Technology's Role in SWIFT Corporate Access
Corporates have been able to connect to the SWIFT network for several years, but so far the uptake has been slow – currently only 150 corporates have any level of SWIFT connectivity. Until recently the only way for a corporate to connect to the SWIFT network was to join a Member Administered Closed User Group (MA-CUG). In this scheme, members – banks – could create a closed user group of corporate customers to whom they could offer services over SWIFTNet. The downsides from the corporates’ point of view were that they had to join a different MA-CUG for every bank they wanted to connect to (assuming that the bank operated a CUG at all) and that a lengthy and bureaucratic sign-up procedure was required for each.
Recent developments in SWIFT’s corporate provision have simplified this picture. There is a new corporate access model, SCORE (Standardised Corporate Environment) that any suitably regulated corporate can join. As members of the scheme, corporates can communicate with any bank that supports the service. To qualify for membership, a corporate must be listed on a regulated stock exchange in an FATF (Financial Action Task Force) member country. The existing MA-CUG structure remains to allow banks to support corporates that don’t qualify for membership of SCORE.
The significance of this change is enhanced by the fact it comes at a time when standards in the corporate-to-bank space are finally gaining maturity and critical mass. The ISO20022/UNIFI core payments kernel messages, for example, offer corporates unprecedented opportunities to track and reconcile payments. The combination for any corporate wishing to automate its financial supply chain is compelling: one standardised channel to talk to every bank that it has a relationship with – one technical infrastructure and one set of standards.
However, more has to happen before the potential of the SCORE arrangement can be realised by more than a handful of larger corporates. SWIFT’s typical customers are banks and the larger non-bank financial institutions. For most of these users, SWIFT has been a fact of life – and a critical part of their operation – for years. They have the computing infrastructure and expertise necessary to support what can be a very complex environment. For corporate customers, however, SWIFT is new. The technical and operational complexities are hard to navigate and the costs, for a service that may be very useful but is hardly mission-critical, are high. For corporate connectivity to take off, therefore, corporates need new ways to realise the benefits of SWIFTNet, without the complexity and expense.
Economists refer to the ‘network effect’, which is that the value of a connection to a network increases rapidly as the number of end-points increases (e.g. a phone becomes more useful the more other people have phones). The new corporate arrangement doesn’t quite conform to this pattern because corporates can’t communicate with each other over SWIFTNet, only with banks. However, a similar type of positive feedback relationship could apply: the more corporates join the CUG, the greater the pressure on banks to offer the service, and the more banks that offer the service, the greater the value of the connection to each corporate. And as more corporates join, the level of automation and standardisation of the overall financial supply chain increases, with benefits for all participants. For this effect to become established, however, it is necessary for the momentum behind corporate access to increase. And for this to happen it is vital that barriers to entry are low, and that they are seen to be low.
Solution providers should play a role in ‘selling’ the concept of connectivity to corporates. There are several different ways that they can achieve this.
Enterprise resource planning (ERP) vendors can provide packaged support for SWIFT-compatible formats and connectivity to standard SWIFTNet gateways. The major vendors in this space already offer this capability to their customers and others will surely follow. Specialist enterprise application integration (EAI) vendors are also targeting corporate customers with simplified offerings to allow other back-end applications to be connected.
While these developments are welcomed, and can greatly simplify the implementation of SWIFTNet, they are not the end of the story. A direct connection to SWIFTNet requires mandatory hardware and software components to connect to the network. Packaged ERP and EAI components can simplify the task of connecting these components to business systems, but the components are still required.
But corporates don’t have to operate a direct connection to SWIFTNet. The alternative is to buy connectivity as a service from a service provider. The advantage to a corporate of using a service provider is that provision of SWIFTNet hardware, software, connectivity, monitoring, backup and resilience measures is taken care of by a third party so up-front costs are low. Charging is typically based on message volumes, so a corporate wishing to experiment with SWIFTNet or make low-volume use of SWIFTNet services can do so with minimal risk and a small investment.
There are several types of third-party organisation offering SWIFTNet connectivity services: member/concentrators, service bureaux and members offering shared connectivity. The most basic services offer a simple upload of SWIFT messages that the service provider undertakes to deliver using its SWIFTNet infrastructure. The service provider may also take care of administration of the interface, security configuration and so on.
More advanced services will soon offer web-based access to sophisticated applications that will allow users to query messages, monitor delivery, input messages manually and repair messages. Such services may also perform the functions of in-house EAI, accepting data from the customer in a non-standard format, mapping it to the appropriate standard format and delivering it.
The cost and complexity of connecting to SWIFTNet may appear daunting for all but the most sophisticated of corporates. But if the full benefits of corporate connectivity are to be realised by the community it is important that these barriers are overcome by a significant number. Solution providers, particularly providers of shared connectivity, have an important role to play in making this happen.