Just over one year ago, in June 2006, the SWIFT board approved a new model for corporate access to SWIFTNet called Standardised CORporate Environment (SCORE). It was launched as a result of the rising demand for a broader group of corporates to have access to SWIFTNet and also calls for the existing corporate access model, the member-administered closed user group (MA-CUG), to be further improved.
The MA-CUG model, whereby corporates access SWIFTNet via bank sponsored communication channels, was criticised for the complexity and time involved in the joining process. For example, because most corporates are multi-banked they have to join several MA-CUGs in order to connect with SWIFT via the closer user group of each of their banking partners. This is further complicated by the fact that banks set up their MA-CUGs in different ways, which can make the task of joining multiple MA-CUGs more onerous for corporates.
The introduction of SCORE has certainly introduced more standardisation to the process of connecting to SWIFTNet – corporates only need to join one closed user group to be able to communicate with all of their banking partners. This, of course, alleviates some of the administrative burden associated with the MA-CUG model. Following the pilots in Q4 last year, the model has been commercially available since January 2007. In the last six months, what has been the corporate experience of SCORE?
SWIFT Corporate Access: Progress so Far
The number of corporates currently connected to SWIFT via the MA-CUG or SCORE model is over 200 (as of end-June 2007). Over 30 corporates have joined through the SCORE model since its launch, including Arcelor Mittal, General Electric, Endesa, Ford Motor Company, Renault and SAP. Opinion has been voiced that the figures for SCORE adoption are disappointing and that SWIFT has still not managed to achieve its goal of attracting more corporates. While we must acknowledge the fact that six months is not a long time for the market to adopt a new connectivity model, we must also consider whether SCORE really meets the requirements of corporates as a SWIFT connectivity model.
According to Jonathan Williams at Eiger Systems, the key factor for corporates is whether the services provided by the bank with which they would like to exchange data are available from some or all of their relationship 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,” he argues in his article, Corporate Access to SWIFT – the First Six Months of SCORE. Currently, MA-CUGs allow corporates to send any traffic across any services that its bank and SWIFTNet support while 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.
Williams says that banks are increasingly talking to their corporate customers about SWIFT but that they have only recently started to articulate the services they will offer across SCORE. “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,” he claims. “This means that banks are not offering all their services over the new channel, which is resulting in an unconvincing corporate business case as costly, proprietary systems and communications cannot be retired and replaced.”
In his article, Can SWIFT SCORE with Corporates?, Barry Kislingbury at Misys also explores the reasons behind what he considers to be the slow take-up of SCORE. He suggests that one of the biggest obstacles to the success of SCORE is that those companies that have joined SCORE are large multinationals “who have the resources to implement and maintain not only the considerable SWIFT infrastructure, but also the internal integration with their numerous processing systems.”
SWIFT is taking action in this area by working more closely with software vendors and ensuring that SWIFT readiness is integrated in treasury management systems and ERP systems. SWIFT readiness was traditionally only considered in the bank-to-bank space but now there is progress in corporate applications. “More software vendors are including SWIFT capabilities in their corporate applications,” confirms Elie Lasker, senior business manager at SWIFT. “We have created a labelling programme through our partner solution department where we certify applications and their ability to dialogue with SWIFT within treasury and cash management.” This will continue to be an important area of development for SWIFT going forward.
Corporate Experience of SCORE
Of course, the most important opinion in the discussion about corporate access to SWIFT is that of the corporates who have adopted the new connectivity model. Parth Desai at ACE Software Solutions highlights the opinions of some corporates and their experience of SCORE in his article, Is SCORE a Hit with Corporates?
“While MA-CUGs offered a huge improvement in rationalisation of connectivity platforms and interfaces, the SCORE corporate access model has made life even easier,” says Pierre Boisselier, general manager, middle office and treasury, optimisation projects, at Arcelor Mittal. “Two of the much-vaunted benefits of SCORE have actually played out in reality for Arcelor.” He describes how SCORE has simplified the addition of new banking relationships because “you do not need to go through an administrative process each time you add a new bank” and it offers greater standardisation of message formats. “There used to be significant differences between the banks’ implementation of the standards and SCORE offers a harmonised environment,” he says.
In Desai’s article, another SCORE user, German-based consumer products manufacturer, Henkel, is also bullish about the value of the new SWIFT corporate access model. According to one Henkel representative, “SWIFT provides the standardised communication solution which we were looking for to process our treasury, cash management and low value payment transactions.”
Corporate Case Study: Microsoft and SWIFT
Microsoft is one of the 30 corporates that has joined the SCORE User Group on SWIFT. “We currently receive daily MT940 (prior day statements) reporting from 10 banking partners covering around 300 bank accounts and MT942 (intraday statement) reporting from two banking partners covering around 50 accounts via our existing MA-CUG relationships with these partners,” explains Ed Barrie, group manager, treasury at Microsoft. “Most of these banking partners also support the SCORE User Group, however, we have only transitioned our communication from MA-CUG to SCORE with one banking partner so far since our focus has been on-boarding additional partner banks for connectivity via SWIFTNet versus migrating existing SWIFT partner banks from MA-CUG to SCORE.”
