Why Corporate Treasurers Still Favour SWIFT Service Bureaux

gtnews recently spoke with Per Trifunovic, CEO of Fundtech’s  BBP
business unit, the first SSB to receive SWIFT’s premier operational
practice certification, on the trends SSBs are seeing in this new
environment. 

 
Q (gtnews): Having talked with SWIFT and some of our other contacts recently, they report that corporates are largely moving away from service bureaux and are migrating to Alliance Lite2. However, you say this might not be the case. Can you describe the trends you’ve observed?

A (Per Trifunovic):
We see a very strong market; many multinational corporates [MNCs] are using service bureaux. From our perspective, this trend is unbroken.

As you know, we have been in the SWIFT outsourcing market for over 20 years. We have more than 600 banks and corporates using Fundtech’s service bureaux for financial messaging, including close to 100 corporates, which represents about 12% of the market worldwide. What we have seen is that some of the corporates that actually went with Alliance Lite2 are now moving back to service bureaux. The reason, from our perspective, is quite clear: what the service bureau is offering is much more than just SWIFT connectivity.

For the clients you’ve seen go with Alliance Lite2 and ultimately switch back to SSBs – what has been their main issue? What specific service have they found that they really needed from a SSB?

MNCs have more demands than just connecting to SWIFT; it’s really the whole package. Let’s say you want to integrate a complex treasury management system; the integration aspect becomes a very crucial point.

Additionally, corporates want to send commercial payments out of payments factories to their local banks. Each bank in each country has its own payment format – the US has the National Automated Clearing House Association [NACHA], the UK has Bankers’ Automated Clearing Services [Bacs], in Europe you have the single euro payments area [SEPA] – there is a lot of complexity, and a service bureau can help with these format conversions.

What’s more, some service bureaux also provide a number of value-added services which are of great benefit to corporates. These include reconciliation, message validation and compliance filtering, among others.

Could you provide an example of a company that was having trouble with different payment format while operating in a new region and how you assisted them?

Yes, one of our corporate customers, Unilever, initially ran its infrastructure in-house, with service centres in Singapore, Europe and America. However as the demands of the business grew, the firm decided that rather than continue to build out a team with specific skills in interbank connectivity, they would outsource to a service bureau that had the necessary skills and experience. They turned to Fundtech, so that we could provide the local expertise and support out of our local offices that they needed.

Another example is a major multi-national home, kitchen and laundry appliance customer of ours. This customer started with Alliance Lite2, but moved back to a service bureau model. Given the complexities of their global business – with multiple operations in many different countries – they needed the special expertise that only a service bureau could offer.

As mentioned earlier, many service bureaux are offering much more than SWIFT; they also provide connectivity to many interbank services – not just SWIFT – as well as reconciliation, message conversion and compliance filtering, among others.

What about cost-effectiveness? Companies may look at Alliance Lite2 and see it as only one fee, but may eventually need to bring in new staff members and/or train staff on SWIFT. Meanwhile, with a SSB, they would already have all the services at their disposal, so might it ultimately be cheaper?

Absolutely. Many corporates do not want to invest in the specialised connectivity skills that are required as their business grows. Thus a service bureau model is often very attractive. When you look at the cost of ownership of Alliance Lite2 versus a bureau, on the first view, Alliance Lite2 can look very attractive. SWIFT charges a one-time cost initially, however, that cost does not include integration.

As soon as you start to look at the costs associated with integration – for example, integration with your enterprise resource planning (ERP) system (Oracle, Wallstreet, Sungard, etc.) or other systems – those costs can quickly add up. Thus it is very important that corporates identify what they need and what costs are covered in the services they are purchasing; otherwise, the add-on costs can quickly surpass the amount they would have initially spent on a ‘full service’  service bureau model.

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