Cross-border payments are an enduring source of frustration for corporate treasury, with SWIFT representing a trusty Volvo, safe, secure and reliable. So say our insiders as we assess progress and pain points in this space.
It’s easy to send an email anywhere in the world, but sending an international payment can often be costly and slow. Despite huge technical leaps in recent decades, for many corporate treasurers, cross-border payments remain frustratingly difficult.
Some of that frustration is directed towards SWIFT, the international payments network on which global corporates depend to make and receive high value payments around the world. Treasury testimonies from the frontline cite reliability and trust but also mention high fees, slow processing times and complexity, often requiring expensive consultants or software solutions, while SWIFT’s ability to provide solutions can be a work in progress.
Founded in May 1973, SWIFT is primarily a banking community (at the network’s annual SIBOS gathering, bank attendees are in the majority. For corporate treasury, despite the rise of agile fintechs, alternative payment channels and bank APIs, at the end of the day, there is little alternative. Ask any large corporate why they use SWIFT and like banks, the response is unanimous. The non-profit co-operative with c11,000 members facilitate payments worth an estimated US$1.5trn a day; it’s reliable and secure and the only thing close to providing the corporate holy grail of standardisation in payments.
“In the payment world, SWIFT is like the family Volvo,” says Felix Meyer who leads Treasury IT and Treasury Technology at ABB Capital AG, the corporate treasury organisation of Switzerland’s industrial conglomerate ABB Group alongside chairing SWIFT Corporate Group Switzerland (SCG-CH), which lobbies the payments giant on behalf of treasury teams for the country’s largest corporates. “A Volvo starts at -20°C or +45°C. It may not be the most comfortable or dynamic, but it is completely reliable and secure and gets you to those far off places not all can reach.” Only 50 years on, Treasury Today interviewees are increasingly calling for an ever smoother journey.
What companies want
The thing corporate treasury requests perhaps more than anything is harmonisation and standardisation. Meeting bank specific requirements when implementing solutions connecting to the network is challenging and requires companies to invest time and money.
But expand beyond standard payment and statement integrations, and the process gets even more complex. Like eBAM or trade finance messaging, where Meyer explains ABB is in the process of going live on SWIFT and the bank specific challenges have become even more problematic, either because the existing standards require tweaking to meet the bank specific requirements or because there is simply no (bank) coverage for the demand.
In theory, banks should be able to provide quarterly extracts of all active accounts and signatories to corporates in a standardised format that allows treasury to reconcile against their existing BAM solutions. The reality is more of a headache. “SWIFT’s eBAM standards offer a structure that partially fits this (standardisation) requirement but stretch this against the banks that even offer eBAM as a solution, mix this with the number of banks that a multinational has to maintain its global obligations, and it becomes clear this is complex for corporates.”
Despite fintechs and established software providers entering the market to try to push a common solution, Meyer says the basic challenges remain for many corporates. Is introducing yet another piece of equipment in the payment landscape that needs to be supported and maintained really the most effective solution, he asks. What is clear, he says, is that SWIFT is in a unique position to introduce standardisation, assuming banks support it.
Getting bogged down in complexity is a common gripe. Take SWIFT’s Customer Security Programme, CSP, the security controls for SWIFT corporates. For Jonathan Schläpfer, Head of Treasury Operations at Würth Finance International, the in-house bank for German industrial fastening multinational Würth Group, responsible for the company’s bank connectivity, payments, cash pooling and all SWIFT-related projects, the guiding document could be simplified. “The programme is valid and important, but SWIFT could support corporates by making the communication and IT around the programme clearer.”
CSP is also front-of-mind for Meyer who says corporates see the value of having a secure financial network, but questions how far SWIFT should push corporates with further tightening of the control framework. Not only does the process require de-facto independent external support, but from this year it turns into an annual exercise. “Of course, we all want to operate in a secure environment, but how far and at what cost to corporates?” he asks.
It leads him to reflect on another SWIFT-related frustration. Pressure on corporate treasury to invest time and money into processes that are already working and from which they are unlikely to see a huge benefit. “It is like that unexpected maintenance call” he says, continuing the Volvo analogy. One example is RMA centralisation, which moves electronic relationship management from local payment applications to a central SWIFT model. Only after a webinar, “endless customer service discussions” and reaching out to SWIFT colleagues did he understand what was needed. As Chairman of the Swiss group, he now plans to loop peers for an upcoming event he hopes will shed light on the initiative.
We are actually in the process of moving most of our international payments/payouts into cross-border ACH which will allow us to avoid some of the disadvantages of SWIFT such as high fees, slow processing times and currency conversion charges which are in fact a hidden fee.
