Once an out-of-reach ideal, access to SWIFT is becoming easier and more affordable for corporates across the globe. Offering treasurers a single, standardised, and secure messaging interface with their banking partners, SWIFT Corporate Access is recognised as a key tool in enabling effective treasury management today. With the commonly perceived barriers to adoption quickly dropping away, isn’t it time your company thought again about SWIFT Corporate Access?
Managing bank communication channels and co-ordinating bank accounts on a global basis is a challenging task. The cost of maintaining multiple bank interfaces is high and the complexity of managing numerous user IDs and passwords is time consuming and frustrating. Above all, the inability to view cash positions across a global bank network often leads to internal inefficiencies, including idle ‘pockets’ of cash.
Mike Burn
SWIFT Corporate Access is designed to address these pain points, helping corporates to achieve increased visibility over their global cash position. The driver behind this is the centralisation of account information – a goal that, for many treasurers – has been superseded by crisis-related risk monitoring.
Mike Burn, ACCESS℠ Product Executive, Treasury Services, EMEA, J.P. Morgan (pictured left), recognises that corporates have higher priorities today than SWIFT as a stand-alone project, but believes that SWIFT Corporate Access plays a key role in achieving overall business efficiencies. “Naturally, there are a number of priorities on the treasurer’s agenda today: FX risk management, investment security and counterparty exposures, to name but a few. As such, SWIFT may seem to be yet another item on the ‘to-do’ list for many treasurers, but in fact, as part of an ‘umbrella’ project, such as centralisation or a payments factory, it could be an essential tool in helping to address those more immediate priorities and indeed in future-proofing the treasury function.”
Reasons to take another look
The benefits of SWIFT Corporate Access stretch beyond cash visibility and a reduction in the costs and complexity of dealing with multiple bank connections, however. For example, the high level of consistency in corporate-to-bank communications that SWIFT provides makes it possible to increase transparency around critical operations – such as treasury settlement, accounts payable, accounts receivable as well as other payment and collection operations, trade finance, securities and custody operations, and foreign exchange confirmations.
Moreover, additional potential benefits include:
Increased geographic reach to your financial operations.
As long as the chosen bank is SWIFT-ready, communications can be made between a corporate and a bank in any location. This increases both the choice of provider in a given location and of course allows for increased visibility over cash on a worldwide basis.
Improved audit compliance.
SWIFT Corporate Access supports compliance requirements with relevant regulations and principles of good practice, such as the US Sarbanes-Oxley Act and the UK Corporate Governance Code.
Improved STP and processing capacities.
SWIFT not only allows for the enhancement of straight through processing (STP) but also offers the related efficiencies of using standards to communicate across your bank network, including near-real-time updates of cash balances.
Security and resilience, integral to the SWIFT network.
SWIFT boasts a 99.999% availability record. As a system that is used by the world’s banks and many payment systems, SWIFT is a trusted means of communicating payment instructions and other sensitive data.
Support for the non-repudiation of payments.
This gives peace of mind to both parties: in the case of a dispute, SWIFT is able to confirm that a message exchange did take place as claimed.
Given these benefits, why is the adoption level of SWIFT Corporate Access still relatively low – having just hit the 900 user threshold? According to Burn, it has a great deal to do with perception. “Expense is overwhelmingly the most significant, or frequently cited reason for not pursuing SWIFT Corporate Access. Although the service has its associated costs, SWIFT has worked hard to make the offering more affordable.” Testament to SWIFT’s on-going pricing restructure is the fact that SWIFT Corporate Access is no longer the domain of only the largest MNCs – mid-market treasuries are now taking advantage of it too.
“When corporates are able to find the time and resources to do a detailed analysis on the benefits that SWIFT could bring, it often turns out to be cheaper than anticipated and easier to implement,” adds Burn. “J.P. Morgan Treasury Services has worked with numerous clients to assist them with these calculations and SWIFT was frequently the most economical route.”
So, with the traditional barriers being lowered, is SWIFT Corporate Access right for your company, what are the available connectivity options and how should implementation be approached?
Best practice makes perfect
When considering SWIFT Corporate Access, companies looking to adhere to best practice should examine the full project lifecycle, according to Stew Cofer, SWIFT Product Manager, Treasury Services, EMEA, J.P. Morgan. The three main phases are as follows:
Planning and preparation.
Building a business case.
Choosing the right connectivity option.
“Planning and preparation is often the phase that gets the least focus but really needs the most,” says Cofer. While corporates can do much of the planning and assessment in-house, or speak to other treasurers who have implemented SWIFT, assistance from bank partners can help to fully realise the advantages of SWIFT Corporate Access. Banks will be able to assist by identifying the types of services and messages that they support via the SWIFT network. Remember that not all banks are reachable by SWIFT, or do not support the SWIFT Corporate Access model. However, the SWIFT Bank Readiness Certification programme should help corporates in determining the suitability of their banking partners for the project.
