Published: October 01, 2009
Deutsche Bank has been one of the pioneers of SWIFT connectivity for corporates and has successfully worked with a wide range of corporate treasuries, payment factories and shared service centres to communicate financial information through SWIFT. In this article, we look at where SWIFT for corporates is today, and how this could evolve in the future.
The first corporates connecting to SWIFT, which were frequently amongst the largest, most diverse and complex organisations in the world, inevitably experienced some challenges, as connectivity to the network formerly reserved for the banking community was a new phenomenon not only for the corporates themselves, but also for their banking partners. Fundamentally, for both new and well-established corporate users alike, SWIFT is delivering on, and exceeding corporates’ expectations, and enabling them to standardise their bank communications infrastructure and achieve a higher degree of straight-through processing.
Furthermore, with far greater experience across the market both of the implementation process, and how to leverage the opportunities that SWIFT presents, corporates embarking on a SWIFT implementation today can expect a much easier experience than the early pioneers. There are various reasons for this. Firstly, the major banks in particular have become far better equipped to support their corporate clients through the SWIFT implementation process. Secondly, with the maturity of service bureaus and member/concentrators, the process of connecting to SWIFT is becoming increasingly structured and convenient. Thirdly, as the needs of corporate users become better defined, the range of services is increasing, such as the evolution of electronic bank account management (EBAM) leading to a richer experience.
Inevitably, a business-critical project requires detailed planning and substantial effort in testing, but a factor which characterises corporate SWIFT projects today is the high level of satisfaction in the final solution. Like the banks and financial institutions that have communicated using SWIFT for many years, corporates are now finding that SWIFT becomes a reliable and discreet element in their overall systems environment on which they have to focus very little, enabling treasury and finance professionals to concentrate on the needs of the business rather than the technical infrastructure that underpins it.
There are inevitably some frustrations still outstanding for some corporate users, particularly those that are multi-banked. A good example relates to the legal documentation which each bank requires their customers to complete before communicating via SWIFT. For some companies, this has been time-consuming and created project delays. Many banks are now adopting as pragmatic an approach as possible, and keep the scale and complexity of legal agreements to a minimum. Although it is unrealistic to think that a single agreement covering multiple banks is likely, the documentation overhead is not too onerous as there is a single agreement for SWIFT, and individual agreements with partner banks to cover specific products and services.
Another challenge, although this is likely to be relatively short-term, is that it is not always obvious who to contact about SWIFT connectivity support issues. If connecting through a banking system, it is usually easy enough to know who to contact and the service is usually quite integrated with the overall banking service; when connecting through SWIFT, it may not be obvious whether to contact the bank, the service bureau or SWIFT. However, this is not posing any real difficulties, and companies are quickly becoming accustomed to a slightly different way of working.
In the early years of SWIFT connectivity for corporates, the companies initially attracted to the service were amongst the world’s largest, with the most complex connectivity needs. Over time, there has been developing interest amongst a wider spectrum of firms as connectivity becomes easier. There has been substantial progress in smoothing the integration between ERP systems and treasury management systems (TMS) which is making it easier to embed SWIFT into a company’s technology infrastructure. In addition, the launch of Alliance Lite towards the end of 2008 has the potential to expand the appeal of SWIFT connectivity to smaller companies or those with more straightforward connectivity needs. Alliance Lite provides a packaged solution that enables corporates to link with their banks through SWIFT directly without routing information to or from internal systems and within a simple legal framework. Alliance Lite has additional potential too. As the solution matures, it is likely that it will become more closely integrated into banks’ connectivity offerings and therefore become an integral part of banks’ connectivity portfolios.
To date, as a young solution, the take-up is still relatively limited, but it is likely to grow in countries such as the UK where no existing multi-bank communication channels exist, so Alliance Lite is likely to grow in appeal. Similarly, Asia may lend itself to Alliance Lite, where ERP usage is currently less prevalent than in Europe and North America. In order to be a viable solution in the long term, Alliance Lite will need to develop its global applicability and support not only international needs but also in-country payment and cash management needs. In some markets, such as Germany and France, there is already acceptance of multi-bank connectivity, with EBICS and ETEBAC respectively. ETEBAC in France is due to be discontinued, and it is likely that EBICS will be an alternative for many organisations; however, SWIFT will co-exist as a viable alternative. [[[PAGE]]]
A concurrent initiative to SWIFT connectivity for corporates has been the development of XML-based standards for financial messaging, referred to as ISO 20022, which is relevant to every form of connectivity, not only SWIFT. While SEPA (Single Euro Payments Area) is acting as a catalyst for widespread adoption of the standard, as SEPA payment messages are based on the standard, it has global applicability and support, e.g. in countries such as China that have a fast-growing financial infrastructure. While previous attempts at standardisation have had only limited success, ISO 20022 benefits from support from SWIFT as a central co-ordinating body and has the potential to extend from end to end in the financial process.
With SWIFT connectivity becoming more established within the corporate community and with a wider range of connection methods, many companies and their banking partners are turning their attention to extending the range of services that are available to corporates through SWIFT. In particular, we see our clients identifying business processes that are generic across banking partners, and seeking to automate these through SWIFT. An example of this is eBAM (electronic bank account management) that enables bank accounts, including opening and closing, and signatory authorities to be managed through SWIFT. This is linked to an initiative by SWIFT to develop user-driven identity, as opposed to being at entity-level through an organisation’s BEI code.
Another example of a new service which will directly benefit corporate users of SWIFT is bank billing, which provides transparency over bank charges, and the breakdown of these costs. This has huge benefit to corporates which have traditionally struggled to reconcile bank charges, particularly with different banks calculating charges in different ways. We have also seen Exceptions and Investigations (E&I) management and reporting being made available to corporates. Already popular with financial institutions, this service has the ability to enhance the sophistication of companies’ back-office functions and accelerate issues management, therefore assisting with reconciliation and cash positioning.
SWIFT connectivity is no longer the domain of the largest and most sophisticated corporations, but has applicability across a wide spectrum of organisations, assisted by the development of service bureaus and member/concentrators and the launch of Alliance Lite. The expansion of SCORE criteria that was announced recently also makes it easier for companies in regions such as the Middle East and Asia, and privately owned companies, to join SWIFT without the need to join MA-CUGs for each of their banking partners.
A parallel initiative championed by SWIFT, namely ISO 20022, has the potential to enhance integration and automation significantly, benefiting the financial industry as a whole. Adopting standards takes time, however, particularly when having to adapt existing technology. Corporate users today can communicate with their banking partners through SWIFT through FIN or FileAct. FileAct, which is suited to large volumes of data, often initiated through a payments factory or shared service centre, enables companies to take advantage of SWIFT by exchanging files in any format, and therefore take rapid advantage of SWIFT, even though they are likely to want to adopt standard messaging in the future.
The current and envisaged capabilities for corporates to connect with their banking partners through SWIFT would seem to be just the first step in a longer and exciting journey. At present, corporate traffic on SWIFT is limited to corporate-to-bank communications. The potential of SWIFT connectivity will be inherently restricted until corporate-to-corporate traffic becomes feasible. By opening up SWIFT to enable supplier-to-customer communications, together with bank-to-corporate messaging, there will be growing opportunities to connect, automate and accelerate the entire financial supply chain.
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