SWIFT for Corporates: State of Play

It is 13 years since the Brussels-based messaging co-operative first addressed the corporate sector with the introduction of limited access to its global financial messaging network via a corporate treasury counterparty message type. This was followed in 2002 by the Member Administered Closer User Group (MA-CUG) category, which enabled corporates to exchange SWIFT messages with their main banks. The MA-CUG is a user group of companies that do business with a specific bank over the SWIFT network. The companies can communicate with the bank, but not with each other. A company can join as many MACUGs as it has banking relationships; the bank that created the MA-CUG administers it.

In 2006, SWIFT introduced the Standardised Corporate Environment (SCORE), a closed user group administered by SWIFT, where corporates can interact with financial institutions. SCORE also improved standardisation for the various messaging services within the corporate offering. As SWIFT’s corporate offering matured, banks have been moving away from developing proprietary solutions and have adapted solutions to extend them to their corporate clients who want to use SWIFT.

Today more than 800 corporations have access to SWIFT, including DuPont, Alcatel-
Lucent, Microsoft, Intel and Petronas. “Interest in corporate access to SWIFT is in line with the overall preoccupation of corporates in the market,” says Elie Lasker, head of corporate market, SWIFT. “Fears about liquidity risk are driving corporates to get greater visibility of their accounts using the reach that SWIFT provides. Corporates are also using SWIFT connectivity to mitigate counterparty risk, gaining greater agility to be able to change or route business to a new bank when necessary.”

Lasker says recent volatility in foreign exchange (FX) markets has also led to a resurgence in interest in SWIFT’s offerings such as Accord, which enables real-time matching and exception handling for FX, money market and derivatives confirmations.

“For the past two years, we’ve seen an acceleration of RFIs and RFPs and strong demand from corporate treasurers for SWIFT connectivity, particularly for service bureaus,” says Mark Mixter, global product manager, financial services, at GXS, a UK-based global business-to-business (B2B) ecommerce and integration services company that operates a SWIFT service bureau. “Corporates are increasingly looking for a set of lifecycle services to manage their banking partners, including bank mapping, bank on-boarding, connectivity, integration to both ERP [enterprise resource planning] and treasury management systems [TMS] and comprehensive testing.”

SWIFT connectivity is the ideal approach for corporates with multiple bank relationships that want robust channels to access their accounts for transactions and for reporting, says Wilco Dado, head of global payments, global transaction services at The Royal Bank of Scotland (RBS). “Multi-bank connectivity is the main driver for corporates to access the SWIFT network. SWIFT access gives them the flexibility to switch from one bank to another, which has become more important since the financial crisis. While we haven’t seen much switching, corporates are generally more cautious and want the option of more than one banking partner in each region in order to spread the financial risk.”

Des Twort, treasury consultant at Bank of America Merrill Lynch (BofA Merrill), identifies three reasons for corporates to implement SWIFT connectivity:

  1. As part of a re-engineering exercise in which the corporate is investing in its ERP and TMS systems platform or building a share service centre or in-house bank.
  2. To simplify and rationalise their current banking infrastructure, reducing the number of banking partner relationships and bank accounts globally.
  3. To “keep up with the latest fashion”.

“Typically only the first two scenarios realistically will deliver a business case to justify the investment,” says Twort. “However, some clients have implemented SWIFT Alliance Lite just to dip their toe in the water to experience SWIFT and then decide on further investment in a service bureau.”

Of the connectivity options (see box 1), direct access is becoming less fashionable. “When SWIFT opened up corporate access the only available connectivity was the in-house, direct access model,” says Christoph Steifel, senior sales manager, corporate market, BBP, a SWIFT service bureau operator based in Baden. “However now with the availability of SWIFT service bureaus, there are not many arguments left to corporates to operate SWIFT infrastructure in-house.”

Box 1: SWIFT Connectivity Options

SWIFT enables corporates to obtain financial services, such as payments, treasury and securities orders, with all of their financial institutions through a single, secure and standardised communication platform. By joining SWIFT, corporates gain access to more than 8500 financial institutions in more than 200 countries.

There are three connectivity options for corporates, covering the largest multinational corporations down to small and medium-sized organisations that have relationships with multiple banks.

Direct access

SWIFT recommends this option for corporations that have specific security requirements, as it gives full control over systems security. It is also aimed at companies that need complete control over their IT environment, including storage of messaging data, because it can be delivered as a tailored solution. Organisations that generate a high volume of financial messages are also suited to this approach.

Companies taking this approach can use Alliance Access, which is SWIFT’s prime multi-platform messaging interface. Another option, Alliance Gateway, is a communication interface that shields the application and messaging components from the network connectivity. It allows users to concentrate and manage the flows of multiple messaging interfaces through one single interface, connecting to the SWIFT network via a single SWIFTNet Link instance.

Outsourced access – ‘off the shelf’

Firms that require an easy-to-operate IT environment and have limited messaging volumes are best served by this category of connectivity to SWIFT. The main offering in this category is Alliance Lite, a packaged solution that delivers functionality via a web browser on a standard PC.