Stew Cofer
J.P. Morgan achieved its Bank Readiness Certification at the inception of the programme in February 2011 and has been a strong supporter of SWIFT Corporate Access since its inception. “By working with J.P. Morgan,” says Burn, “our clients can draw on the bank’s extensive experience in this area. Although no two SWIFT implementations are the same, there are definite lessons to be learnt and we have picked up a number of tips and hints for corporates along the way.” Many customers are leveraging J.P. Morgan’s industry experience with ISO 20022 in combination with SWIFT, allowing them to utilise the same formats and methods across their global bank network, reducing technology expense and streamlining their operational processes.
Furthermore, J.P. Morgan can facilitate communications with a corporate’s banks that are SWIFT members but do not participate in SWIFT Corporate Access, thereby allowing a corporate to further leverage its investment.
Building a solid business case
Having a realistic business case to present to the Board that includes capital requirements and expected return on investment can be ‘make or break’ for a SWIFT implementation. By gathering as much data as possible up front, you will be better positioned to build a solid proposal.
The main points to consider around capital requirements include:
SWIFT costs, for registration, connectivity and messaging.
Financial institution costs for transactions and reporting.
Non-SWIFT costs for project management, operations and application integration.
While the number-crunching may require some assistance from your banks, one of the harder stages to building a business case is quantifying the less tangible benefits. These include risk management, security, fewer manual errors and improved control. In fact, these may be key drivers behind the ‘umbrella’ project which SWIFT forms a part of. Providing an accurate indication of the financial benefits, from improved working capital for example, can also be challenging. According to data from SWIFT, however, corporates that have joined have typically received between 200% and 300% return on investment.
Burn and Cofer recommend that the following considerations are also taken into account when building the business case:
The cost of internal processes.
Build a model for work-hours spent and costs associated with gathering and incorporating banking data. In addition, remember to quantify security credential management, as each bank will have its own requirements. Furthermore, by adopting standardised SWIFT formats across multiple banking institutions, you will be able to eliminate the rekeying of payments for your various banks, which will reduce labour costs and reduce margin for error.
Conduct an inventory of your banks and accounts.
Assess the amount of actively managed cash and the value and volumes of accounts that are not actively managed. This assessment will enable you to develop a global financial positioning model. Once you have visibility into all your accounts, you will need to determine whether it will be necessary to pool all of your transactions for a comprehensive view.
Understand your total cost-of-ownership for your banking infrastructure.
Assess current technology and any necessary changes.
Evaluate your core systems, such as treasury, accounting, and your ERP applications and assess any requirements for integration with key banking communications applications (eg cash accounts, payables). Speak with your ERP or workstation provider(s) to see if they are SWIFT capable. If so, find out what formats they support (MT and XML) across the various business processes that you intend to deploy through SWIFT.
Technical connectivity
How a corporate connects to SWIFT is invisible to their counterparties, but there are financial and operational considerations affiliated with each method:
Direct access
The technical infrastructure is located at the corporate’s offices, requiring up front investment and on-site technical support and expertise for on-going management and maintenance of the connection. This option is ideal when the corporate has specific security requirements, or requires a high volume infrastructure, for example. However, corporates should be aware that this is not a ‘plug and play’ solution.
Alliance Lite
This is an ‘off the shelf’ outsourced solution for customers with low volume requirements. This browser-based solution is often used as an entry into SWIFT, or to build a test case for an eventual move to a direct SWIFT connection or the utilisation of a service bureau.
Service bureau (indirect access)
The technical infrastructure is hosted and maintained by a third party, providing specialist knowledge, full disaster recovery and value added features such as the conversion of messages to SWIFT format.
Member/concentrator (indirect access)
The infrastructure is hosted and maintained by a third party offering the same benefits as the service bureau model. However, the member/concentrator has to be a SWIFT member and they offer a broader remit of services, including administration of the SWIFT contract such as registration and receiving SWIFT invoices.
Of course, deciding whether or not to connect to SWIFT and/or the best connectivity solution to use will depend on a corporate’s own set of circumstances and business requirements. Size, global locations, the number of banking relationships, transaction types and volumes, existing systems, the current structure in treasury and strategic plans will all impact on the ultimate decision.
Administering your SWIFT membership
There are two different SWIFT membership options for corporates, but they are not mutually exclusive. They affect which message types you can exchange and with whom you can exchange them. Either SWIFT or your bank representative can advise further on which is right for you.
SCORE
Since 2007, the Standardised Corporate Environment (SCORE) has been the main model for corporate participation in SWIFT. It is a one-to-many open model, meaning that corporates that join this group can send/receive with any of banks that have joined it. SCORE is widely perceived as the ‘default’ option for corporates joining SWIFT.