According to Barrie, there is no functional difference between MA-CUG and SCORE other than how SWIFT configures the network linkages. SCORE does simplify the joining process to a one-time event rather than repeatedly signing up with individual banks via the MA-CUG structure. Whether a corporate uses the MA-CUG or SCORE model, they still need to sign a separate electronic services agreement with each banking partner (and, in some cases, multiple times with the same banking partner depending on which countries a corporate’s bank accounts are located in). This is separate from SWIFT’s MA-CUG or SCORE ordering process.
“The major challenge in implementing SCORE is that the initial support by banking partners was limited, however, there are now close to 40 banks (according to the SWIFT website) that support corporate connectivity via SCORE. Some of these banks are existing partners with Microsoft and we will consider communicating with them via the SCORE user group,” affirms Barrie. “Many of our existing in-country banking partners do not support either SCORE or MA-CUG and we are asking all of our banking partners to support communication with us via SWIFTNet using preferably the SCORE option or the MA-CUG connectivity option.”
The second biggest challenge with the SCORE and MA-CUG models, according to Barrie, is finding the right person or group within a banking partner’s organisation to initiate the on-boarding discussions with. “Often, when we initiate the dialogue with our partner banks, our account manager is not aware that corporates can use SWIFTNet and they tell us that SWIFT is only used by banks to communicate with each other,” he says. “We have to spend time educating the account manager and then they spend time trying to find the right person or group within the bank to continue the discussions with.”
A third challenge for Microsoft has been the lack of take-up among smaller banks for SCORE and MA-CUGs. “We see strong support of corporate connectivity via SWIFTNet SCORE and MA-CUG by large international banks but the support is lacking or non-existent among smaller banks that only have domestic presence,” explains Barrie.
Corporate Education: Exploring SWIFTNet
There is evidence that banks are starting to communicate more with their corporate clients about access to SWIFT. In the past two weeks, for example, there have been two major events dedicated to raising corporate awareness. HSBC hosted a one-day seminar for corporates, banks, solution providers and consultants to share information, opinions and best practice relating to SWIFTNet corporate-to-bank access. In addition, a ‘SWIFT for Corporates’ Day was hosted by JPMorgan Chase and organized by Treasury Strategies where senior treasury and financial executives shared insights about the applications for, and benefits of, corporate access to SWIFT.
As corporate access to SWIFT gains more traction within the industry, we are likely to see more of these events, which is a positive sign that banks are taking more responsibility for increasing corporate access to SWIFT as well as recognising the business benefits for themselves and their corporate clients.
Significantly, for the first time at SIBOS this year in Boston, SWIFT has dedicated a two-day forum to corporates where senior managers from corporates and financial institutions will be able to discuss the issues they collectively face in the corporate-to-bank space.
One of the areas that should be developed in terms of corporate education is raising awareness about the range of services that SWIFTNet can offer. According to Barrie, at Microsoft, corporates should not view the capabilities that SWIFT provides in a vacuum or as a ‘treasury only’ tool but rather work on developing a vision of ‘enterprise financial messaging’ and what that might mean for the company. “Once this vision has been created then corporates can determine how to leverage the capabilities of SWIFTNet to help meet these needs,” he says.
As a guideline, Barrie outlines some of the issues that need to be considered by corporates when connecting treasury and cash management applications to SWIFT:
- Deciding which SWIFT messages and services (i.e. FIN, FileAct or InterAct) to use within their business processes and line-of-business application needs.
- Developing an understanding of the market practices for specific messages (more applicable to FX and derivative related messages).
- Deciding which middleware applications to use to connect line-of-business applications to SWIFTNet.
- Understanding how to map SWIFT messages (FIN and XML) into and out of line-of-business applications via SWIFTNet.
In his article, Developments in SWIFT Corporate Access, Martin Zimmermann at Biveroni Batschelet Partners, highlights SWIFT’s capabilities beyond its messaging services and provides an overview of other transaction solutions, such as SWIFTNet Accord, for example, a matching service for treasury deal confirmations, which centralises, stores and matches the confirmations between both parties as well as the Trade Services Utility (TSU), SWIFT’s new centralised matching and workflow engine.
SWIFT’s Lasker underlines the fact that the organisation will broaden the spectrum of services that it offers. “Payments and cash management have been the killer applications to date but we are aware that treasurers do have other functions to perform,” he says. Together with its community, SWIFT is looking at other treasury processes, such as automating FX confirmations, securities and also a money market fund solution, for example. This will also be a focus at SIBOS 2007 with one session dedicated to the subject: ‘Beyond Cash Management’.
Importance of Standardisation
According to Kislingbury at Misys, to truly make life easier and reduce costs, the industry needs international standards for the messaging between corporates in the trade space and they need to be aligned with the corporate-to-bank messaging for trade finance and payments. “Over the years, there has been several disparate initiatives, including TWIST and more recently ISO 20022, which have produced advances in the payment initiation standards for corporate to bank payments, but there have also been a few missed opportunities,” he says.
