Can SWIFT SCORE with Corporates?
My last article on the Standardized CORporate Environment (SCORE) (see Technology’s Role in SWIFT Corporate Access), discussed what SCORE is and the options and challenges facing corporates who use it. It went on to examine the difficulties of installing and maintaining the network provided by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and it concluded that SWIFT, software vendors and service providers need to do more to help corporates make the most of the new service. However, the article did not mention banks; it assumed that banks, either because of client pressure or through innovation, would be supporting their clients’ move towards SCORE and away from their proprietary systems.
Banks are not as wedded to their proprietary corporate systems as people might think. Corporates are looking for improved services and proprietary systems tend to be legacy-based and therefore slow and costly to update for new products and services. Banks that want to be innovative in the corporate space therefore have additional internal benefits by deploying modern technology to support SCORE. As well as offering new products, they can customize their offerings more easily, improve straight-through processing (STP) and they can do all this at a lower cost while replacing their legacy applications. This seems like an ideal investment opportunity, and banks have many options for how they approach these issues. Many banks are starting this journey, which can only be good for the industry as a whole.
So where are we six months since the introduction of SCORE? According to the numbers provided by SWIFT, there are 209 corporates on SWIFT, with 58% still in Europe, 20% in the US, 8% in Asia and 14% in the rest of the world. See figure 1 below.
But is this a great advance? SCORE went live in January 2007 and since then 28 corporates have joined (two were already members for the pilot stage making a total of 30 SCORE members). The other corporates were members of the earlier attempts to persuade corporates to use SWIFT, namely the Treasury Confirmation (TRCO) service and member-administered closed user groups (MA-CUGs). If we assume the percentages work across the 28 new members, that’s 16 members in Europe, six in the US, four in the rest of the world and two in the whole of the Asia Pacific region. This is a good start, but there is a long way to go before SWIFT achieves its targets.
For the ‘network effect’, mentioned in my last article, to really start working, more banks need to offer standardized SCORE services so that corporate users can access all their banking services through SCORE. Without all banks being accessible through standard formats over SCORE, corporates will still be tied to a few banks who in turn will communicate on their behalf with their other banks. This will mean that neither the banks nor the corporates will see the full benefits that SCORE could bring in terms of better services and increased revenues.
As you can see from figure 2, there are 149 financial institutions offering SCORE services to their corporates. Considering there are 8,000 members of SWIFT, there are a lot of banks that still need to join.
Why is there such a small number of corporates? I believe there are a number of reasons for this.
More banks need to offer their services over SCORE to allow more corporates to manage their multi-bank relationships in a standard way. This is one area that SWIFT could concentrate on, promoting the role-out of SCORE and FileAct to more banks to accelerate the required network effect.
SWIFT is not actively promoting the service and benefits to corporates, probably because the banks want to do this themselves – and they are SWIFT’s masters. Some of the larger banks are just beginning to conduct road shows to educate their corporate clients.
At the moment, the 30 members are large multinational companies who have the resources to implement and maintain not only the considerable SWIFT infrastructure, but also the internal integration with their numerous processing systems. This is a significant challenge to attracting more than the top 200 corporates, and is one of biggest challenges to the success of SCORE.
SWIFT has also been working on the connectivity issues; it’s well known that maintaining a SWIFT infrastructure is a considerable undertaking. To simplify this and make it easier to own a SWIFT infrastructure, they have introduced six SWIFTNet packages designed to offer a variety of options and costs depending on the requirements. Between the packages, bank solutions, software vendors and bureaux, corporates have a number of cost effective options to solve the physical connectivity problems.
But, to truly make life easier and reduce costs, we need international standards for the messaging between corporates in the trade space and these need to be aligned with the corporate-to-bank messaging for trade finance and payments. Over the years there has been several disparate initiatives, including TWIST and more recently ISO 20022, which have produced advances in the payment initiation standards for corporate to bank payments, but there have also been a few missed opportunities.
Firstly, SCORE today concentrates on cash management, payments, treasury confirmations and securities messages, and mainly in the traditional message type (MT) space. To really help corporates, the service offerings from banks and standards need to include the richer dataset as supported in TWIST and ISO 20022 that tie together the physical supply chain with the financial supply chain allowing much needed STP from financing, to purchase order to payment.
This leads nicely onto the single euro payments area (SEPA). SEPA is currently self regulated by the banks via the European Payments Council (EPC), who have concentrated on the inter-bank payment messaging with their new ISO 20022 based XML messages, corporate-to-bank messaging has been secondary and is not mandatory. To have included this in the schedule would have provided much needed impetus for both SCORE and involving corporates in SEPA earlier, many of which have limited knowledge of what SEPA could do for them. However, even without the EPC, SWIFT is progressing the development of these messages, which is very welcome as without these standards the job for some will just be too hard even with easier connectivity. But this is just Europe, SWIFT’s primary domain. The recent announcement from the US that their future payments infrastructures (in response to SEPA) will use the STP800 standards instead of ISO 20022 appears to be unfathomable. Potentially this shows that SWIFT’s influence in the Americas is far too weak, or that they are still not agile or fast enough with standards development and product management.
Finally there are the enterprise resource planning (ERP) and treasury systems providers. Many have been developing their SWIFT components for some time, but few seem to have delivered readily available packaged modules to connect to SCORE; SAP being one exception I am aware of.
There is positive progress on the hot topic of SCORE, especially for larger corporates and innovative banks. But there is a long way to go and a lot of work still to be done in different areas before the masses of corporates can really see the benefits.