Published: September 22, 2008
The ability for corporate customers to connect to their banks through SWIFT is one of the most significant milestones in the development of corporate-to-bank connectivity. This goes far beyond simply providing a new mechanism for corporates to connect with their banks, it also extends to the way in which information is exchanged between corporates and banks, ensuring that both parties have a common understanding of data.
In this article, we examine some of the trends and new initiatives in corporate-to-bank connectivity.
In many countries, corporate treasurers are more aware of the benefits of standardisation than their banks. Many companies today need to connect to a large number of banks through multiple systems, produce information in many different formats and import data presented in a variety of ways into their ERP and treasury management systems. A standardised approach to connectivity would mean that multiple communication channels could all be replaced by one system, which is the aim of SWIFT. In addition to a common communication channel, in an ideal world, all parties to a financial transaction would also use a standard format, bringing a number of advantages, as the case studies in this Guide illustrate:
Where do we stand today in terms of connectivity and format standardisation?
SWIFT connectivity is gaining momentum amongst corporates, with strong year-on-year growth in the number of corporates connecting to their banks through SWIFT (see Luc Meurant’s article in this Guide). Yet the story of corporate access to SWIFT has really only just started. In many ways, the introduction of MA-CUGs (Member Administered Closed User Groups) was the first chapter. From that point, corporates have had a means to reach all their banks in a similar manner, to transmit cash management transactions, confirmations of market transactions, etc.... Added to that, FileAct capabilities have enabled them to choose freely between the benefits of a communication standard and the specific formats they might require. For instance, at Société Générale, we have made our full range of services available through FIN, complementing our offering with messages such as MT3XX, MT 210 (advice to receive).We also use FileAct coupled with a wide range of local and international formats, including Edifact and XML. However, to take advantage of these capabilities, corporates needed to have SWIFTNet services available with all their banks, and to register in as many CUGs! [[[PAGE]]]
SWIFT connectivity is gaining momentum amongst corporates, with strong year-on-year growth in the number of corporates connecting to their banks thorugh SWIFT.
SCORE brought improvements in a variety of different areas: it simplified the registration process, enhanced standardisation, and by doing so, opened the way to increasing collaboration between corporates and banks. A core team comprising banks, corporates and SWIFT have worked closely together to get better understanding of the business requirements, to provide guidelines for a common implementation, and solve the problems of differences in messages or communication parameters from different banks.
In the past, banks differentiated themselves through their proprietary connectivity offering. In recent times, this trend has reversed: instead of focusing on technology, banks are increasingly choosing to differentiate themselves through the banking services they provide. This explains why the level of cooperation within the banking industry on connectivity matters has significantly increased under the SWIFT umbrella.
Another very important aspect has been the involvement of corporate representatives to ensure that corporates’ needs are truly supported. The entities engaged in the SCORE working group have tested the technical aspects of SCORE and contributed to the implementation guides for FIN and FileAct, significantly improving the overall result.
Of course, needs will evolve, so the models will have to adapt, but based on the level of co-operation that has been achieved, there is good reason for optimism about the capacity of the market to achieve the necessary adjustments in a similarly collaborative, structured, planned manner.
It is therefore only natural that banks and other industry players will endeavour to promote standardisation beyond the issue of connectivity alone. An example is the ongoing work which has been done on the payment (PAIN) and reporting (CAMT) messages of UNIFI 20022, a new ISO standard for financial messaging based on XML (see Helen Sanders’ article for more information). This initiative aims at providing a common approach to the exchange of financial information through any channel. This gives corporates the choice of how to connect with their banks whilst integrating information to and from their internal systems in a standardised way. [[[PAGE]]]
SCORE simplified the registration process, enhanced standardisation, and by doing so, opened the way to increasing collaboration between corporates and banks.
Both corporates and banks have been involved in the development of UNIFI 20022, the first step of which has been payment messages. There are still challenges in the development of this standard, particularly to ensure that it is flexible enough to cope with local needs and specific enough in its definition to avoid different interpretations in its use. SEPA transactions rely on XML, so UNIFI 20022 is set to be a major format now and in the future across Europe; it is also being increasingly adopted in other areas. In every case, the ultimate aim is to achieve full, end-to-end STP (straight through processing). Again, the most remarkable aspect of UNIFI XML messages building is no doubt the collaborative way in which it has been approached. Société Générale is one of the ‘Early Adopters’ of UNIFI 20022 XML standards, which we now currently use with our customers. For example, we are working closely with Alcatel, the major telecoms firm. Alcatel has deployed Société Générale’s XML services and is now able to send payments in XML format, including both SEPA payments and other domestic/cross-border payment types in a single file. Société Générale then forwards each payment through the relevant channel as appropriate. This greatly reduces the amount of resource required from Alcatel and the firm can take advantage of SEPA payments without the need to make changes to its infrastructure.
Looking ahead, we see an increasing number of corporates using XML formats for transmitting both SEPA and non-SEPA payments in the coming years.
Whatever the channel used by corporates to communicate with their banks, security is always an issue in the transmission of financial information, and SWIFTNet is no exception. The strength and security of the network itself partly covers the issue, but another aspect that must be considered is the need for personal electronic signatures on transactions. The business requirement may be different from one country to another, depending on local legislation and usage. In France for instance, large corporates are familiar with personal electronic signatures as this is a feature of ETEBAC 5, a standard domestic protocol. Moreover, the reinforcement of local regulations tends to impose a level of security met by the use of personal certificates. To be efficient such a system obviously needs to be multi bank, and we believe that SWIFT has a role to play in the development of a such a solution.
The story of SWIFT for corporates and standardisation has just started, and there is still a great deal to look forward to. We see the continued emphasis on collaborative efforts including banks, corporates, SWIFT and other industry players as a catalyst for rapid progress. Société Générale is pleased to support, and in many cases, lead these efforts. We believe that standardisation will provide significant benefits to all the participants in the payment and cash management space. This is why Sociéte Générale has a particular interest in the evolution towards standardisation. A very practical example is the way we have built SWIFTNet capabilities, ensuring the same level of service as our SCORE and MA CUG solutions. This explains why Sociéte Générale was among the first to be awarded the ‘SCORE compliant’ label by SWIFT in May 2008.
How Thought Leadership Can Reduce the Cost of Sales by Patrik Havander, Havander & Partners A focused attention on the costs incurred by the global sales and marketing processes is becoming increasingly important for corporate banks and their transaction banking departments. While the client/bank relationship remains vital, research has shown that in fact relationship selling […]
