SWIFT for Corporates: a New Perspective
Celebrating its 40th birthday this year, SWIFT and its
technological offering continues to evolve, delivering high-value transaction
messaging all over the world, 24 hours a day.
Recently, however, the
success of new initiatives designed to recognise the growing role of corporates
as a strategic priority has been questioned. Indeed, some market participants
seem to think the Standardised Corporate Environment (SCORE) programme – more
commonly referred to as ‘SWIFT for corporates’ – has even stalled.
Fortunately, this is not the case – with much of the confusion in fact
stemming from a simple misinterpretation of the intended target audience. This
misunderstanding applies to both SWIFT for corporates, and to recent product
launches under its remit, such as Alliance Lite 2.
Prior to the
launch of SWIFT for corporates in 2007, corporates seeking to use SWIFT
technology to connect with their financial institutions could only do so through
the Treasury Counterparty and Member Administered Closed User Group models. In
this respect, SWIFT for corporates is a response to market demand, offering
increased automation and standardisation to match growing corporate treasury
needs.
The target audience was large multinational corporations
(MNCs) and for this reason, the take-up of the programme, and indeed its
success, should be judged on the number of MNCs that have joined the initiative.
So while, at first glance, the programme’s 907-strong membership
might appear to be relatively few in number, when compared to SWIFT’s total
users (10,279 in 2012) this figure is as would be expected. Furthermore, the
initiative can boast the support of a number of high-profile, market-leading MNC
members.
Recognising the Benefits of SWIFT
However, such
support should not be surprising, given that SWIFT (as a whole) continues to
offer numerous working capital, bank-agnostic and regulatory compliance benefits
for corporates. By creating a multi-bank standardised communications platform,
SWIFT has significantly increased the global visibility that members have over
their cash positions, and enabled them to optimise their investment and
liquidity management practices.
Moreover, by removing the need for
proprietary connections with each of their respective financial institutions –
and thereby rationalising their inter-bank communication – corporates have been
able to cut costs. The automation provided by SWIFT platforms is a key advantage
in this respect; particularly as corporates put greater value on inter-bank
messaging that can be fully integrated into their enterprise resource planning
(ERP) systems.
Furthermore, leveraging technology to improve payment
and transaction-related data communication has also benefited the security and
reliability of financial messages. In fact, the SWIFT network has a near-perfect
track record of reliability, with a network availability ratio of over 99.99%.
In addition, by allowing corporates to retain control over all payment
initiation, this has also decreased fraud and associated transaction risks.
From a compliance perspective, the use of the SWIFT platform
provides a single interface through which corporates can monitor and update
their financial messaging data, and gain instantaneous access to all
transaction-related information – such as payment dates or collections data –
which lessens the administrative (and accordingly the compliance) burden placed
upon them.
Moving to SWIFT Connectivity
It is no wonder,
then, that we continue to see strong corporate adoption of SWIFT connectivity –
both from large MNCs and also from mid-size corporates, particularly those in
the US and Europe.
Such connectivity has been stepped up by the
introduction of SWIFT Service Bureaux (SSB). SSBs effectively outsource SWIFT
connectivity to external SWIFT-recognized providers (such as technology,
consulting or banking partners), who can then initiate the connection to the
SWIFT network and potentially operate the SWIFT interface on behalf of the
corporates that have elected them to do so.
That said, there is also
evidence of growing regional corporate adoption of SWIFT in Asia; a trend that
seems to have been catalysed by increased awareness of – and ease of connection
to – Alliance Lite 2. Launched last year, Alliance Lite 2 is in many ways an
extension of the SWIFT for corporates programme. The new solution is designed to
focus on mid-size corporates that are unable to gain access to full SWIFT
integration. There is also a corporate cost saving, as Alliance Lite 2 entails
significantly fewer technological requirements than total SWIFT integration. In
fact, because the software has been developed for use with cloud technology,
Alliance Lite 2 can even be operated from a single USB device.
Such
shared and even reduced infrastructure is an important driver for increasing
SWIFT connectivity among a wider variety of corporates. However, as payment and
transaction flows continue to grow not only in volume but also in complexity –
particularly with regards to cross-border payments – some corporates may find
the transition to SWIFT difficult to undertake.
The Challenge of
Adoption
Corporates looking to adapt to SWIFT technology are often
faced with a number of challenges. How can they achieve and maintain global
coverage from their banking relationships without proprietary corporate-to-bank
connections? How can they address the technological integration that is required
of SWIFT connectivity? How can they safeguard against the legal challenges that
accompany differing – and evolving – global regulations?
While there
are answers for all of these, the critical point is that corporates must be able
to identify the product or solution that best suits their needs, and matches
their desired level of SWIFT integration. With this in mind, the onus is on
banks, and SWIFT itself, to help corporates understand the most suitable
offering for their requirements and preferences.
Certainly,
corporates must obtain a more in-depth understanding and awareness of what
exactly the move to SWIFT connectivity entails. Indeed, rather than selecting
SWIFT solutions from a product brief , many corporates could benefit from
detailed explanation and demonstrations in gaining a specialist understanding of
the intricacies of SWIFT’s corporate offering.
The growing use of SSB
has gone some way in bridging this knowledge gap for some corporates, however
further collaboration with banking partners who have the SWIFT Bank-Ready
certificate is a sensible approach. This certification means that SWIFT has
effectively audited the bank to ensure they can provide a consistent quality of
SWIFT service and consultation. Moreover, such banks are better placed to help
corporates engage (either through the bank or directly) with SWIFT software, and
begin SWIFT training for individual employees.
Reconciling Financial
Messaging
Such collaboration suggests corporate adoption of SWIFT
connectivity does not necessarily mean a move away from banks’ proprietary cash
management portals. Rather, it is important to acknowledge the benefits of
greater integration between SWIFT standards and proprietary bank solutions; not
just for individual corporates, but also for the market as a whole.
Deutsche Bank understands the importance to clients of being able to explore a
variety of potential products and services, and of helping them to decide the
‘best fit’ for their business. So they have access to both Deutsche Bank’s own
proprietary solutions – including the bank’s online offering – as well as SWIFT
services, and indeed continue to use both.
In all this, it is
important to remember the banking community’s wider goal of making all
transaction-related communication straightforward and easy to use, despite the
growing complexity of market demands.
As payment-related cash and
data flows continue to increase, and become more intricate, the ability to offer
access to a variety of SWIFT and bank proprietary messaging platforms – in a
secure and technologically sophisticated environment – is more important than
ever, and remains Deutsche Bank’s top priority.