The attraction of Alliance Lite is in its fast deployment, ease of installation and operation and cost effectiveness, says SWIFT.

Outsourced access – tailored

There are two options available for corporates in this category – a service bureau for corporates or a member concentrator.

  1. A service bureau will manage a corporate’s SWIFT connectivity, tailoring the implementation to specific needs. It will take on the support and maintenance of the SWIFT connection, shielding corporates from systems and standards upgrades.
  2. Member concentrators are SWIFT members that use their existing SWIFTNet infrastructure to offer services to their institutional and corporate clients. They typically take care of the SWIFT administration, the connection to SWIFTNet and possibly some of the message transformation, therefore reducing the TCO of these smaller users.

Steifel says banks and corporates with existing in-house solutions are migrating to service bureaus in order to reduce total cost of ownership (TCO), while at the same time increasing reliability, serviceability and availability. New corporates joining SWIFT typically choose the indirect connectivity model, he adds, either through outsourcing to a service bureau or via Alliance Lite.

Conversely, says Bert Vanbrabant, head of service bureau at Brussels-based Atos Worldline, some Alliance Lite users are now opting for service bureaus. Early adopters that initially opted for direct access are now migrating to service bureaus because they can outsource the specific technical know-how while realising cost benefits, he says. “Corporates that opted for Alliance Lite because they had limited budgets have discovered the real benefits of SWIFT lie in fully integrated end-to-end business flows. Alliance Lite does not cater for this, which is why a number of corporates are now migrating to a service bureau.”

A strong point in favour of service bureaus for SWIFT connectivity, says Dado, is that they help corporates with on-boarding to the SWIFT network and will undertake maintenance, including making any changes that are necessary when formats are changed, for example.

The service bureau route is not without its challenges – there are more than 140 organisations offering SWIFT bureau services, despite the fact, as Lasker points out, that “not any organisation can become a SWIFT service bureau”. SWIFT has a number of criteria and labels, such as SWIFTReady Connectivity, that are applied to service bureau. Of the total service bureaus, just six – Atos Worldline, BBP, Broadridge Financial Solutions, Bottomline (SMA Financial), SunGard and Syntesys – are cited by SWIFT as “experienced partners” that have a proven track record of helping corporates to do business with banks worldwide using the SWIFT network.

“There are quite a large number of service bureaus, not all of which are focused on corporates. For this reason, we have come out with a number of criteria specifically for SWIFT for Corporates service bureaus, including a minimum number of corporate clients, the ability to do bank on-boarding and other functions specific to corporates,” says Lasker.

In choosing a service bureau, says BBP’s Steifel, corporates should consider whether the bureau can provide round-the-clock, global support. “Service level agreements [SLAs] are becoming more and more important as corporates implement SWIFT on a global scale and not only for treasury but also for commercial and bulk payments,” he says. A bureau should also adhere to globally accepted audit standards (SAS 70 Type II) for outsourcers and service bureau certifications, which are mandatory public multinationals that must comply with Sarbanes-Oxley (SOX) or comparable regulations.

“Multinational corporations want to harmonise their current proprietary banking connectivity on a global scale, and they want to roll out SWIFTNet connectivity to all of their operations around the globe,” says Steifel. “That requires partners and service bureaus with global reach, support and local interfaces and delivery organisations.”

Twort says in addition to checking if a service bureau has SWIFTReady certification, a corporate should also examine the history and track record of the provider, its financial position and stability, implications of possible acquisition of the service provider and whether the bureau can deliver scalability in a timely manner to support growth of the corporate’s business.

Geographic coverage is an essential criterion, says GXS’s Mixter for evaluating SWIFT providers, particularly when most corporates have global needs and want to keep their options open for the future. In addition, “integration experience is a must-have consideration, since SWIFT connectivity is really about integrating the daily financial flows with your banking partners, across firewalls, time zones and back office systems.”

In the early days of SWIFT corporate access, some banks reportedly feared that corporates would use the network to communicate directly with each other, thus disintermediating banks. Lasker says it was more a case of banks being concerned that they would not be ready with services to meet the expected demand. “This has changed now with a large number of financial institutions able to deliver their services over SWIFT. A number of banks have been aggressively promoting SWIFT access to their corporate clients through road shows and workshops,” he says. “These moves have positioned SWIFT with other channels for corporates, as banks realise there is real demand out there from multi-banked corporates for a single channel to communicate with banks.”

While SWIFT’s offering for corporates has remained fairly static in the past few years, banks are more geared up to service corporates over SWIFT than they were 18 months ago, says Atos Worldline’s Vanbrabant. “For years a number of global transaction banks have been promoting services over SWIFT, but only in the past year have they seemed to be ready to deliver.”

Box 2: Corporate Connectivity in Numbers

Number of corporates as of end April 2011: 807

Connectivity options chosen by corporates:

  • Service bureau/shared connectivity: 69%
  • Alliance Lite: 23%
  • Direct: 8%

Click here to download the free gtnews 2011 Buyer’s Guide to SWIFT Service Bureaus.

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