SWIFT Whitepaper: Correspondent Banking 3.0

In a new whitepaper, SWIFT unveils its vision for a customer-centric, ‘experience banking’ model – entitled Correspondent Banking 3.0 – where customers are the trigger for banking services and banks link together the best components to create a consistent and seamless customer experience.

The whitepaper argues that correspondent banking 1.0 in the mid-1970s was about automating the telex via connections between a large network of banks. A more efficient 2.0 emerged in the late 1990s, based on centralised global transaction processing, using fewer but deeper relationships and tighter performance management. Correspondent banking 3.0, SWIFT asserts, pushes for further efficiency on the current model. The model is still too bank product centric, based on inherently inefficient multiple agreements.

Profits are under pressure as banks need to comply with more regulation and deal with increased competition. Meanwhile, we are bracing ourselves for another global financial crisis and economic slowdown. Combine this with the emergence of mobile payments and the cry from corporates for more integrated solutions, and the need for significant innovation becomes clear.

To move towards this new model, four collaborative projects have been identified following 35 in-depth interviews held with banks by SWIFT during 2010-2011. Each of these projects was shortlisted based on the criteria that they are collaborative, new, achievable and significant for the industry. The four projects are:

1. Enhanced business intelligence services to better identify new market opportunities, understand end-customer behaviour, and better monitor liquidity.
2. An interbank electronic bank account management (EBAM) central utility to more efficiently manage bank accounts and relationships.
3. A bank-owned global service for person-to-person (P2P) payments, that is mobile-enabled.
4. An international market infrastructure, to reach many small banks with low volumes, without the need for a correspondent bank relationship and account with each of them.

“The purpose of this whitepaper is to start a dialogue in the banking industry on this new model and projects proposed, and we may identify other projects. Our objective is in the end to gain consensus and focus on implementing one or two concrete new collaborative services that can bring significant benefit to the industry,” said Luc Meurant, head of banking, supply chain and corporate markets, SWIFT. “The world is changing rapidly. To keep their payments franchise, banks must take charge of their destiny and lead the way.”

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