Corporate Access to SWIFT - the First Six Months of SCORE
It has been almost six months since the release of SWIFT’s Standardised CORporate Environment (SCORE) proposition that sets out to simplify the process for corporates to use SWIFT. In my first article for gtnews, #gtnarticle(6581)#, I looked at the background to SCORE, compared it with the upgrade of the BACSTEL payments channel to BACSTEL-IP in the field of corporate-to-bank communications and reviewed the main reasons why treasurers and financial directors might want to take up SWIFT’s offer.
It is worth recalling the differences between the new SCORE proposition and the existing member-administered closed user groups (MA-CUG) product, launched in 2002. In essence, SCORE provides fewer ways for corporates to transfer data than MA-CUG, but makes it easier to join, especially if a treasurer has relationships with more than one bank. SCORE changes the SWIFT for corporates proposition from a bank-centric view to a corporate-centric view.
MA-CUGs were managed by a single bank (a SWIFT member) for its communications with its corporate client(s). SCORE is administered by SWIFT to allow a single corporate to communicate with multiple banks.
MA-CUGs allowed corporates to send any traffic across any services that its bank and SWIFTNet supported. SCORE limits this to FIN messages and FileAct, allowing payment instructions and files to be transferred, but not interactive services such as secure e-mail or secure web access. It is, however, worth noting that existing MA-CUGs are used mostly for FIN and FileAct. SWIFTNet FIN is SWIFT’s core store-and-forward messaging service. SWIFTNet FileAct allows secure and reliable transfer of files and is typically used to exchange batches of structured financial messages and large reports.
As SCORE is administered by SWIFT, the corporate needs a single contract for SWIFTNet services, rather than one per bank. The corporate must abide by any additional agreements specified by its bank.
Only publicly listed companies from the Financial Action Task Force on Money Laundering (FATF) countries are eligible for membership of SCORE, unlike the MA-CUG proposition, where a customer has only to persuade its bank to allow them to participate.
From SWIFT’s perspective, SCORE is just a different way of dealing directly with its corporate customers, rather than at arm’s length through members. In essence, this is simply an administrative change that creates a precedent allowing corporates to become direct SWIFT customers, rather than indirect as customers of their bank.
The key value for corporate treasurers is not, however, being more directly involved with SWIFT. In essence, the benefits have proven to be:
For corporates, the key driver of success is whether the services provided by the bank with which they would like to exchange data are available from some or all of their banks. Does SCORE solve their problem? Does it allow them to remove complexity and cost from their communications systems with the banks? This question is fundamental to whether or not corporates will take up the offer from SWIFT.
In the past few months, as with all good, pre-planned marketing launches, SWIFT launched and released SCORE, with a number of prospects taking up the new product and strong growth forecast. But has that happened?
Following the release and launch of SCORE, the market has been quiet, with only a few corporate organisations making public statements. This is to be expected at this stage of the market. Only a rash corporate treasurer changes his/her systems to a new set of standards without a strong business case – and ‘rash’ is a word seldom used to describe corporate treasurers.
I believe that, unfortunately for SWIFT and its members, corporates are looking seriously at the business case for SCORE and MA-CUGs, and reviewing the benefits it can bring them in light of their own consumption of bank data services and the availability of those services from their bank(s) over SWIFT.
It may well be that, until companies can turn off a system or retire a communications link, the financial business case based on cost savings will not make sense. Until there are tangible reductions in operational costs, SWIFT for corporates may remain an interesting experiment for some and a real benefit for only a few.
Increasingly, banks are starting to talk to their corporate customers about SWIFT and the benefits of exchanging information over the new channel. Banks that previously offered MA-CUG services have started to promote SCORE to their treasury and payments customers as well. It is interesting to note, however, from discussions with some banks that, perhaps, SCORE is not ideal for all of their corporates and that a MA-CUG may be more appropriate in some cases.
Banks have only recently started to articulate the services they will be offering across the new communications channel. Some have taken the approach of ‘dipping a toe in the water’ by allowing corporates to initiate payments using FIN messages. Some have started to provide existing statement data across FileAct. Others have allowed corporates to send files of payments in non-SWIFT formats or by using the new ISO 20022 XML-based standard. The overall picture is of a chaotic, early market for banks’ SWIFT-based services, with little or no consistency between banks. Meanwhile, corporates have to rely on proprietary, legacy systems to build a complete set of corporate-to-bank data services.
In the midst of this confusion, one bank has made a bold claim that all data it currently offers through other channels is available via SWIFT. This may sound like an assertion that is easy to back up, but behind this statement lies many months of work shoe-horning legacy data services into a modern, self-consistent portal.
If this statement is true, it means that, for the first time, a corporate can retire its existing, proprietary data-links with this bank and just use SWIFT. It is not clear whether this is a clean, efficient, seamless set of services or simply a set of disparate legacy systems presented across a new, efficient interface. However, the significance of this is clear: it can be done.
Often, banks claim the pressure of maintaining legacy systems and supporting legacy customers gets in the way of innovation and solving the customer’s problem efficiently. Providing all of a bank’s data-based solutions over a single interface is, therefore, a significant step forward, especially when one considers the multitude of customer-facing bank systems involved.
It could be argued that SCORE is not in the banks’ short-term interest as it allows corporates to more easily switch from one banking service provider to another. In the medium term, many banks are looking to transform their products from being proprietary and equivalent to standards-based, value-added services. Allowing existing corporate customers to shop around for banks means that some banks may struggle to survive to the medium term and, therefore, any step that enables their customers to be more promiscuous with their custom could prove fatal in the medium term.
This inertia means that banks are not offering all their services over the new channel. This is resulting in an unconvincing corporate business case as costly, proprietary systems and communications cannot be retired and replaced. If corporates fail to adopt SCORE, banks then see low customer demand, which does not encourage them to promote SCORE – see figure 1 below.
In essence, the SCORE proposition currently is this: wait for the banks to differentiate their services not by proprietary software, but by real added-value services.
As expected, there has been no overwhelming victory for SCORE and SWIFTNet in the past six months. Banks still need to communicate their strategy to their customers more clearly, while corporates are still assessing the position. The next 12 months will be crucial for the ‘SWIFT for corporates’ proposition.
The bank business case is confused by the need to move from customers locked in by software to customers who have loyalty because of the value the banks create for them. It is the move from lock-in to competitive differentiation that banks need to pursue.
For banks that do see the benefit, it is essential that, if they are to offer data services to their corporates over SWIFT, they articulate clearly what those services cover and how they will save businesses money.
For corporates, it is time to build the business case, assess the bank offerings and work out whether and how to amalgamate all the new and existing data feeds from this new channel into their business systems.
This year, SIBOS in Boston will see the banking community welcoming the corporate community to its annual forum for the first time. If, at SIBOS, only a few banks promise to make available all of their services over SWIFTNet, SCORE could be viewed as an interesting experiment but with limited longevity. If most banks offer their services, the potential of SCORE to be a true business enabler will remain high.