Is SCORE a Hit with Corporates?
By any measure, SWIFT took its time in opening up its bank-owned messaging network to the corporate community, hampered principally by the banks’ fears of being disintermediated in a world in which corporates could easily send secure payments messages between each other. The co-operative’s first two services for corporate SWIFT connectivity, the treasury counterparty (TRCO) model and the member-administered closed user group (MA-CUG) option – both of which are still in existence – offered some value for corporates but ultimately they lacked flexibility. The TRCO model is restrictive in terms of the types of messages corporates can use, and the MA-CUG model limits corporates to accessing one bank per CUG.
The latest development in terms of connectivity – the Standardised CORporate Environment (SCORE) model – still hedges around certain restrictions in that it is only available to corporates listed on stock exchanges in Financial Action Task Force (FATF) countries, but essentially it does address the issue of flexibility. Corporates can leverage the SCORE model to send and receive a range of message types, and communicate with numerous banks. The bulk of market observers agree that finally, after years of wrangling and a few false starts, SWIFT has a really valuable option for corporate access to its network, and is in a strong position to help corporates in their quest for standardisation.
A survey carried out by HSBC at the end of 2006 on gtnews demonstrated the positive effect of SCORE on corporates’ attitudes to SWIFT (see #gtnFeature(161)#). Of the 121 corporates surveyed, 65% said they were considering SWIFT corporate access, up from just over half of corporates surveyed two years previously during the MA-CUG rollout. Thirty-nine per cent of corporates said they were actively considering it in the next 12 months, up from a third in 2004. This increased to 46% among those with annual revenues of more than US$10bn. And whereas in 2004, 36% of corporates had said they did not see SWIFT access as being relevant for their business, only 22% gave this response in the 2006 survey.
Since the June 2006 board meeting at which the plan to truly open up the network to the corporate community received overwhelming support from the banks that own the co-operative, SWIFT itself – always keen to capitalise on the opportunity to increase messaging volumes on its network – has wholeheartedly embraced corporates. As well as devising simplified connectivity options for corporates to ease their entry into the SWIFT world, it has devised training programmes for corporates that are new to SWIFT access and messaging, instructing them on the benefits of handling corporate cash management and treasury via a single window, explaining the different SWIFT message types to them and walking them through a SWIFT implementation project. It is also working with the key vendors of related solutions and services to provide off-the-shelf connectivity and back office integration for corporate users.
And at SIBOS this year, SWIFT’s annual user conference and exhibition, in Boston on 2-3 October, corporates are invited to attend the first SWIFT Forum for corporates. This dedicated programme includes information sessions and debates on the latest developments and issues in the corporate-to-bank space, as well as practical case studies. Speakers on the corporate side will include representatives from Microsoft Treasury, GE Company Global Treasury, Virgin Atlantic and Ikea, and they will be joined by speakers from Societe Generale, BNP Paribas and Citi on the bank side. This is a demonstration of SWIFT’s commitment to the corporate community.
SWIFT is certainly bullish about the progress being made with SCORE and with corporate connectivity to the network more broadly. But, during these past six months, has the actual level of activity among corporates on the network really been enough to justify this confidence on SWIFT’s part? The corporates are still not permitted to communicate with each other via SWIFT – with the banks’ ongoing fear of disintermediation making itself felt once more – so for SWIFT to be a viable option for corporate usage is dependent upon the banks providing services via the network of which their corporate clients want to take advantage. SCORE is likely to be the most appealing SWIFT access option for the corporates for the reasons discussed above, but it is not unreasonable to expect it to take time for the banks to migrate their corporate services into the new environment. Six months is not such a long time.
Indeed, some analysis of the data available on the SWIFT website regarding the providers of corporate access (updated on 25 June) bears out the theory that the transition to SCORE on the banks’ part is still a work in progress. Of the 70 banks that have agreed to have their names published as providers of corporate access over SWIFTNet (not an exhaustive list of banks providing such access), only just over half – 36 – are so far offering SCORE. Thirty-two are offering both MA-CUG and SCORE, with the vast majority offering at least MA-CUG and four having leapfrogged straight to SCORE. So the banks are buying into SCORE, but it will take time for them all to pick up on the new corporate access option.
SWIFT’s own numbers on the rate of corporate adoption are pretty positive. Following an event for corporate treasury managers and financial institutions in Paris recently, the consortium announced it had signed the 200th corporate on to its IP-based messaging platform. Of those, 29 have signed up for SCORE, SWIFT says – again an indication that migration to the new environment will take time. Users so far include Alcatel-Lucent, Arcelor Mittal, Endesa, Ford Motor Company, General Electric, Henkel, Microsoft, Norsk Hydro, Renault, SAP and Telecom Italia.
