As the messaging service provider for most of the systemically important payment and securities clearing systems in the world, SWIFT is what is known as a ‘critical financial market infrastructure’. It would be reasonable to view the global corporate community as a major player within that system and yet back in 2007, at SWIFT’s own Sibos event, the assembled stakeholders were informed that business users were not necessarily feeling part of the process.
At the event, held that year in Boston, the then Virgin Atlantic Group Treasurer, Alex Harris (now at Al Muhaidib Group in Saudi Arabia), commented in a plenary session that while it was recognised SWIFT had made progress in “lowering the barriers to entry”, the corporate access model was “weighted heavily in favour of the very large multinationals”. Furthermore, banks were regarded as “reacting very slowly, especially to the needs of mid-market firms”.
Harris certainly had a point: the few corporates that were interested in accessing SWIFT directly had to sign up to the cumbersome Member-Administered Closed User Group (MA-CUG) model and only the major multinationals could justify the effort and expense. However, since the introduction in 2004 of SWIFT’s single closed user group, Standardised Corporate Environment (SCORE), corporates have been able to use transaction banking functionality via the network, communicating with any bank that is part of their group. Whilst SCORE promised to ease much of the MA-CUG pain, it has been apparent that not all banks know about or wish to subscribe to SCORE. This in part has limited the usefulness of corporate membership.
With the growth of the emerging markets, particularly in Asia Pacific, the issue of awareness and access may be about to change for the better and Joan Lee, Director of Corporate Markets, Asia Pacific, for SWIFT says the industry cooperative is on the case.
Asia in sight
In 2007, SWIFT had started rolling out its corporate access model in Asia. Having matured its operations in North America and Europe, it had been considering how it would attract more interest from the emerging markets, being particularly mindful of the growing number of businesses making their entry into Asia Pacific. It set its sights on the region, prioritising China, Japan and Korea, Singapore and Hong Kong, followed by India, ASEAN and Oceania.
But it was not just the mega-corporations that were reaching into the region. Smaller businesses from outside were keen to take advantage of the vibrancy of the commercial environment. Driven in part by a ‘customer-centric’ operational model, many were setting up shop closer to their clients or, if they were large companies, establishing regional treasury and shared services centres. Home-grown enterprises too were seeking a greater slice of the commercial action both domestically and overseas. By launching its ‘user-friendly’ corporate access programme in Asia Pacific, SWIFT was effectively “moving with the trend for customer-centricity”, notes Lee. With so many mid-sized businesses and regional banks located there, this was also a timely response to the criticism that it was an exclusive club for multinationals.
Whilst the level of uptake by corporates globally has now reached about 1,300, representing about 30,000 entities in total, the figure for Asia Pacific has edged past its first century-milestone and is currently heading towards 130. “With greater brand awareness and bank support we do believe this number will rapidly and exponentially rise,” states Lee.
Generating interest to fulfil this belief has seen Lee and the corporate sales team use a multi-pronged marketing approach that in the first instance exploits its obvious relationship with the banking community – bank referrals are important, she says. Naturally, SWIFT must call upon its own knowledge and understanding, working directly with industry bodies and financial communities in Asia Pacific, with the anticipation that, as the number of corporates increases, word-of-mouth will also play its part in driving growth. But SWIFT is keen to work closely with its industry partners such as application vendors and ASP partners, whether these are positioned globally, regionally or domestically; the latter two, notes Lee, are typically able to offer essential experience and knowledge of local market practices and conditions. Some of these markets – Japan, China and Korea in particular – have unique needs in legal and regulatory terms and local partners are in fact essential to facilitate SWIFT’s progress, she says.
