Published: January 01, 2000
Many new developments have driven up the interest in SWIFT membership for corporates. More industry expertise and collaboration, cheaper access options, and the promise of new integrated solutions have led to increased demand.
Corporate interest in SWIFT connectivity is at an all-time high. Once seen as an option suitable only for a handful of corporations large enough to justify the costs, over 1,000 companies are now connected to SWIFT – and demand continues to rise. But what is driving this interest and how are companies migrating to SWIFT in practice?
The current surge in interest is being driven by a number of factors. For one, the cost barrier to adoption has all but been eliminated in the last couple of years.
The introduction of Alliance Lite2 in 2012, as well as adjustments to the way service bureaus price their services to align with this new stage in the product life cycle, have brought the costs down. As far as direct connectivity goes, the second generation of SWIFT’s entry-level connectivity solution, Lite version 2 is faster and less expensive and is in many ways more compelling than its predecessor. For example, the original Lite product restricted transaction volumes to the point that many companies had outgrown the solution before they started using it.
Under this new version the volume restrictions have been removed and some technical gaps have been filled in. As a result, Lite2 offers the technology necessary to connect and manage SWIFT FIN and FileAct services directly. This is as competitive with the functionality that is provided by a SWIFT service bureau – albeit without the professional services and data transformation services that a bureau provides.
Whereas early SWIFT adopters found that experts on this topic were few and far between, companies now have access to a wider range of consultants, peers, banking experts and other trusted advisors with expertise in SWIFT connectivity. The snowball effect is helping to drive awareness within the industry. Companies are increasingly speaking out about the benefits of connecting to SWIFT, while service bureaus, technology vendors, and SWIFT have been proactively promoting the benefits to a wider audience. Beyond the basic decisions involved, understanding is growing of the practical considerations involved in a SWIFT connectivity project – such as the one eBay Inc. recently faced.
eBay Inc. is a multifaceted e-commerce firm based in San Jose, CA, with more than 100 million users worldwide. In addition to eBay, the company also owns PayPal, the world’s largest online marketplace and payments engine, as well as the merchant-focused ecommerce platforms GSI Commerce and X.commerce.
Together, these portfolio companies give eBay Inc. an on-the-ground presence in more than 39 countries across six continents — helping enable the firm to capitalise on global growth trends and nimbly adapt to shifting economic conditions. Driven by rapid growth through international acquisitions, eBay Inc. had more than 500 accounts at 60 different banks. By 2008, this unwieldy structure had begun to hamper cash visibility and reduce the efficiency of its payment processes. Later that year, eBay Inc.’s treasury team considered ways to streamline its account structure and increase visibility into its cash position.
Given its global operations and the need to keep accounts in-country, the team initiated an effort to migrate many of its accounts from legacy host-to-host connections to SWIFT. The company recognised that SWIFT’s reliable messaging infrastructure, spanning more than 200 countries, was becoming the global standard for corporations to connect with their banks. As such, SWIFT participants use SWIFTNet — a single, shared IP-based messaging platform — to optimise cash and liquidity management, increase straight-through processing (STP) and streamline operations.[[[PAGE]]]
“SWIFT migration emerged as the best way to get a better grip on our worldwide payments and see our account activity in near-time,” says Jeanette Longstreet, principal treasury consultant, eBay Inc. “We also realised that moving to the global messaging standard would make it easier to get up-and-running in new countries.”
Given the project’s inherent complexities — a large number of accounts, numerous banking relationships, a wide range of transaction types and the need for global coordination — the treasury team decided to divide the account migration into phases. The first phase, initiated in 2009, focused on connecting the company’s accounts held at a single bank as a way for eBay’s team to build expertise in SWIFT connectivity and pave the way for more elaborate migrations. With the success of a few smaller project phases behind them, eBay turned to Bank of America Merrill Lynch in 2011 to begin migrating more than 250 accounts across 37 countries in Europe, Asia, Canada and the US.
Tina Nelle, senior treasury sales officer at Bank of America Merrill Lynch, says that with a project of this nature, communication is essential. “The way we work is to gather the right technical resources from all sides from the beginning, which helps avoid project delays,” she explains. “We are absolutely committed to doing our homework upfront.”
For the Bank of America Merrill Lynch team, this ‘homework’ covered a wide range of activities, including circulating account lists to identify and confirm which accounts would be set up for balance reporting, ACH, wires and FX wires, and collaborating on an internal game plan prior to the kickoff with eBay’s treasury staff. The bank quickly established routines and communication channels, including weekly team calls and a range of global and in-country contacts for eBay’s convenience. Additionally, the bank assigned a project implementation coordinator to manage the various work streams.
Although SWIFT is a standard global language — and essentially bank-agnostic — it’s still crucial that banks tailor solutions to help clients achieve the full benefits of SWIFT connectivity. Bank of America Merrill Lynch offered a newly available integration option to eBay which uses local access to the low-value payment systems of every country in which it operates. This enabled eBay to take advantage of SWIFT’s in-country fee structure and avoid significant fees associated with sending funds to different countries. The bank devised a way to optimise a pricing strategy while keeping the accounts in-country. The solution involved creating a single, centralised bank identifier code (BIC) for all of the company’s Bank of America Merrill Lynch accounts.
Traditionally, banks have had different SWIFT codes for each country in which their clients hold accounts. But with the single BIC from Bank of America Merrill Lynch, eBay has one address for delivery of all payments, regardless of where the account is domiciled. Bank of America Merrill Lynch routes the transaction through internal channels to and from eBay’s in-country accounts. When unforeseen issues emerged during implementation, the bank’s team devised creative ways to keep the single BIC project moving forward.
One challenge was a delay in setting up automated, end-to-end straight-through processing (STP) tests (since the bank’s internal testing was completed prior to SWIFT’s recognition of the new BIC). The bank’s support team stepped in to execute testing cycles manually and performed payment message receipt, type (book transfer, domestic transfer or cross-border) and content validations to ensure the accounts were correctly credited and debited. Once the connectivity was established, the team performed another round of testing to confirm the success of the STP setup.
The single BIC service is seamlessly integrated with eBay’s enterprise resource planning (ERP) system, creating a versatile and flexible infrastructure to meet the company’s cash management needs.
By combining project management discipline, significant expertise on both sides and a clear view of eBay’s objectives, the project was completed on time and on schedule. The migration has increased eBay’s worldwide cash visibility, generated efficiencies by allowing it to terminate its legacy host-to-host connection and made it easier for the company to enter new markets.
Not all migrations to SWIFT progress as smoothly, however. In addition to the planning and preparation carried out by banks, it is important that companies looking to connect to SWIFT do their homework first. Time invested at the outset in understanding the topic thoroughly will mean that when the company initiates the project it will be knowledgeable enough to ask the right questions, make the right decisions and hit the ground running. This can be an important factor in the overall success of the project.
Also important is keeping on top of the latest developments. The single BIC concept pioneered by eBay is attracting attention from other global companies and is likely to be a common feature of SWIFT connectivity solutions in the future.
Meanwhile, beyond the basics of SWIFT connectivity, early adopters are increasingly focusing on the wider potential offered by SWIFT. Original trailblazers of SWIFT are looking for new ways to use the channel to get the most out of their investment - for example, they are aiming to leverage SWIFT's FX capabilities or implement an electronic bank account management (eBam) solution.
SWIFT connectivity has never looked more attractive for corporations, and in light of these value-adding developments and the arrival of Lite2, it should come as no surprise that interest in the topic is surging.
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