
While large banks with a global footprint, such as HSBC, can provide positive answers to the above points, in the industry as a whole there are still many variables in this regard. This is why key industry players have been working on self-certification in an attempt to make things clearer for potential corporate clients. Marcus Treacher, Global Head of Client experience at HSBC, is Chairman of the Corporate Advisory Group at SWIFT. “We came up with a policy of certification, because we had corporates complaining that, depending on the bank they dealt with, they either had a full range of SWIFT services and implementation was good, or they had a very different experience,” Treacher explains. The Corporate Advisory Group responded by encouraging banks to self-certify at one of two levels. Level one certifies that the bank can do the basics, while level two covers the basics and also the bank’s ability to provide value added services. The corporate section of the SWIFT website lists the banks who have self-certified, and is a good reference point for treasurers.
If a corporate decides to go directly through a bank to access SWIFT, how does the implementation process unfold? Taking HSBC as an example, Treacher notes that they start with the business problem that the corporate has, and then work with the client to create the best transaction banking solution to enable them to get where they need to. “In that thinking process, the decision on using SWIFT and then the method of connecting to SWIFT, comes quite a long way down in the thinking process,” says Treacher.
The most important thing for the corporate and bank to establish first is which transaction services are needed, covering which high value and low value clearing solutions, and on what level of quality. The most efficient way of connecting is then looked at - does the corporate run an industry-standard enterprise management package such as SAP and Oracle Financials, and if so is there a need to connect directly to the corporate’s SAP or Oracle? If the corporate treasury department is dispersed around the world, there may be a need for the bank to work with its client to help bind these units together more tightly. Following this, the actual terms of the messages that are to be transferred between bank and client need to be understood. “If they’re choosing HSBC along with a small number of other global banks, they would need to feel comfortable that we can all speak the same language,” says Treacher.
SWIFT is a very good solution for anyone who physically wants to cable up with more than one bank. But it is important for banks to have the conversation about SWIFT for Corporates as part of an overall detailed project discussion with a client. [[[PAGE]]]
The main advantage that corporates gain from SWIFT connectivity is visibility, enabling treasurers to see their global cash positions in one place. They don’t have to chase data from various electronic banking (EB) systems, host-to-host systems or anywhere else. SWIFT provides one source of data, which can then be processed into the corporate application, such as a treasury management system (TMS), providing the treasurer with full account visibility. Using the TMS gateway, corporates can make their treasury payment flows to all of their banks using the MT standard.
As well as the connectivity benefits, Ian Bryant, Head of Client Integration Consulting at HSBC, also points to the peace of mind that standardised formats can bring to corporates. In the FIN world, the MT 940s, MT 942s and MT 101s are well known and respected. The same format is generally accepted by banking partners, and comes back from all the other banking partners. It is a similar situation with FileAct. “In the FileAct world, more and more corporates are using the XML ISO 20022 payment initiation message, and once again giving that same message to all of their banking partners for accounts payable (A/P) and accounts receivable (A/R) transactions,” says Bryant.
While this may not sound that exciting, the plumbing of the SWIFT network can give the treasurer much greater control of the basics that they’re working with on a daily basis. Getting the basics right in a simple manner allows the treasurer to focus on the strategic side of the job. It starts to give them much more control over the risks inherent in the operation they’re supporting. Treasurers are much more highly regarded in their organisations than they ever have been before, because they are seen as managing the units that have the best handle on operational and delivery risk within the organisation. Having the basics locked down and having the ability to bank accurately, safely and reliably, with information that the treasurer can automatically mulch and churn creates a strong position to estimate accurately and make more informed decisions on where to place funds.
One problem that organisations can face on their way to achieving the efficiencies possible through SWIFT for Corporates is the sheer amount of technical jargon in the implementation process and beyond. In the banking world, it is accepted that SWIFT is complicated and requires experts in the back room to know it inside out before the bank can really work with SWIFT. “It’s analogous to having a phone on your desk where you need to be an expert in VoIP to make a phone call,” says Treacher. In this situation, the corporate really just wants to make the phone call, and will most likely have neither the time nor spare funding to support an expert in SWIFT. Beyond the technology itself, the complex legal documentation can also be a pain point for corporates.
This is a concern that has been identified by the banks, with some noting that unless this complexity of information can be addressed, SWIFT for Corporates may struggle to make the leap in take-up that surely its efficiencies warrant. Treacher is bullish about the industry’s ability to overcome this challenge. “It’s not a crisis, and I’m very confident that we’ll get SWIFT for Corporates reconfigured in terms of a marketed proposition, and simplified down to a point where it is plug and play, for organisations that want the benefits of SWIFT, but quite rightly don’t want to employ the experts who live and breathe it.” [[[PAGE]]]
SWIFT Service Bureaus (SSBs) have gained some traction in the past 18 months, perhaps due to some of the complexity mentioned. In addition, a bureau has the advantage of aggregation, connecting to the number of banks the corporate requires while providing them with a single point of contact. It can also scrape the data from these banks by being part of SWIFT, creating a consolidated statement and also providing analytics on that data.
The downside here is that if the data given is inaccurate or if a data centre trips up, the corporate is left in a tangle between the bureau, SWIFT and the banks. In a situation where this occurs, a corporate really needs one counterparty that is big enough to deal with in a problem. “For me it really boils down to financial stability,” notes Bryant. This is an area where, traditionally, banks do have the edge.
That is not to say there is no room for improvement for the banks, as they still face a challenge in being able to aggregate at a peer level. Banks have still not reached the end of the process that enables them to be easy for corporates to connect to, and there’s still work to be done on standardising the messaging banks send back to their clients. “We’re doing quite well with ISO 20022 standardisation, and the evolution of SWIFT from MT to MX - the banks are working together very well on that basis,” argues Treacher. Once true standardisation is available across connectivity, messaging, eBAM, digital signatures and other SWIFT offerings, corporates will be in a strong position to reward banks that offer them the best value added services for their organisation - a true ‘win-win’ for both corporates and banks.
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