An increasingly favoured SWIFT access route in Europe – particularly for smaller companies – is via a service bureau. It is worth noting here that of those corporates currently accessing the programme in Asia Pacific, few are using this route. “It can be used but it is generally less of a workable solution due to widely varying regulatory, compliance and technical requirements,” explains Lee. Although service bureaux are operating in jurisdictions such as Singapore and Hong Kong, the entry-model of choice across the region tends to be what she calls a “partnership total solution”. This means the major technology vendors – such as the ERP and TMS providers – offer a “connecting bridge” between SWIFT and the corporate’s own technology infrastructure. “A lot of vendors work very closely with us to extend their solutions; being able to penetrate this market provides them with a competitive edge. We just have to be conscious of the best business model to serve the customer base.”
Amongst the relevant technology firms, such as the SWIFT-certified vendors (those whose products reach a certain operational and functional standard as laid down by SWIFT), there are a few that are truly global (such a SAP and Oracle). Lee notes that a rising number of international application vendors, especially those with a strong presence in North America or Europe, are seeking closer alliance with SWIFT to facilitate their move further into Asia Pacific. Some local partners tend to focus on their own niche territories simply because the diversity of regulatory environments and customer-segment needs is generally too broad for these vendors to tackle, especially where complex markets such as Japan, China and Korea are concerned. “We have not seen one vendor that can meet the needs of the whole region,” she comments.
There is clearly a market opening for a local vendor capable of bridging that gap. In the meantime, in the interests of meeting local peculiarities, SWIFT is working with a small number of domestic vendors in each of these countries, encouraging a “proactive approach” to product development. SWIFT’s Asian market partnership model is not restricted to application vendors. Consultancy practices, including the ‘Big Four’ are very much included in the programme, working with SWIFT and providing recommendations to their customers.
Getting in focus
The programme to raise brand awareness and sign new corporate members in Asia Pacific is precisely targeted; Lee confirming that China, Japan and Korea are indeed the strategic focus. As might be expected, Singapore and Hong Kong with their regional status as preferred sites for regional treasury centres are equally placed in that hierarchy. SWIFT is also eyeing Malaysia and the Philippines in light of the number of up-and-coming shared services centres here; these being promoted vigorously by their respective regulatory and central bank authorities. The current strategic focus, Lee insists, is not being implemented to the exclusion of the other countries in Asia Pacific. Indeed, as SWIFT’s operation in the region progresses the net will be cast ever-wider. It already has a sales presence in Australia, India, Japan, Korea, China, Hong Kong) and Singapore, whilst the other ASEAN countries are also now firmly on the SWIFT radar.
The total number of corporates on board today is within the realms of SWIFT’s expectation, states Lee. “There is a five-year plan which is reviewed annually. We are moving at a reasonable pace and year-on-year we are seeing around 50% growth in terms of corporate targets,” she adds. “Brand awareness is critical for SWIFT but is something that is lacking in the Asia Pacific region, even in the regional and domestic banking communities.”
The entire region presents as a “dynamic and exciting” market place, with diverse social and business cultures using multiple currencies and languages. SWIFT has been in Asia Pacific for more than 30 years and understands the need to raise brand awareness but the sheer diversity of the region is simultaneously a benefit and hindrance. For SWIFT’s awareness campaign, placing teams in each and every country is not feasible. However, by taking a more creative approach and using its partners to drive home the message, SWIFT is able to overcome such limitations.
For example, SWIFT works “proactively” with the banks and partners – using educational events, seminars, speaking opportunities and so on – to generate awareness amongst the relationship managers. Industry and trade associations are frequently co-opted to reach their members and help create greater awareness at both regional and country levels. “From there we will drive greater awareness amongst the customers,” states Lee. SWIFT also works to bring the financial community together, through various user groups and working groups, operating collaboratively to shape market practice, define standards and debate issues of mutual interest.
The right products
The SWIFT for corporates offering has grown in recent years, developing from its core messaging service to include a broad suite of corporate solutions covering payments, treasury, trade and supply chain. Lee notes that the Asia Pacific market is still developing at the emerging phase, “where corporates have started to see the importance and greater need for global cash visibility and management”. Therefore, many Asia Pacific corporates are actively looking for cash and treasury management solutions to achieve greater operational process efficiency, risk mitigation and cost efficiency. For some users, they are looking beyond cost and treasury management to other services such as eBAM, SWIFTRef, 3SKey and Accord.
