Cash & Liquidity ManagementPaymentsSWIFTDemystifying MA-CUGs: Q&A with Julius Pietkowicz

Demystifying MA-CUGs: Q&A with Julius Pietkowicz

Questions posed by gtnews readers in response to a recent call for questions revealed a growing demand for information about the practicalities of setting up a member administered-closed user group. SWIFT’s Julius Pietkowicz explains the issues key to getting started and considers the benefits membership could bring to corporates.

gtnews: What messages are being sent via MA-CUGs?

Pietkowicz:Most MA-CUGs have been established for the purposes of cash management, and are using mainly FIN message types from Category 1 – Customer Payments and Cheques (e.g. MT101, MT102), Category 3 – Treasury Markets, Foreign Exchange, Money Markets & Derivatives (e.g. MT300, MT304, and MT307), and Category 9 – Cash Management and Customer Status messages (e.g. MT 940, MT950). SWIFT has published guidelines on the most appropriate choice of FIN message types for payments, corporate cash management and reporting. To complement FIN-based MA-CUGs, corporates are also using SWIFTNet FileAct to send commercial and pension payments as files, as well to transport financial instructions in domestic or proprietary message formats.

gtnews: What are the benefits that existing users are realizing?

Pietkowicz:MA-CUGs enable banks to re-use their existing SWIFT infrastructure for financial messaging with their customers – without any additional investment in technology. Banks can also improve their STP and reduce costs through increased automation by receiving instructions from their customers already formatted as SWIFT standards. In addition, the performance, resilience and security of SWIFT is a key benefit and cost saver.

In turn, corporates are able to enjoy similar benefits: a single, highly resilient and secure global channel that can cater for all their banking relationships using SWIFT standards. A single infrastructure not only allows corporates to reduce their operating costs by rationalising their banking channels and applications that they need to support, but also as more flows can be carried through this ‘single window’, treasurers have a much better view on their positions which can translate to significant improvements in liquidity management.

gtnews: How are the various services priced for MA-CUGs?

Pietkowicz:SWIFT charges the bank an MA-CUG set-up fee which is based on the number of participants in the MA-CUG. SWIFT does not charge corporates for participating in the MA-CUG. It is entirely at the bank’s discretion how it wishes to price its services offered through MA-CUGs.

Other costs relate to connectivity and messaging. If not already connected to SWIFT, corporates will need to purchase a connectivity solution and pay for any messages that they send over SWIFT in the MA-CUG. For MA-CUG participants, SWIFT waives SWIFT membership fees and also offers major discounts on its interfaces. For smaller users, SWIFT also offers Introductory packages which start from 3,500 Euro. As the administrator of the service, the bank can ask SWIFT to set-up the MA-CUG so that any messaging traffic that is sent by the participant is aggregated to the bank’s messaging invoice.

gtnews: What is the sign-up process?

Pietkowicz:Establishing a MA-CUG is very simple: the bank asks SWIFT to create a MA-CUG according to its operational and business requirements. The bank’s customers are then able to subscribe to the MA-CUG via that bank. If the customer in question isn’t yet connected to SWIFT, it will need to install an interface and connectivity so as to be able to connect to SWIFT and the MA-CUG. In this case, SWIFT or its partners (SWIFT has a community of over 600 registered partners) will work with the customer to advise on the best connectivity solution for its needs. Once connected to SWIFT, the customer can begin messaging with its bank or banks.

gtnews: What is the average set-up time for an MA-CUG?

Pietkowicz:SWIFT can create the MA-CUG within 3 weeks, meaning that if the end-customer is already connected to SWIFT, it can begin messaging from that point in time. If the end-customer is not yet connected to SWIFT, the time frame is longer, typically 4 – 5 months, to take into account the ordering and installation of the necessary infrastructure components at the corporate’s premises. This is a one-time installation, and the same infrastructure can be used for all future SWIFT messaging services such as other MA-CUGs.

gtnews: Is a corporate that sets up an MA-CUG able to communicate with all its banks through this one channel?

Pietkowicz:A corporate cannot itself set-up an MA-CUG: only a bank can request this service from SWIFT. Providing that all its banks are offering MA-CUGs, a corporate could use SWIFT for all its bank communications. A corporate that joins one MA-CUG can only communicate over SWIFT with the bank providing the service, or to any of this banks’ branches that are also in the MA-CUG. There is no restriction on the number of bank branches that can be added into MA-CUGs and it is free of charge. Most of the banks offering MA-CUGs have added their branches into their MA-CUGs to extend their MA-CUG-based services internationally. With so many branch networks already on SWIFT, it means that the ‘reach’ of the MA-CUG can be extended very significantly to service not only domestic customers at an international level, but any customer or new customers interested in SWIFT MA-CUGs located around the world. This aspect of MA-CUGs is particularly interesting for regional treasury centres as each centre can be serviced through the same MA-CUG run by the same bank(s), to the same service levels, and without the need for changing banking relationships.

A MA-CUG bank can also act as a ‘relay’ to forward instructions to other financial institutions, assuming that the bank has agreements in place to do so with these receiving banks. In general, we find however that most corporates will mirror their most critical banking relationships into MA-CUGs.

gtnews: How are MA-CUGS used to consolidate information reporting and transaction initiation across multiple providers and the user’s own internal applications?

Pietkowicz:MA-CUGs themselves will not consolidate or process data transported over SWIFT. MA-CUGs should be viewed as a highly secure and resilient value-added channel on which banks offer their services. Banks can continue to offer corporates access to the same applications but via SWIFT rather than proprietary or VPN networks. Data and transaction processing is done by treasury management systems, back-office applications, or back-bone systems. Using MA-CUGs does not necessarily need to change how such data is processed, but automating around SWIFT standards and using SWIFT as the single channel to banks can create the platform on which to make these processes more efficient and reduce cost.

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