Standing their Ground: SWIFT Service Bureaux
Google, Chevron and United Parcel Services (UPS) are among the major names that have turned to the company as an outsourced solution to secure their day-to-day SWIFT connectivity.
Murali describes Axletree’s work as “a very critical link in the ecosystem of the financial supply chain”. The role of the bureau has come under question since the launch of SWIFT’s AllianceLite2, which SWIFT describes as the easiest way to access its network to transfer financial transactions through a financial message.
However, while the emergence of AllianceLite2 might have created an increased competitive climate, Axletree continues to expand. Murali reports: “As recently as few weeks ago we received a confirmation from a large corporation that looked at AllianceLite2 and another service bureau but has confirmed that it will go with Axletree. So not everyone has stopped doing business with service bureaux and gone with Lite2.”
The bureau market has faced two challenges in recent years, but still remains a viable option. The first challenge arose in 2010, when SWIFT announced its 2015 strategy – part of which was to build direct connectivity and direct relationships with customers. In essence the bureau market was under threat of disintermediation.
“The 2015 strategy has negatively impacted the SWIFT eco system of partnerships putting SWIFT sales people in direct competition with the SWIFT service bureaux,” says Murali. Previously organisations such as Axletree Solutions were perceived as an extended channel, rather than a competitive third party.
The outcome from that strategy was the launch of AllianceLite2 which provides a secure, cloud-based connection to the SWIFT network and related applications and services. It is promoted as easy to use, cost-effective and reliable. Murali notes that Alliance Lite2 is an ambitious programme, which is generating success. However it is not for everyone and it will not necessarily always integrate well with the large complex systems of a large corporation.
The second factor which has made life more challenging for the bureau market is SWIFT’s Shared Infrastructure Programme. Under the new programme, published in January 2013 and effective as of April that year, service bureaux can choose to comply with one of three different operational practice levels. Listed in ascending level, these are: the Minimum Operational Practice, the Standard Operational Practice and the Premier Operational Practice.
On its website SWIFT notes: “All service bureaux must comply with the Standard Operational Practice requirements by 31 December 2016. However, to facilitate a smooth migration to the Standard Operational Practice level, SWIFT allows service bureaux to comply with less strict Minimum Operational Practice requirements in 2014 and 2015.”
Service bureaux that choose to further distinguish themselves and achieve a Premier Operational Practice certification will be rewarded by SWIFT with the designated label of Service Bureau Premier.
In other words the SWIFT service bureaux marketplace is in the middle of a significant – and to some bureaux potentially devastating – transformation.
An Increased Value Proposition
Axletree Solutions has obtained the Premier status, as has its peer Fundtech BPP. From Murali’s perspective SWIFT is asking the service bureaux to increase the value that they are offering customers. In response to the 2010 SWIFT strategy, Axletree began diversifying into new areas.
To give an example, Murali explains that his organisation has built a treasury management application that has been well received – named TreasurYtree, it launched in October 2013 – as well as back office processing solutions that leverage the SWIFT treasury application and processes. In essence the company has moved from being a pure play SWIFT service bureau/provider to being a bank and treasury automation expert.
As well as increasing its offering, Murali points to other factors which bureaux customers are looking for. Perhaps unsurprisingly the level of service tops this list. As he says: “Because this is a critical link between the customer and its bank, Axletree has to ensure the highest level of security, confidentiality and integration with systems and guarantee the delivery of the transaction at either end.” Additionally of course it should be remembered that bureaux continue to bring their clients onto the SWIFT network and so SWIFT continues to benefit from that particular revenue stream.
For customers such as Google, Axletree takes the transaction and the payment instructions from the corporate treasury and enterprise resource planning (ERP) systems and sends it to their banks, which process the payment and report back. Axletree then performs the inbound work, taking the report from the banks and feeding it into the corporate’s systems.
This level of service from a top bureau offers customers flexibility and a speed of delivery which is hard to match and will be required for the foreseeable future. The bureaux market certainly isn’t planning to make a quiet exist. Its players have recently formed Solutions4SWIFT, which is described as an independent solutions provider community (SPC) forum for SWIFT. It will be interesting to see what impact they have on the direction of travel.
As was noted in the 2013 issue of the
gtnews SWIFT Service Bureaux Buyer’s Guide
: “there have been changes here to the qualifying criteria and operational performance levels, with more emphasis on security, professionalism and resiliency perhaps driving some smaller players from the market as the new qualifying criteria are rolled out.
“Larger SSBs providing a full end-to-end bureau capability … all assist in navigating the complex legal and technical issues in connecting to SWIFT and have back-up facilities and business continuity plans, could be the last ones left standing as a consolidation process gets underway due to the increased expense and demands of being an SSB under the new criteria.”
It was an accurate prediction and remains a pertinent summary of a shifting but still vibrant marketplace.