“In Asia Pacific, adoption is not solely a top down process,” Lee adds. “It requires a lot of effort to reach out to the banking community and for the corporate decision makers to accept these products.”
“The strategic approach for us now is to focus on the core needs of customers,” says Lee. “We want to correct the perception held by some Asia Pacific corporates that SWIFT does not have products for businesses with basic requirements.” This is why SWIFT now has a variety of ‘on-boarding’ packages to more closely match corporate usage. The large corporate presence in multiple countries, working with multiple banks and accounts, will typically require a host-to-host service. “This is where our Alliance Access and Alliance Entry messaging interfaces come into the picture,” she says. Alliance Access is targeted at medium to high-volume users, whereas Alliance Entry is the version aimed at customers exchanging a maximum 1,000 files and messages a day; this may still prove too costly for some to justify. For customers with even less complex usage requirements, SWIFT offers the scaled back web-based Alliance Lite2 entry-level connectivity solution (Alliance Lite was introduced in 2008 and Lite2 arrived in 2012, claiming to further simplify on-boarding and reduce cost).
Within the SWIFT corporate family, some of the larger firms in the region are members of the Common Global Implementation initiative (CGI). This is a global collaboration between banks, corporates, vendors and payments institutions which, since 2009, have been seeking message harmonisation in the cash management sector. In Asia Pacific, Lee reports that its membership includes major corporates such as Huawei and China Railway Group Limited in China. It also has support from several global treasury centres in Singapore, including that of medical assistance organisation International SOS, and some of the larger regional corporates in ASEAN which are preparing treasury centres in their own countries and are primarily interested in the core cash management and treasury reporting services from SWIFT.
As an example of the latter, China National Offshore Oil Corporation (CNOOC), the largest offshore oil and gas producer in China, was one of the first state-owned enterprises to introduce advanced cash and treasury management technology and processes, including multibank connectivity through SWIFT. “We are very pleased with the benefits we get from using SWIFT,” Huang Yi, Treasury Supervisor at CNOOC told Treasury Today. Now with a single, secure and standardised messaging platform he says the whole process is straight through, “bringing us greater efficiency while reducing costs and risks”. He sees CNOOC’s progress to date in this space as a “significant milestone as we continue to strengthen business operations in achieving our aggressive growth plans”.
Stemming from the desire to harmonise processes, and perhaps the key to progress for many users, is the adoption of ISO 20022 and MX standard for financial services messaging. As an alternative to the existing and more insular SWIFT FIN format, ISO 20022 (which has been adopted by many other financial services providers such as ISDA, FIX and Omgeo) uses the relatively simple XML format to encode documents. XML, being based on Unicode characters, allows it to express just about all of the world’s writing systems, meeting the needs of the global financial services industry and its customers.
“This is an initiative that both the banking and corporate communities should look into,” says Lee. “It facilitates operational efficiencies and eases process and integration costs.” That said, she feels uptake has faced “some challenges”, perhaps because of the general level of awareness of SWIFT services but also perhaps because of a general regional tendency not to be the first to adopt but instead to ‘wait and see’. “This is the consensus we are picking up on the ground so we need to share more information about the benefits of ISO 20022.”
Spreading the word
That SWIFT is now offering a number of services and products aimed directly at corporates of all sizes – but especially those that are multi-banked – is proof that it is trying to lower the barriers to entry and that its options for access are no longer weighted heavily in favour of the very large multinationals. The slow but steady level of uptake of SWIFT corporate services in Asia Pacific is more a symptom of the level of awareness than a lack of suitable products. As is the case across the globe, SWIFT membership is not appropriate for every business, but Lee is certain that if the level of understanding and knowledge is communicated at the right levels within the banks and the wider financial services industry, the interest of the corporate community is practically assured.