Standardisation, or rather the lack of standardisation, is certainly a hot topic when it comes to the discussions around SCORE and corporate access to SWIFT. One of the main reasons why banks and corporates have been unable to resolve the issues surrounding common standards is that the two groups inevitably have different priorities. The focus for the past decade – among banks and corporates – has been straight-through processing (STP). For banks, STP has been about achieving a ‘clean’ payment transaction while, for corporates, STP is really a much broader question of streamlining payments and integrating that with supply chain and operational efficiency.
Banks have been reluctant to embrace the concept of common standards and this has been a barrier to progress. They have feared that common standards and interoperability would increase the ability of their clients to leave them easily. The pervading mindset at many leading cash and treasury management banks was that by lowering the barriers to clients leaving them, competition would be increased and the bottom line would be hit.
SCORE undoubtedly means that the ‘switchability’ of clients will increase, the new model and the broader use of SWIFTNet by corporates is, however in the interest of many bank clients and therefore they should encourage corporates to use it where it makes sense.
Jonathan Roy, at Citi, agrees that it is important to capitalise on the momentum of the SCORE initiative. “Following the banks’ recognition of the importance of agreeing on a single standard, and the work that had already been done in forums such as TWIST, SWIFT is co-ordinating the introduction of the new ISO 20022 XML standards for payments, receivables, returns and rejects and statements,” he says.
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Rolling out the ISO 20022 standard will certainly be a significant focus for SWIFT in the second half of this year. “We are currently working with both banks and corporates to implement the standards through an early adopters’ programme,” affirms Lasker at SWIFT. “In order to make sure implementation is consistent industry-wide, collaboration is essential.”
Lasker adds that while SCORE is indeed a big step forward in terms of standardisation, it is currently only available to listed companies. “The MA-CUG remains an important model for corporate access and we are working on improving this model to make it more user-friendly for non-listed companies who are not eligible for SCORE, and therefore ensure they can enjoy the same high level of standardisation through the MA-CUG model,” he says.
What Next for Corporate Access to SWIFT?
At this stage, it is probably too soon to judge the success of SCORE as a corporate access model to SWIFT. It has only been commercially available for six months and there are various stumbling blocks that still need to be resolved before more corporates are motivated to join. In particular, banks have a significant role in supporting industry efforts towards greater standardisation and also creating a clear business model in terms of the services that will be offered via SCORE. Corporates, in turn, also need to review their own connectivity channels with banking partners as well as their individual business case for joining SWIFT.
Microsoft’s Barrie is certainly clear about SWIFT’s proposition for corporates. “The business case for corporates using SWIFTNet is simple: a single channel used to communicate with the majority of a corporate’s banking partners that provides maximum security, reliability, resilience, scalability and lower overall total cost of ownership leveraging industry standard message formats and data exchange capabilities,” he says. “The days of individual point-to-point connectivity between a multinational and its banking partners is limited due to the high cost and complexity (on both sides) and overall lack of scalability. Multinationals are quickly seeing the same business case for leveraging SWIFTNet.”
In fact, the pitfalls of point-to-point connectivity and the rise of the network model is the focus of the first part of the five-part guide, Why Connect? Why Now? by SunGard AvantGard. The article encourages corporates to re-assess their bank-to-corporate connectivity models based on the fact that network models have always proven to be more cost-effective and beneficial than closed point-to-point methods.
While Microsoft’s Barrie supports the SWIFT business case, he is vocal about what needs to be done in order to improve corporate access going forward. “SWIFT and banks should help make it easier to connect the people within a corporation to the correct people or group within each bank that understands how to implement corporate-to-bank connectivity via SWIFTNet using either the SCORE or MA-CUG option,” he says. “Corporates spend far too much time trying to figure out who to contact at the bank in order to begin the dialogue of using SWIFTNet.”
He also believes that SWIFT should consider providing ‘best practice’ or prescriptive guidelines to corporates on how to best implement SWIFTNet SCORE for communicating with their banking partners and which messages and services are most commonly used by corporates.
In addition, he advises banks to gain a better understanding of the fact that corporate treasury departments generally lead SWIFTNet initiatives in a centralized manner from their corporate headquarters, which can create challenges when a bank has traditionally only had contact with the local subsidiary of the corporation. “Banks need to be responsive to enquiries from corporate treasury departments of organisations. They also need to work on streamlining electronic services agreements that cover SWIFTNet connectivity,” he says. “We have seen 40-page service agreements, for example. SWIFT has provided a standard electronic services agreement template for use with SCORE but we have not yet seen any bank adopt this.”
Clearly, there is still work to be done in terms of encouraging more corporates to connect to the SWIFT network and raising their awareness and education on SWIFTNet. Banks, corporates, software vendors and SWIFT all have a role to play in this and the fact that there is widespread recognition of the value that SWIFT can offer corporates as a business model is a positive sign. SWIFT has stated that it wants to be connected to 25% of the Fortune 1000 by 2010 – with the current momentum and emphasis on education programmes, this appears to be an achievable goal.
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