Case Study: National Grid’s SWIFT Connectivity

National Grid is an international electricity and gas company. The treasury department operates a £20bn debt book and is responsible for managing a large number of banking relationships using different electronic banking (e-banking) platforms, terminals and security devices. Making payments and receiving balance and transaction information that could be consolidated into an accurate picture of the true cash position was a highly manual and complex process, until the company turned to SWIFT.

Although cash is predominantly held in sterling and US dollars, National Grid also operates a number of other currencies. Payment volumes are low but typically high in value, adding up to £40bn each year. Security, efficient payment processing, reporting and greater visibility over account balances in the organisation is therefore vital to the company’s ability to manage its cash effectively.

With several hundred bank accounts, the manual processing involved in obtaining balance and transaction reports restricted cash management flexibility and National Grid realised that investing in its payment processing infrastructure could potentially lead to significant benefits. The treasury department took advice from the company’s main banking relationship provider, Barclays, which recommended SWIFT connectivity to provide a single communications platform for financial messaging.

The Solution

National Grid quickly ruled out building and maintaining an in-house connection to SWIFT. It then conducted a detailed evaluation of the available SWIFT service bureau (SSB) suppliers, eventually selecting Bottomline Technologies’ SWIFT Access Service for its connectivity.

Once the company had identified SWIFT connectivity as a key element of the proposed treasury infrastructure it had to decide on the best way to implement it, bearing in mind that the treasury team are not SWIFT experts. With its relatively low payment volumes but high payment values, the benefit to National Grid of accurate balance and transaction data, greater security and operational efficiency helped build the business case for choosing a cloud-based SSB model. This fitted with the company’s strategic initiative to use remotely hosted solutions where possible. It is able to achieve better results by using a cloud platform, as it removes the overhead of maintaining the infrastructure on the company’s own servers which, in turn, frees up both treasury and IT resources.

When comparing different SSB offerings, the treasury team was impressed by Bottomline’s accreditations and credentials in the SWIFT space and it was a benefit that their cloud-based bureau was already used in other high-value corporate payment scenarios. It had the added bonus of a strong endorsement from Barclays, reinforcing confidence that this was the right partner for the company and could meet its long-term SWIFT connectivity requirements.

A project team was formed consisting of Bottomline consultants, National Grid IT and treasury resources, with support from Barclays. Working closely together, the combined team ensured that National Grid enjoyed a relatively smooth implementation of its SSB. The expertise of its strategic partner was to prove invaluable in helping to guide treasury throughout the entire process from initial registration through to ‘go live’, and this was a major help in easing the team’s introduction into the world of SWIFT.

Today the SSB is used to send MT101 messages, which enable National Grid to make a payment to any bank account that is connected to the SWIFT network. It receives MT940 prior day statement messages along with MT942 intraday messages, which provide statement updates, during the course of the business day.

Other message types in use include MT900 confirmation of debit that the funds have left National Grid’s account and MT910 confirmation of credit. The latter is particularly useful as it provides an immediate confirmation when National Grid has received payment funds, and it also uses MT195/196/199 messages for making and resolving queries with its banks.

By using the secure SSB for sending its financial messages National Grid has clear visibility over payment success, which is essential when dealing with high value transactions. The near real-time confirmations that SWIFT connectivity enables allows the treasury team to maintain a more accurate view of its cash across all accounts.

Results and Benefits

SWIFT connectivity has delivered a number of benefits to National Grid which, with the help of its partners, has enabled it to achieve its key project goals. These include increased security and efficiency in the processing of its high value payments and resulting confirmations from counterparties, as well as eliminating a number of manual steps in the payment lifecycle which, in turn, help to reduce the company’s operational risk.

The introduction of real-time cash balance and transaction reporting from any of National Grid’s accounts is a major step forward.  It enables treasury to manage cash more effectively as it has a clear understanding of the true cash position at any point in time.

Security

The automation that National Grid has introduced into its payment lifecycle has enabled the company to make major process improvements that have satisfied the auditor’s requirements for enhanced security for treasury payments. Additionally it was useful to know that the company’s chosen SSB supplier is working towards the Statement on Standards for Attestation Engagements No 16 (SSAE16) audit accreditation, which gives additional confidence in their commitment to process and control excellence.

Treasury now has a more robust and reliable payments platform, which also gives it greater control and flexibility over how it manages its banking relationships. The SSB has enabled treasury to accommodate more overseas accounts, particularly in China where it has seamlessly connected both onshore and offshore accounts into its payments infrastructure.

The outsourced cloud-based SSB model has the added advantage that all backups, disaster recovery and upgrades are taken care of by Bottomline. A clear cost benefit to National Grid, along with time and resource savings, confirmed that the company had made the right choice to use SWIFT for its financial communications.

Future Plans

The effort that National Grid has put into setting up a cloud-based SSB connection to SWIFT has been justified by the security and process improvements that have been achieved. Treasury has removed a number of proprietary banking terminals which previously required maintenance and it is difficult to imagine a scenario where it could ever go back to this approach.

The SWIFT connectivity project has been vital to developing a solid foundation for future treasury projects which includes the introduction of a new treasury management system (TMS). This will give the company further scope to leverage straight-through processing (STP) opportunities and to link more bank accounts, for example by using the SSB in other parts of National Grid.

 

 

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