Any privately or publicly held corporate can join SCORE. If you are not a listed company, a SCORE bank can sponsor you into SCORE by recommendation/sponsorship.
MA-CUG
The Member Administered Closed User Group (MA-CUG) was the first model through which corporates were able to exchange a broad range of treasury and cash management messages via the SWIFT network. Set up in 2001, it opened up SWIFT to corporates through a bank sponsorship structure. It is a one-to-one model where the messages and/or formats that will be exchanged are agreed on between the corporate and the bank. Corporates can join multiple MA-CUGs, should they so wish.
This model is most suited for use as a complement to SCORE in those cases where a message is not permissible over SCORE.
“Corporates will also need to consider whether they want to own or rent their technology; to understand the trade-off between fixed investment costs and variable operating costs; and to determine how much in-house IT capability is available for the treasury function.”
“Corporates will also need to consider whether they want to own or rent their technology; to understand the trade-off between fixed investment costs and variable operating costs; and to determine how much in-house IT capability is available for the treasury function. As such, Alliance Lite, for example, may be preferable for some clients over a full, direct connection,” says Burn.
“J.P. Morgan also has proprietary technology available, including J.P. Morgan ACCESS℠, an internet-based workstation delivering integrated access to information reporting, investment and transaction services, for example, as well as inquiries in real-time. Our online e-banking, files channel and SWIFT capabilities complement one another to maximise their value,” adds Cofer. Through these proprietary services, J.P. Morgan is able to provide multibank payment initiation and reporting, drawing on SWIFT capabilities without requiring SWIFT connectivity. “These services can also complement the use of SWIFT to optimally support a company’s financial operations,” he says.
Taking SWIFT to the next level
Aside from the potential benefits of a SWIFT connection itself, new services and solutions designed specifically for corporates are helping treasurers to realise further value through SWIFT. The introduction of electronic bank account management (eBAM) solutions for SWIFT, for example, is assisting treasurers to future-proof their operations. “We were particularly excited at the potential of SWIFT to bring interoperability and clear, established standards to the corporate-to-bank space,” says Burn. “At J.P. Morgan we have put a great deal of focus on the proof of concept around eBAM and the corporate benefits are significant. For those treasurers considering a SWIFT implementation, eBAM has the potential to take the value proposition one step further.”
Cofer believes that while eBAM is still in its infancy it may, in time, “replace paper, wet ink signatures and manual processing with electronic documents, digital security credentials and automation.” Using a series of 15 eXtensible Markup Language (XML) messages, all based on the ISO 20022 standard that provides the financial industry with a universal messaging design, corporates will be able to send instructions to their bank to open an account, change authorisations or close an account. Requests can be submitted either using a bank-hosted web portal to affect accounts at that particular bank, or via direct connection with all their banks using SWIFT FileAct or host-to-host.
What is eBAM?
Electronic bank account management, or eBAM, is the electronification and automation of the total bank account management cycle, from account opening to maintenance to closing. eBAM eliminates paper exchange between treasury and bank and enables corporates to self-service common account administration activities. By streamlining and automating bank account management processes, eBAM will:
Provide corporates greater transparency, security and control over their bank relationships.
Reduce error risk and collapse cycle times to execute changes.
Track and monitor account activities automatically, increasing visibility.
Enable audit reporting and improve control of account management.
Free-up scarce treasury resources for more value-added, strategic activities.
“J.P. Morgan, along with SWIFT and other leading banks, promotes the use of agreed-upon industry standard models for eBAM messaging and security to reduce cost and improve adoption,” continues Cofer. ISO 20022 provides a single messaging format, a central dictionary of financial communication items and a set of XML design rules that are expected to lower cost and make the paper-to-electronic transition simpler for all players. On the security front, J.P. Morgan advocates the use of the interoperable credentials with eBAM to replace the proprietary infrastructures banks currently use. A digital credential that can be used on networks like SWIFT as well as the internet will allow clients to manage their various banking relationships with greater ease. “SWIFT 3SKey has seen encouraging adoption in specific regions as well as uptake in the eBAM vendor community, and we view these initial events as important steps towards achieving credential interoperability in wholesale banking” adds Cofer.
“We would recommend any corporate who has not considered eBAM to at least investigate it, in particular those embarking on a SWIFT implementation,” concludes Burn. After all, the demand for service innovation that benefits corporates’ bottom lines and provides enhanced control has never been greater. The combined eBAM and SWIFT proposition looks set to provide significant value to corporates. Indeed, the word ‘commodity’ is increasingly being applied to the corporate-to-bank communication channel of the future, where SWIFT will no longer be viewed as ‘nice to have’ but as an essential.
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