Improving Corporate Cash Management with SCORE
SWIFT corporate access is gaining momentum. Around 250 corporates are already connected and interacting with more than 500 financial institutions. The key application today is cash and treasury management, but the industry has only scratched the surface of using possible cash and treasury management applications over SWIFTNet. How can corporates extend their use of SWIFTNet for cash and treasury management in the field of low-value payments or the single euro payments area (SEPA) for example, and how can the industry broaden SWIFTNet usage to include mid-size corporates?
It is important to consider current corporate experience of SWIFT in order to evaluate the benefits and existing barriers to wider usage. In this section, we consider the experience of Microsoft, a pioneer on SCORE and one of the first users of the Member-Administered Closed User Group (MA-CUG) model, and Henkel, the German-based company that provides brands and technologies, who is a relative newcomer to the SWIFT network.
Microsoft installed its SWIFT infrastructure in early 2006. The company piloted connectivity with five banks in October 2006 and is now live with 15 banks feeding MT940s for around 350 accounts and three banks feeding MT942s for around 60 accounts. According to Ed Barrie, group manager, treasury at Microsoft, there has been no downtime or errors since the launch date.
Henkel joined SWIFT at the beginning of 2007 through the SCORE model and is now live with three banks. The company uses FIN Messages MT940/942 for account statements and high value payments, and FileAct for low cost routing payments, direct debits, mass payments and account statements.
For Barrie at Microsoft, the company’s goals in terms of banking partner connectivity are realised through connectivity to SWIFT and these include:
Going forward, Microsoft wants to add additional banking partners and the company has a vision of ‘enterprise financial messaging’ across the organisation, such as treasury wire payments, FileAct for proprietary/legacy data feeds, capital market operations, and exception and investigation messages for case management and workflow.
According to Dirk Feisel, head of cash management at Henkel, the company’s expectations from the rollout of SCORE are to be 100% live in terms of transactions within each country and for banks to support FileAct by the beginning of 2008. “Banks should really drive the business,”he argues. For Feisel, the advantages of joining SWIFT include one single entry point to the banking landscape, simplification in changing banks, improved funds visibility, global coverage and increased security.
While Feisel and Barrie certainly advocate corporate access to SWIFT, both also agree that there is room for improvement. Current challenges outlined by Barrie include the fact that not all banks support SWIFT messages in the same way, as well as the fact that corporates still need to sign individual service agreements with their banks (on top of the SCORE or MA-CUG service agreements with SWIFT). “This is a very time consuming process and needs standardisation,”he says. “A template exists but we haven’t seen banks use it and we ask them to do so or make it simpler for us to.”
Barrie also suggests that it should be made easier to find the right person or group within a bank’s organisation to begin the SWIFT on-boarding discussions with.
Henkel’s Feisel agrees that having a standard contract for all banks would be a major improvement, as well as enhancing the flexibility of invoicing and the SWIFT on-boarding process. “Other specific issues that should be addressed include tighter integration with ERP vendors, the reduction of pricing, promotion of the ISO 20022 XML standards and ensuring broader support from banks for FileAct-based transactions,”he adds.
Taking into account the comments from Microsoft and Henkel, we certainly believe that banks must communicate more with vendors and that it is a bank’s responsibility to make the SWIFT on-boarding process as easy as possible for corporate clients. The role of the bank is vital in the implementation phase of SWIFT. BNP’s strategy, for example, is to benefit from economies of scale, meet market needs, attract more large corporates and also further develop the trend towards encouraging mid-market corporates to join. (BNP’s offering is based on hubs where connectivity is focused on SWIFTNet and is applicable to multiple business lines.)
In order to increase adoption by mid-market corporates, the promotion of more service bureau-type approaches in the future is important. According to Feisel at Henkel, this would reduce cost and maintenance issues for corporates and allow them to focus on their core business instead. In response to industry demand, BNP plans to integrate SWIFTNet packaging and generalise SWIFTNet access through its service bureau. Our aim is to reduce the complexity of SWIFTNet access for corporate clients and deliver a high quality service in terms of payments and reporting as well as greater security.
Luc Meurant, head of corporate access at SWIFT, has also stated that the co-operative is working on better integration as well as a ‘lighter approach’ for mid-market corporates.
The benefits of corporate access to SWIFT, such as single access and enhanced security, are well understood but corporates should also take advantage of wider benefits. SWIFTNet and XML-based standards, for example, have transformed the capability of payment factories. For corporates that want to establish a payments factory, SWIFTNet really answers the mass payments challenge. (For more coverage on this issue, read #gtnArticle(6985)#)
It is important to note, however, that transformation will not happen overnight and that the industry still has some significant issues to address. Payments networks remain heterogeneous and standards have not become universal. There are also issues around security (i.e. personal signatures) and wider integration of vendor solutions that need to be resolved. BNP is currently working closely with vendors on this issue, as progress requires a community approach. In addition, the bank has also joined the Identrust network to provide Identrust digital certificates to enable personal digital signatures for corporate clients.
The industry is moving forward and we can expect corporate access to SWIFT to gain further momentum in 2008.