Published: September 01, 2008
With Sibos this year attracting a record number of corporates, and an increasingly broad spectrum of corporates sharing their experiences, SWIFTNet is becoming the talking point across the corporate treasury community. But why is the story of SWIFTNet so compelling and what likely developments will we see?
BNP Paribas was one of the first banks to enable connectivity to its corporate customers via SWIFTNet and has continued to expand its expertise and client base.
To summarise the SWIFT proposition, corporates are able to connect with their banking partners through the same network (SWIFTNet) that banks have historically used to exchange financial messages with other banks. SWIFTNet is universally accepted as the most secure and reliable network for financial messaging in the world. With over 8,300 participants globally exchanging a wide range of messages, it is highly versatile and presents substantial opportunities for corporates to connect to their banking partners of choice anywhere in the world. There is an increasing range of services available through SWIFTNet, from securities processing through to cash management, FX and trade.
BNP Paribas was one of the first banks to enable connectivity to its corporate customers via SWIFTNet and has continued to expand its expertise and client base. In 2008, SWIFT ranked BNP Paribas as the leading bank globally for FileAct, the SWIFT delivery mechanism for high volume payments. Initially, very large multinational corporations were attracted to SWIFT, seeing an immediate advantage in replacing the multitude of banking systems used to connect with their banking partners worldwide with a single communications channel for exchanging a variety of messages. In the early days, when SWIFT first opened its doors to corporates, the resource and expertise required to implement a SWIFTNet connection was quite substantial. Today, the opportunities are more varied and SWIFTNet is now a far more realistic and cost-effective option for mid-market corporates with international requirements as well as the largest companies.
Our corporate clients often ask us whether connecting to their banks through SWIFTNet would bring advantages to them. Our advice to corporates considering this route is to think not of the connection itself but the capabilities which they are able to access from their bank through this channel. After all, SWIFTNet is simply a ‘pipe’ through which messages are exchanged and the value is in the information which is exchanged rather than the channel. Consequently, SWIFTNet connectivity should be considered in the context of opportunity and innovation, providing possibilities in transaction management, cash management and trade services. But what does this mean in practice?
SWIFTNet enables corporates to exchange a variety of different messages across the same network, replacing the multiple systems and communication channels which currently exist with different banks. These include high value urgent payments, mass non-urgent payments, bank statements, confirmations, FX transactions, securities processing and increasingly trade finance. This also allows a coherent approach to security and user administration and reduces the need to maintain multiple systems. Any format of information can be exchanged through SWIFTNet, including the new XML-based formats, such as ISO 20022 for payments. This means that corporates can take advantage of a common platform for communication without having to change the way that files are produced or received. [[[PAGE]]]
At the same time, SWIFTNet enables corporates to leverage the increased standardisation on which banks and corporates have collaborated closely using XML. For example, ISO 20022 standards, including SEPA payments, will allow the same payment files to be exchanged with any bank, as opposed to creating multiple files in slightly different formats as many companies are forced to do today. Standardisation using XML is an opportunity not only for payments but for all financial messaging. For example, BNP Paribas is also actively involved in the design of new bank account mandate formats (E-BAM) for electronic exchange of mandate information that promises to be a valuable innovation for treasurers.
Looking ahead, we see mid-sized corporates as the primary growth market for SWIFT.
Historically, many corporates have found it difficult to centralise their financial processing entirely, due in part to the need to maintain multiple systems for communicating with their banks in different locations. The transition to SWIFTNet opens up greater opportunity for centralising cash management, trade and transaction management functions and introducing greater uniformity in financial processing. While this means that corporates can rationalise costs and technology and introduce greater efficiency and control, centralisation can also be challenging if a significant degree of organisational change is required. We understand this can be a complex area, not least because enabling SWIFTNet connectivity for corporate clients results in similar challenges to those of our clients. For example, we too need to support different products and financial messaging through the same channel, bringing together services which may historically have been delivered by different parts of the bank. Like our customers, centralisation brings organisational challenges but we see considerable benefit to both our clients and BNP Paribas. For each business line, we would historically have had different systems and different architecture supported with different business processes. By centralising processing of financial messages, we create a more efficient hub, with harmonised processes across business lines and a cohesive approach to exceptions and investigations.
Centralisation, standardisation and enhanced connectivity open up new opportunities for efficiency and financial innovation, but SWIFTNet and the Service Bureau concept (Taolink) are no longer solely the domain of large multinational corporations. Looking ahead, we see mid-sized corporates as the primary growth market for SWIFT. Although these corporates may not have the same volume of banks or transactions as their larger peers, the business case can be equally, if not more compelling. A single channel based on standard formats means that new banking relationships can be set up quickly as international horizons expand and less resource is required to maintain banking technology and create different file formats. This in turn means that treasurers can focus less on technology and more on the financial optimisation of the business, with the benefit of complete transparency over the global cash position. [[[PAGE]]]
The expansion of SWIFTNet amongst mid-market firms will not happen overnight, but it will accelerate in certain markets where the business case is strongest. In turn, as these companies develop expertise and share their experiences, we see more widespread adoption. In France, for example, many thousands of companies will need to migrate from their existing banking protocol, ETEBAC 5, in the coming years, which we anticipate will result in a large scale adoption SWIFTNet as corporates’ banking communication channel.
Key to success in delivering services to mid-market companies via SWIFTNet is integration with in-house systems and a simple secure solution to satisfying firms’ business requirements, such as retrieving bank statements. Although the new offering from SWIFT announced at Sibos, Alliance Lite, will make SWIFT connectivity a more realistic opportunity for smaller corporates, many companies will be looking for greater integration with their internal systems than this is likely to provide. We see ‘lite’ as a wider concept, with banks, with BNP Paribas offering the future ‘Taolite’ as well as SWIFT presenting ‘lite’ solutions which satisfy the needs of mid-market corporates in terms of pricing, architecture, implementation effort and available services, based on the Member/Concentrator model.
As well as the need to migrate from ETEBAC 5 in France, we see SEPA (the Single Euro Payments Area) as a catalyst for SWIFTNet, not only in France of course, but across Europe. With new, standard formats for SEPA Credit Transfers and Direct Debits and the ability to operate in a uniform way across the eurozone, companies will be able to adopt a new approach to bank account management and cash management structures. Being able to use standard products, standard formats in an entirely centralised way will bring significant advantages to corporates, and a single channel for banking communications will extend these benefits even further.
A major issue in the French market is the need to replace ETEBAC 5. The coming year will see the first phase of this migration, for which BNP Paribas will be significant assistance to ease the technology, administration and legal aspects of migration to clients’ chosen alternative, including SWIFTNet. Across other parts of Europe, North America and Asia, we see the trend of large multinational companies moving to SWIFTNet continuing, with mid-sized companies starting to come through.
In many respects, we see the French market as both a barometer and a catalyst for change in other parts of Europe. As the number of French corporates connecting to their banks through SWIFTNet expands, we also see other European companies in countries such as Spain and Belgium expanding their horizons beyond local solutions to a pan-European vista.
We also see significant growth in SWIFTNet adoption in emerging markets. While a year ago there was sporadic interest from companies in North Africa, Middle East and Asia, for example, there is a strong movement towards treasury and payments centralisation, for which SWIFTNet connectivity is ideally positioned. BNP Paribas is anticipating and driving many of the developments in these markets by ensuring that our subsidiaries worldwide support our clients’ connectivity and wider financial ambitions.
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