Making Business Sense of SWIFT Corporate Access
A number of factors are driving corporations and their treasuries towards SWIFT connectivity. Treasuries themselves are taking on an increasingly prominent role within organisations, particularly when it comes to managing corporate risk. And in a global environment of heightened regulation, liquidity requirements and volatility, there is a trend towards centralised treasury departments that maximise resources and tighten control over payments.
Often, this means that corporate treasuries are managing a number of banking relationships across multiple accounts around the world. And for some corporations without SWIFT connectivity, the result can be a confusing array of disparate interfaces that do not ‘talk’ to each other. This in turn makes it more difficult than ever to receive secure, timely and reliable payment processing information, achieve straight-through processing (STP), comply with regulations and, ultimately, to keep an eye on the bottom line.
Direct access to the SWIFT network can make it easier for some treasuries to manage these challenges. Rather than maintaining several host-to-host (H2H) platforms and proprietary links, multi-banked corporations could consolidate their banking with a single SWIFT solution.
But the route they take to use SWIFTNet, the industry standard for interbank connectivity, depends very much on the size, resources and aims of the organisation. It is down to their banking partners to guide them in the right direction with objective independent advice, and to clarify the benefits of the appropriate solution.
An important step towards finding the right SWIFT-based solution for a corporation is, clearly, to assess the scope of its payments requirements and management.
When a corporation makes most of its payments through a limited number of banks, it needs a straightforward cash management channel, and a proprietary internet banking services could meet its needs.
But with a SWIFT connection, a corporation can make and receive global payments in a range of formats with several banks – using a single system and interface.
We have seen a move to greater use of developments in IT and SWIFT services to automate and then to consolidate banking relationships. The corporate gains increased control over financial and operation processes, and optimises the timely availability of cash balances and transactions.
The case for corporate connectivity to SWIFT effectively begins when a corporation makes payments through multiple banks and non-bank financial institutions.
For such multi-banked corporations there are, broadly speaking, three SWIFT access options. Connection to SWIFTNet can be made via a closed user group (direct access), a dedicated service bureau (indirect and managed access) and, finally, SWIFT’s own user-friendly but low-volume online solution, Alliance Lite.
The most advisable route for a corporation to follow will be decided by, among other factors, its capacity for capital investment, the availability of in-house expertise and resources, its business plans and typical payment volumes.
A number of major international banks, offer SWIFT corporate access solutions to corporations and non-bank financial institutions via closed user groups.
By joining a closed user group, corporate members can send payment messages and receive statement information over SWIFTNet, and integrate the resulting data flows into their own enterprise resource planning or treasury management systems. In effect, they are benefiting from direct access to the bank’s own global network and processing platform – and will usually be able to send payments in a full range of globally accepted formats, through SWIFT’s FIN or FileAct messaging services.
The direct SWIFT access route is recommended only for corporations that are prepared to invest heavily in infrastructure. Around £100,000 or more may be needed to build in-house SWIFT equipment, which will need to be maintained on an ongoing basis. Maintenance and upgrades will place their own pressures on an already overstretched treasury team and call for a certain level of SWIFT expertise.
Typically, banks offer corporate access via two types of closed user group: Member Administered Closed User Groups (MA-CUGs) or Standardised Corporate Environment (SCORE). So, what is the difference between the two?
SCORE is managed by SWIFT while MA-CUGs are set up by individual banks. In simple terms, joining SCORE means that a corporation only has to register once to send SWIFT messages from multiple banks. With MA-CUGs, a multi-banked corporation has to join each of its bank’s closed user groups separately.
Until June 2009, a corporation wishing to join SCORE had to be listed on the stock exchange of a Financial Action Task Force (FATF) member country. Now, membership can be granted to any corporation provided it is recommended by a financial institution that itself belongs to SCORE and is based in an FATF member country.
Similar message types are, in general, supported by both types of closed user group. MA-CUGs support both MT101 and MT103 message types, while SCORE credit transfers must be made using MT101.
SWIFT service bureaus fulfil an important role by offering SWIFT connectivity – via MA-CUGs or SCORE – without major and recurring investment in technology, infrastructure and specialist personnel.
If the business case for an in-house SWIFT solution is not strong enough, a service bureau could provide a more cost-effective alternative. By outsourcing its connectivity requirements to a service bureau, a multi-banked corporation with a small treasury team and limited IT resources will benefit from assistance joining the SWIFT network.
However, in the course of our own research into the needs of corporate treasuries, we have discovered there is enormous potential for SWIFT service bureaus to do more.
Many bureaus now offer the validation and translation of financial messages as standard. But with forecasting being a top challenge for treasuries, service bureaux can help by enriching and aggregating the resulting data flows for their corporate customers. More to the point, the consolidated data should be instantly available in a secure web-based format to offer total visibility of cash positions in near real-time.
For corporations that process low volumes of payments – under 4,000 a month – the most cost-effective way to connect to SWIFTNet may be using SWIFT’s own web-based product, Alliance Lite.
To access the online interface, corporations need nothing more than a standard internet connection and a hardware security USB token from SWIFT. Specialised knowledge of SWIFT standards or formats is not required, and secure, low-cost access to SWIFT is guaranteed. Most notably, perhaps, Alliance Lite makes SWIFT connectivity portable – while giving corporations the credibility they need to conduct cross-border transactions.
It must be stressed, however, that the solution could not meet the needs of corporations that process high volumes of transactions – any more than 200 a day.
With a growing number of gateways between corporations and the SWIFT network, the challenge for banks is to look at the bigger picture for their customers.
For those with multiple payment banks, proprietary banking channels may not necessarily be the best fit; a SWIFT solution could give treasurers the tools they need to improve visibility and liquidity.
Above all, the chosen solution should meet the corporation’s specific needs, manage the impact of an ever-changing global environment – and help the business as a whole gain as much financial insight, control and advantage as possible.