RegionsEEAEurogiro Members Make a SWIFT Connection

Eurogiro Members Make a SWIFT Connection

Eurogiro, a cross-border payment cooperative created for the exchange of low value payments between financial institutions, in October 2003 signed an agreement with SWIFT allowing Eurogiro to act as an administrator of a closed user group (CUG) within the SWIFT network. Acting as an administrator is not revolutionary in itself, but what was new was the fact that members of the Eurogiro SWIFTNet closed user group were able to communicate directly and did not have to communicate via the administrator. The network communication is thereby leveraged from the traditional one-to-many-communication to a many-to-many communication setup. This type of CUG solution not only facilitates a number of benefits for the members of Eurogiro, but it is considered by some to be a ground-breaking solution which potentially could be adopted by other institutions.

What is Eurogiro and What Does it Do?

Eurogiro was established in 1989 as a cooperative between Posts and Postbanks with a focus on cross-border payments in the low value payment market. In 1992 the company Eurogiro Network was established and the Eurogiro system for the electronic exchange of low value payments went into production. The background to this cooperation was partly that the Posts and Postbanks saw opportunities for cost efficiencies by working closely together securing low processing costs and developing value added products and also that a number of Posts and Postbanks at that time were not admitted to SWIFT. The inception of the cooperative was based on a simple principle: how can organisations obtain value by working as a community, rather than working individually?

Today Eurogiro has evolved into a payment association consisting of more than 40 banks, post banks and postal organisations that all offer their customers low value, cross-border payments, mass payment handling and use the Eurogiro standards to send these cross-border transactions electronically. Eurogiro provides the network (hardware and software) and the SWIFT-like message codes enabling the members to offer different cross-border payment products to their customers, for example, credit transfers and cash payments. Eurogiro also provides Service Level Agreements for the various types of payments and other message types exchanged over the network. In 2004 it is forecasted that Eurogiro members will send around 2 million transactions through the network every month.

In order to develop further the transaction growth momentum and to continue to add value to its growing member base, Eurogiro has embarked on an ambitious five year strategy which is already now in its second year. The basis for the strategy is the persistent search for cost effectiveness, for example, low network costs, high quality, high STP rates and even relatively low costs on non-STP transactions. The latter has been achieved through the recognised Service Level Agreements.

Further in line with the strategy, Eurogiro is now attempting to position itself as an attractive gateway to members and alliance partners in the financial world. Therefore they are attempting to merge the best (business opportunities) of these financial worlds with the quality and low production costs which characterise the Eurogiro universe. Alliance partners include the US Federal Reserve Bank, SWIFT, Visa Europe, Western Union and the Universal Postal Union.

Adding a New Dimension: the Eurogiro SWIFTNet Closed User Group

In October 2003 Eurogiro and SWIFT entered into a new cooperation agreement, which meant that Eurogiro now acts as an administrator for a Closed User Group for payment transactions among Eurogiro members within SWIFTNet. The CUG allows members to exchange FileAct and potentially other types of exchanges between themselves or with non-SWIFT members of Eurogiro via the Eurogiro hub.

Those members of Eurogiro who are already using SWIFT and who have migrated to SWIFTNet will consequently be able to abolish the system currently used for connection to the Eurogiro network, and thereby have one IT platform less to maintain. Up to six-digit cost savings have now become possible, and since FileAct allows for any character, content and structure, the standard Eurogiro batches or ‘Envelopes’ can be exchanged without any need to modify file operations. Further cost reductions can be achieved by implementing the proprietary ESM software developed by Eurogiro. This software includes pooling and compressing functionalities and therefore provides additional cost savings for the members.

Implementing the Eurogiro CUG in the Eurogiro community will not have a substantial impact on non-SWIFT members of Eurogiro who remain using the system. These members can continue to exchange standard Eurogiro Envelopes with their Eurogiro partners, irrespective of whether the partner is connected through the CUG or directly via the Eurogiro system. When sending transactions via the Eurogiro hub, the non-SWIFT members of Eurogiro will also experience cost benefits through the use of pooling and compressing functionalities.

Figure 1: The figure below illustrates that all Eurogiro members can continue to exchange transactions – either directly on their respective networks or between the networks through the Eurogiro hub:

Alliance Partners – a Gateway of Business Opportunities

On the whole, the example of cooperation between SWIFT and Eurogiro, as two organisations which to some extent offer supplementary solutions, proves that by cooperating both organisations can provide value added services to their members.

Additionally, the Eurogiro SWIFTNet Closed User Group is a perfect example to illustrate the Eurogiro gateway strategy, where the focus is placed on connectivity for members to more products and business partners via less IT platforms and incurring lower costs. Furthermore, the strategy has led to new innovative connectivity. Firstly, the postal world is now connected to the banking world. Secondly banks, posts, non-financial institutions and domestic clearing solutions. can be linked across different geographical regions. Thirdly, and most recently, the card world and payment world can be linked, as illustrated by the new agreement between Visa Europe and Eurogiro.

While staying focused on low value payments, Eurogiro hope to be perpetually open for new alliances and developments, which can add value to its members.

Members of Eurogiro (September 2004)

Afghanistan: Afghanistan International Bank Luxemburg: P & T Luxembourg
Austria: PSK/BAWAG Morocco: La Poste – Barid Al Maghrib
Belgium: Financial Post Netherlands: ING/Postbank
Brazil: Empresa Brasileira de Correios e Telégrafos Poland: ING Bank ?l?ski SA
Canada: National Bank of Canada Portugal: CTT Correios de Portugal
Cape Verde: Correios De Capo Verde Romania: Posta Romana
China: China Post Romania: Banc Post
Croatia: Croatian Post Senegal: La Poste
Czech Republic: Ceskoslovenska obchodni banka (CSOB) Serbia and Montenegro: Postal Savings Bank
Denmark: Sydbank Slovakia: Postova Banka
Egypt: Commercial International Bank (Egypt) SAE Slovenia: Postna Banka Slovenije
France: La Poste Spain: Banco Bilbao Vizcaya Argentaria (BBVA)
Germany: Deutsche Postbank Spain: Correos y Telegrafos
Greece: Hellenic Post Switzerland: PostFinance – Swiss Post
Hungary: Magyar Posta Togo: Societe des Postes du Togo
Iceland: Iceland Post Tunisia: La Poste Tunisienne
Ireland: An Post Turkey: PTT General Directorate of Posts
Israel: Israel Postal Authority United Kingdom: Alliance & Leicester Commercial Bank plc
Italy: Poste Italiane United Kingdom: Visa Europe
Japan: Japan Post, Postal Savings Business Headquarters USA: Deutsche Bank
Latvia: Latvia Post  

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