Cash & Liquidity ManagementPaymentsIntegration: Simple Payments with SWIFT

Integration: Simple Payments with SWIFT

Often, the most basic tool of corporate treasury is Excel. Every department involved in some kind of treasury process uses this spreadsheet programme in one way or another. For other tasks in treasury, professionals use additional applications, such as online banking systems for communicating with banks. As a rule, all companies have at least one such solution for processing payments and collecting account statements. In many cases, organisations deploy multiple e-banking systems – and more often than not they use a whole range of applications.

Varied Systems for Payments

E-banking technology varies greatly from one system to the next. Each bank has its own proprietary platform. Therefore, companies usually manage different user names and passwords, and often diverse hardware, for authorising payments. Naturally, only users whose signature is recorded on the bank’s signature card can sign payments on these platforms. If the authorised person changes, the replacement on the signature card causes substantial administrative effort. All this creates a maze of legal and technical restrictions. These are methods which companies have learned to accept but which nevertheless cause problems in day-to-day work. How often have we asked ourselves “How am I supposed to stick my USB dongle into my mobile phone to authorise this payment”, and which chief financial officer (CFO) likes having to deal with a complex system landscape in order to sign an urgent payment quickly?

Integrated Four-dimensional Payments

Fortunately, solutions to such issues have been available for quite some time, especially for payments. Integrated systems are the key to simple business processes in everyday work. Today, payments are possible in all dimensions on a single platform independent from banks one application to manage the payments of all group companies worldwide. Such systems are able to support and integrate all four dimensions of payments:

  • Domestic
  • Cross-border payments
  • Multi-country
  • Multi-bank

Ultimately it even makes no difference whether local subsidiaries, a payment hub or head-quarters create, authorise and send a payment.

Modern Banking Communications

Banking communications are based on diverse standards. One example is the widespread, multi-bank-enabled Electronic Banking Internet Communication Standard (EBICS) format, which is the nearly ubiquitous standard in France and Germany. Technological counterparts include Multi Bank Standard (MBS) in Austria and Finance Transaction Exchange (FTX) in Switzerland. These standards provide a convenient and easy means of electronic communication with banks based in these countries and which focus their operations on local business and local requirements.

The ’next level‘ of communications employs proprietary host-to-host (H2H) connections. They offer the advantage of enabling the exchange of information through direct and individual connectivity with a particular banking group.

H2H connections can transport files in certain formats, e.g. International Organisation for Standardisation (ISO) 20022, for payments or other instructions such as opening accounts (eBAM) or for receiving intra-day and day-end account statements. An H2H connection to multinational financial institutions allows corporates to have one single point of entry to these banks. As a consequence, every subsidiary can potentially transmit payment orders via a single standardised channel regardless of their country for local and cross-border execution. The connection usually processes more detailed notifications about transmission success or failure, error messages etc., providing a wealth of communication details which may offer added value. H2H communication offers true multi-country connectivity – however, this solution is limited to a single banking group only. In case multiple banking groups need to be connected, the proprietary connection has to be maintained for every group individually.

Multi-bank and Multi-country Connections with SWIFT

To achieve the ambitious next step towards global banking communications across countries and banks, companies should consider using a global network. Ideally, a unified banking connection from a central system enables professional and efficient treasury management.

Using the SWIFT network offers companies far-reaching opportunities.
However, when they consider integrating SWIFT with their existing treasury application landscape, many corporate groups face a dilemma. On the one hand, they would like to benefit from the SWIFT network’s advantages with its global reach and associated services, but on the other they fear the costs and the workload of a large, capacity-intensive project.

Integrating SWIFT into tm5

A few years ago, as the first and so far only solution provider, BELLIN began integrating a SWIFT connection as an additional communication channel into its comprehensive range of payment solutions. In the last months of 2012, in close collaboration with SWIFT, the company began adjusting the previously-established SWIFT network connection for use with the tm5 treasury management system (TMS). The partners each developed software components in their traditional areas and combined their individual strengths to achieve their common goal – a standardised and easy-to-implement SWIFT connection integrated into a full-fledged and globally available treasury application.

This meant integrating the connection into the application’s processes and implementing it in the IT environment. BELLIN has offered both on-site and hosted installations of the web-based tm5 application for many years. A high level of experience with solutions provided as a cloud, soft-ware-as-a-service (SaaS) or hosted model were important factors on the way to embedding SWIFT connectivity smoothly. Moreover, SWIFT has very high technical security standards and had to guarantee that its security goals were maintained in the context of this setup.

An Innovative SWIFT Solution

BELLIN and SWIFT intended to make connecting to SWIFT as simple as possible for their customers. Entering into the necessary contracts with SWIFT, which marks the beginning of the customer project, has been simplified. Then, BELLIN implements the required technology completely on its own hosted servers. The consultant finishes configuring the service within tm5 together with the customer. Each customer receives their own bank identifier code (BIC), which is a prerequisite for the company’s access to the SWIFT network. Subsequently, the company contacts its banks and determines which type of message it will exchange with the respective financial institution. These can potentially include any kind of bulk payments via FileAct, MT101 payment files, confirmation messages (MT3xx) as well as communication regarding trade finance transactions, such as guarantees or letters of credit (LCs). (MT798). Customers already benefit from BELLIN’s experience in connecting to numerous banks worldwide in other projects. In case a bank does not yet offer the required connections or functionalities, the parties involved can work out a solution together with SWIFT and can leverage the close cooperation of BELLIN and SWIFT with many banks. If this is not required, however, SWIFT’s role is to validate the customer at the beginning of the project, ensuring that the customer’s connection meets the minimum security requirements and that all messages are transferred according to the high level of SWIFT standards.

Using SWIFT for Other Financial Transactions

Often, a company’s first priority is to ensure that payments and account statements can be processed smoothly before they consider integrating additional financial transactions. Other services, such as integrated electronic applications for bank guarantees or confirmation message exchange (matching services) are always available to be added later with little effort. Once SWIFT integration has been configured, organisations can select from various additional functionality. Connections to other banks (depending on their capability) can be configured and implemented quickly, in contrast to proprietary H2H solutions, which require a completely new implementation project for every new bank. The time and effort per H2H connection is roughly equivalent to the one-time integration of SWIFT connectivity.

Integrated Solutions Reduce Costs

The BELLIN SWIFT Service offers a powerful channel for communication that offers more advantages than just low cost and high extensibility. Companies trying to harmonise their application landscape need no separate product for connecting to the SWIFT network, since it can be integrated into the already established treasury solution. Compared to conventional on-site installations, this reduces the IT requirements of the company substantially, as the systems no longer need to be hosted on-site. IT staff no longer need training for dealing with SWIFT including all necessary security measures.

In conclusion, due to the close and trusting cooperation between the two solution providers, the BELLIN SWIFT Service has firmly established itself and has been implemented successfully for several companies. It is only a matter of time before every international organisation should consider the possibility of a SWIFT connection in order to be well prepared for the future. An integrated SWIFT connection enables quick and simple four-dimensional payments in one of the most sensitive areas of the entire corporate group.

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