Alliance Lite2: The New SWIFT Paradigm for Connections
Alliance Lite2 supports all SWIFT messaging formats, standards and file types, along with automated and manual exchange of messages and files. Users also can access other services across the network, including those from third parties. Unlike Lite1 which was targeted at low volume corporates, Lite2 has the same volume capabilities as any other SWIFT connection method and at a very cost effective price point.
Moving to the cloud
Many treasurers are retrofitting their treasury workstations to use evolving methods of SWIFT connectivity. Retrofitting old systems can be costly and time consuming. Alliance Lite2, with message translation provided by cloud providers, allows corporates to bypass all of that.
Some cloud providers can format things specifically for that connection and then receive messages back through it. When it’s run in the cloud environment, the customer’s Alliance Lite2 subscription can be combined with the ability to manage the messages and the formats back and forth between their enterprise resource planning (ERP) system and what SWIFT requires from the banks. Additional features allow corporates to have a visual user interface for all the workflow, approvals, limits and reporting dashboards needed for cash management, forecasting and payments. It is all hosted and subscribed in one place with no need for customer “on-site” installations.
Many organisations already have ERP systems, which typically do not contain treasury models. Those that do are often expensive, difficult to implement and possess limited capabilities—particularly when it comes to using SWIFT and supporting next generation user experiences like tablets and touch interface. Cloud technologies shield corporates from integration problems because they can output, say, payments in a SAP Intermediate Document (IDOC) or Oracle native format and send them to the cloud where they can be converted into SWIFT, sent to any of 10,000 connected banks, and back again for confirmations. From there, the cloud treasury system can see and display all that data without displacing the ERP as the system of record for accounting, payments, etc. This should enable low risk, high quality and high security adoption for corporate treasury groups without a major “big bang” cutover to all new systems at one time. A corporate can simply set up the subscription, and begin by onboarding some outlier banks in low volumes until the solution proves itself, and then cut over their more primary accounts over time.
There is a difference between the Alliance Lite2 user interface, which offers some lesser capabilities on its own, and AutoClient, which is more like a file management system that allows next generation cloud treasury systems the connection to SWIFT but with a much richer user interface and metrics based capabilities. The Lite2 user graphical user interface (GUI) becomes a kind of backup or exceptions and investigations tool. Through this model, a true SWIFT-based cloud treasury provider can offer a much richer user experience and capability set and integrate the messages with the customers’ internal ERP and even treasury workstation system, whereas if they use the SWIFT user interface, there is less opportunity for integration with their back end. This is a key distinction.
There is a common misconception among treasurers that moving to a cloud-based system is a lengthy process. However, implementation typically involves a 30-day set-up followed by a few months for onboarding banks. The actual time depends on the readiness of the individual bank.
As all corporates know, security is critical these days. Many corporates are turning to cloud computing to protect their financials and high impact business data. While treasury departments for major multinationals generally have the required level of resources, smaller and mid-cap businesses often have the same vital functions to perform but on much smaller budgets. However, the cloud offers them the chance to access the same— or even superior—capabilities to those enjoyed by their larger rivals, while keeping their actual involvement and IT risk and expense to a minimum. This doesn’t, of course, prevent larger corporates seeking to reduce the cost of the global treasury operations from also using cloud message hubs.
Alliance Lite2 also allows corporates to cut costs by minimising connections. When we talk to organisations, they often assume that their web-based banking platforms are things that they need to keep, regardless of whether they use SWIFT. That’s simply not true. Once up on SWIFT connectivity, a corporation can get rid of the cost of all of those connections. That’s one of the things that people get stuck on; they use an interface from their largest US or foreign bank partner and assume that they have to keep that in order for their accounts payable to port in and out of their ERP system to route their treasury payments through a major correspondent bank. In reality, they can get rid of all of those connections and the organisation does not have to be a large multinational with a lot of different accounts in other countries to afford this capability.
Treasury departments also tend to find cloud-based systems inherently easy to use. Drag and drop visual treasury capabilities allow treasurers to move money in real time, see balances, see dashboards, group bank accounts into visual balance reporting all in an excel look and feel.
Of course, old habits die hard. A corporate with a credit relationship with a particular bank is likely to continue using that bank’s portals even if other, more efficient technologies are available because of that credit relationship. But often, a bank agnostic approach with respect to connectivity works best with cash-rich companies that don’t rely heavily on a single bank credit relationship.
Treasurers of mid-cap companies, in particular, can potentially gain a competitive advantage over their larger rivals by moving to the cloud, adding more capabilities at significantly lower cost. The resulting ability to access new markets and profit from more efficient liquidity management, global payments, FX and bank account tools means treasury itself can develop into more of a revenue centre for the organisation. Corporates also would have a subscription, rather than a software license requiring capital every year. Treasurers can receive dashboard-based metrics that allow their companies to set targets for exposures and then have the system automatically enforce them for things like low balances, FX exposures and settlements, contract approval and execution, investment exposures to currencies, counterparties, etc.
When you think about an integrated treasury, remember that Alliance Lite2 supports multiple message formats. Let’s say you have someone in a region that is forecasting a payment in Indian rupee. They create a forecasted item in the system, but the system responds that rupee is not a currency that the organisation holds in treasury, which creates an FX exposure. It then appears on the FX dashboard as an exposure and when you make an FX deal, it creates a settlement instruction for the FX contract over SWIFT that is automatically released for the value date of the contract and settlement of funds.
So it basically says, “Okay, on this day, we have to deposit this much money in US dollar debit account because it’s going to buy this much Indian rupee.” That fund availability will be enforced by the system and require deposits sufficient to satisfy the FX exposure and related contract. Then when executed, you’ll receive the statements back from SWIFT that confirm all debits and credits for each currency along the way. There is certainly an integrated process you can use via this platform to be able to do multiple things in one place, rather than a bunch of separate systems—one for FX, one for payments, one for bank statement reporting, one for investment deals, etc.
If a company has five or more banking partners, using a single SWIFT connection available on the cloud via Alliance Lite2 probably makes more sense than connecting separately to all of your banks. An average bank connection costs about US$16,000 per year or more. So for corporates that have more than one connection, the SWIFT Lite2 connection may be a less expensive and enable more flexible growth with a more standardised route. It also gives corporates the built-in benefits of SWIFT, including guaranteed delivery, non-repudiation, automated bank routing, linking of payments to statements within the system, and value-added services like LEIs (Legal entity identifiers), sanctions (terror watchlists), and SWIFT reference and matching data services.
Corporates can also achieve least cost routing for payments via the cloud system. It can dynamically use rules defined by treasury as to when to use wires, ACH, etc., based on cost, delivery requirements and amounts.
Many treasurers are retrofitting their systems to adapt to SWIFT connectivity, which can be costly and time-consuming. By using Alliance Lite2, a cloud-based system, treasurers can improve their ability to connect with the SWIFT network, while achieving substantial cost savings and making their data more secure. Unlike its predecessor, Lite2 has the same volume capabilities as any other SWIFT connection method.
Treasurers of smaller or mid-cap companies find moving to the cloud advantageous, as they can add more capabilities, such as global payments, FX and bank account tools, at a lower cost. But also for large corporates with multiple banking partners, using a single SWIFT connection on the cloud through Lite2 is ideal.