Statistics released by SWIFT slightly prior to this event provide a useful illustration of the evolution of corporate usage of the network. As of Q1 2007, 197 corporates had signed up to SWIFT (58% in Europe, 20% in North America, 8% in Asia-Pacific and 14% in the rest of the world). The 2006 figure was 181; a big leap forward from the 108 signed up in 2005, itself a significant increase on the 55 in 2004 and the tiny 22 in 2003. Other figures showed that SCORE is ‘ramping up quickly’, SWIFT claimed. Banks adopting the new model rose from 27 in January this year, to 84 in February (across 30 banking groups) and again to 88 in March (across 33 banking groups). Corporate users grew from five in January to 13 in February and 20 in March. The number of MA-CUG providers had grown from 41 in 2003 to 133 by Q1 2007.
So what have been the experiences of the corporates that are using SWIFT? There are certainly some happy customers out there. Steel giant Arcelor Mittal was “an early enthusiast of corporate connectivity to SWIFT,” says its general manager, middle office and treasury, optimisation projects, Pierre Boisselier in a SWIFT case study. After a move by the firm to centralise treasury operations in order to cope with expansion and the addition of new banking relationships, Arcelor became a member of some 30 MA-CUGs and is one of the first users of SCORE. “While MA-CUGs offered a huge improvement in rationalisation of connectivity platforms and interfaces, the SCORE corporate access model has made life even easier,” says Boisselier. “Two of the much-vaunted benefits of SCORE have actually played out in reality for Arcelor.” It has simplified the addition of new banking relationships because, according to Boisselier, “you do not need to go through an administrative process each time you add a new bank,” and it offers greater standardisation of message formats. “There used to be significant differences between the banks’ implementation of the standards,” he says. “SCORE offers a harmonised environment.”
Another SCORE user, a German-based consumer products manufacturer, Henkel, is also bullish about the value of the new SWIFT corporate access model. “SWIFT provides the standardised communication solution which we were looking for to process our treasury, cash management and low value payment transactions,” according to a Henkel representative.
On the bank side, there is also obvious enthusiasm for SCORE. Chris Furness, global head of cash management at Standard Chartered bank in Singapore (according to the SWIFT list Standard Chartered provides both MA-CUG and SCORE-based services), says: “There is now a recognition that corporates need a standardised communications protocol to deal with their banks.” Interoperability based on a shared transport mechanism and standard message formats is attractive to corporates, and “SCORE opens up these options.”
If SCORE has got off to a positive start, how does SWIFT plan to ensure its relevance for corporates continues to grow? One plan is to increase the number and type of messages that can be used in the SCORE environment. Currently, a range of cash management, treasury, investments and precious metals related message types can be exchanged between corporates and banks within SCORE. In a nod to the fact that other ‘standards’ have been deployed by corporates historically – and reflecting SWIFT’s growing openness across the board to allow different message formats to be carried on its network – it is also possible to send non-SWIFT standards, such as EDIFACT and local country-specific standards for the exchange of bulk payments related flows over SWIFTNet FileAct.
Going forward, according to Luc Meurant, head of the corporate access programme at SWIFT, the consortium will support banks and corporates in the implementation of the next generation ISO 20022 XML-based messages. “Starting in mid-2007, SWIFT will also support its financial institutions in extending the corporate offering to include securities and, from 2008, SWIFTNet Exceptions & Investigations (E&I) and trade-related services,” he adds.
Three corporates have already confirmed their intention to implement the SwiftNet E&I solution – already live among SWIFT’s bank users and designed to automate up to 60% of payments enquiries – with their major service providers. A modelling group composed of corporates and responsible for corporate cash management product development within financial institutions has validated the solution for its use in the corporate-to-bank segment, and additional features are being developed to address corporate business needs, SWIFT says. The final solution will be available by November 2008 and implementation in SCORE is planned for 2009. Paul Burstein, director, cash management strategic initiatives at General Electric, says: “The adoption of SwiftNet Exceptions & Investigations by the overall financial community will translate into higher STP and shorter turnaround times for everyone.”
Overall, it is hard to escape the conclusion that SWIFT’s new SCORE option for corporate access is something of a hit. SWIFT obviously has some way to go in bringing on board the bulk of the corporate community, and the ongoing success of the initiative will be dependent on the banks – and SWIFT itself – ensuring that the services corporates can access continue to evolve and meet the requirements of the corporate community for streamlined, standardised connectivity and real efficiency and productivity gains. For their part, the corporates need to ensure that their own approach to accessing SWIFT has built into it sufficient flexibility to cope with their own evolving use of SWIFT-based services. This almost certainly means – whether they opt to connect directly or via one of the numerous service bureau offerings that are springing up in the marketplace – ensuring that SWIFT connectivity is handled separately from their back office systems, to isolate their core infrastructure from the ongoing efforts required to keep up with changes to SWIFT messages and services.