Reaping the Potential of STP Through SWIFT
Banks have taken great strides towards achieving internal straight-through processing (STP). Yet true “end-to-end STP” with direct external links to clients’ systems remains rare. Clients, however, are seeking lower processing costs. To achieve this, banks will have to develop a true end-to-end STP solution. SWIFT has already made progress in supporting this move with its SWIFTNet offering; but the true potential of this innovation remains largely unrecognised.
The primary advantages of SWIFTNet are its new web-based functions, its corporate connectivity enhancements, and its potential new service offerings for banks. These new SWIFT functions help banks cut costs, raise efficiency, and mitigate risk, while corporate user access to SWIFTNet helps broaden banks’ service range and add value.
FileAct
This provides an easy file transfer service, which can be used for almost any information exchange-from structured, standardised bulk payment information to any type of documents. The file transfer is charged on a per-megabyte basis instead of a fee per message, so many banks can cut costs by up to 50 per cent based on the number of messages and the file size/format.
InterAct and Browse
These perform simple searches for status information, and modifications. This is particularly useful for transactions now handled by bi-directional messaging, such as requests for statements or priority changes in the queue for real time gross settlement (RTGS) systems.
More Automation
Banks using SWIFTNet can replace their proprietary connectivity solutions, and adopt common standard technology and architectural principles. By cutting the number of interfaces between corporate ERP and banking systems, and reducing the number of manual tasks required to feed the separate systems, SWIFTNet increases automation and improves communication processes.
Higher STP Rate
To improve efficiency and reduce costs, banks have to raise the number of operations processed straight through from end to end (STP rate), and cut the number of operations requiring manual intervention. By integrating corporate ERP systems and banks’ systems, SWIFTNet facilitates a true end-to-end STP. The links forged between the systems enable a customer’s physical supply chain and the bank’s payments value chain to be connected, creating efficiencies in speed, costs, and processes.
Reduced Risk
Corporate users tend to centralise their finance functions, notably invoicing and reconciliation, so they raise the vulnerability of their information exchange. SWIFTNet’s secure and reliable connection helps to mitigate this risk.
SWIFT member banks can establish a member administered-closed user group (MA-CUG) and invite their customers to join. By enabling a corporate user to connect to SWIFT through its bank, the MA-CUG provides direct bank-to-customer connectivity. Member banks determine the range of services, messages and the functionalities, such as the files to forward or re-route.
Not all corporates have a need for high reliable and secure information exchange. The implementation cost of a SWIFT connection is relatively high, so a SWIFT connection is only justified for a limited number of corporate users. The MA-CUG facility today might be of interest for approximately 10,000 corporate users worldwide.
Membership in MA-CUGs can create significant value. It provides more information and links with players involved in financial transaction processing. Besides customers, participants in a MA-CUG might include the bank’s own branches and institutions, such as clearing houses, financial services providers, or insurance companies. SWIFT recently announced it was admitting new participants, such as payment infrastructure providers and securities market data providers.
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Greater automation: Integrating SWIFT connectivity to corporate ERP systems enables automated transaction processing. This especially reduces costs in technical interfacing and maintenance. Access through a single window: SWIFT offers various facilities for financial services e.g. payments, securities, trade services, treasury, etc. Connecting to SWIFTNet allows banks to offer corporate users access to SWIFTNet through one single access point. Transmission of large-volume and critical information: SWIFT MA-CUG is a solution designed for the top-tier (approximately 10,000) corporate users with intensive traffic or very critical ordering and information exchange. For instance:
Automatic reconciliation for accounts receivable: SWIFT, Rosettanet, and their bank clients cooperate to make automatic reconciliation of accounts receivable possible. Extended remittance information in an XML syntax structure, with an 18-digit reference number, is exchanged by Rosettanet between corporates. The SWIFT-supported payment also includes this reference number. By integrating the physical supply chain with the payment value chain, this cooperation can lead to substantial cost savings. Starter kit: SWIFT recently introduced its SWIFT Alliance Starter Kit, which substantially lowered the financial threshold for SWIFT corporate connectivity. Billing options: In a MA-CUG, corporates can benefit from the high message volume of the member bank and the degressive fee structure, by so called reverse billing. Besides this, SWIFT’s prices have steadily dropped over the past 10 years, and SWIFTNet operational costs are only slightly higher than other networks. |
By giving customers more freedom of choice, new functions, and faster networks, SWIFT is redefining competitive rules. MA-CUG’s generic infrastructure and common underlying technology standard provide corporate users with a highly secure and reliable facility without tying them to a specific bank. This puts pressure on banks to renew the focus on their customers and prove the value of their service offerings.
MA-CUGs enable banks to play a crucial role by delivering a broader range of innovative and differentiated services. They can develop competitive MA-CUGs with two levels of service – common and high-value:
While most banks currently offer only a limited selection of traditional FIN message services, many other message types are available to corporate users with a MA-CUG connection:
Using the functionalities of FileAct,banks can develop specific high-value services. FileAct can be used for all kinds of information exchange, from bulk payment to documentary payments. FileAct can be used for exchange of information in all formats both international and proprietary standards. The value of the MA-CUG is also determined by the variety of participants and facilities that the member defines, e.g. clearing houses, insurance companies, etc.
The MA-CUG gives banks the opportunity to develop closer relationship with their customers. Providing end-to-end STP, the MA-CUG membership, the single window access, and reductions in connection costs through greater volumes are valuable service offerings.