Francisco Meyo, Corporate Controller, Masterworks
Of course, SWIFT isn’t unaware of corporate pain points. Nasir Ahmed, Head of SWIFT, UK and Ireland says the organisation puts listening at its core and is dedicated to “actively addressing challenges facing its community” of which he lists “poor quality data, limited transparency and a lack of common languages” as bottlenecks. He continues: “Our offerings are designed to remove complexity and deliver value for end-users to enable them to provide frictionless experiences.”
Bruno Mellado, Head of International Payments and Receivables, BNP Paribas Cash Management, who spends much of his time advising corporate clients on the reasons why payments in certain currencies fail, insists the problem is often one of country rules. For example, recent changes in local clearing requirements in Saudi Arabia didn’t apply the same way at all banks. “Some local banks required an extra data field, but others didn’t,” he explains. “Many problems are linked to the currency of destination, and this is seldom explained to end-consumers upfront.”
Similarly, foreign payments are also delayed due to specific country regulations. A payment from China into Europe takes a few hours but a payment from Europe to China can take several days. “Local regulations are often underestimated,” he says. Payments rely on a web of bank relationships yet sometimes those relationships involve a third-party introduction, slowing the process down. “Some highways are more direct than others,” he explains. “Relationships are trust-based. Even if you have the technology, you still need a network relationship.”
Mellado also believes treasury’s craved-for standardisation is coming. SWIFT gpi, ISO and new cloud-based API technology; the SWIFT TMP platform and pre-validation services, all show SWIFT’s commitment to speed, standardisation, and security in cross-border payments. “Combined, all these changes will amount to much faster, frictionless payments and corporate treasury will feel the benefit,” he says. New ISO standardisation is a classic example. “A lot of payments are stopped because people are looking at the wrong data, ISO CBPR+ standards put the right data in the right place.”
But for corporate treasury, touted innovation can fall into the burdensome and not particularly useful bucket. For sure, SWIFT gpi has caught the imagination of many corporates. Although tracking has been around for a while, treasury still face gaps around end-to-end visibility and transparency of payment flows. Banks offer the ability to track payments via e-banking tools, but teams don’t want to log onto multiple different e-banking platforms, says Alejandro Muñoz, Head Treasury Operations & Payment Factory at Würth Finance. Working alongside Schläpfer, Muñoz oversees around €10bn worth of payments annually including cross-border payments in 25 different currencies where tracking missing payments can get a lot more complex. “We welcomed an initiative that allows us to track money via a central tool,” he says.
But Treasury Today interviewees aren’t convinced SWIFT gpi delivers for corporates yet. It enables banks to better track payments, but some flows aren’t covered since not all banks are SWIFT gpi member counterparties, able to access the tracker. Moreover (and in a nod to corporates being on the periphery of the network) corporate treasurers have no access to the system, explains Schläpfer. “Some flows are still not covered and access to the tracker is difficult. It still lacks transparency,” he says.
For Muñoz, tracking is another example of SWIFT corporate solutions still not quite hitting the mark. “We appreciate these types of initiatives, but the tracker could be more user-friendly. It would really help us to have one connection to one central financial tracker where we can see everything. SWIFT could do more for corporates.”
Payment fraud is another area treasury is calling for more support, urging SWIFT to tap into its vast store of data for solutions. “All the information needed is in SWIFT,” continues Muñoz who says SWIFT has the data to know if a beneficiary bank account is secure. “Using community information to fight fraud would really help corporate treasury,” he says.
Meyer also urges SWIFT to use its community to do more to support corporates around fraud prevention rather than pressuring corporates to come up with their own solutions. “In the end, it has to be a group effort, but we are grateful when the largest players can also contribute proportionally to the effort,” he argues. He cites that even the pre-validation topic (whereby banks can validate key information before a payment is executed, a key step in raising the values transmitted in the instant payment world) has not been universally accepted by banks nor is it available to corporates as an API to perform such validations. “On this topic we are left hanging without appetite to invest in fintech solutions and feel SWIFT should be offering such solutions as part of the club,” he says.
One sure-fire way to galvanise more corporate-friendly solutions is competition and the threat of volumes ebbing away from SWIFT to alternative payment providers. Like a railway network, corporate treasurers say they only need one system via which to send payments yet if there is only one system, bereft of competition, it will likely be a bad one. Alternative payment channels like EBICS, CHAPS, Ripple, JPM Coin and bank APIs are just some of the different rails galvanising and prodding innovation and adoption of more corporate-friendly processes. “SWIFT responds to competition,” says Meyer.
“Of course, we use SWIFT, but only because other options are limited,” says Francisco Meyo, Corporate Controller, at New York-based Masterworks, voicing his frustration with international payments in this edition’s Corporate View. “We are actually in the process of moving most of our international payments/payouts into cross-border ACH which will allow us to avoid some of the disadvantages of SWIFT such as high fees, slow processing times and currency conversion charges which are in fact a hidden fee.”
But the reality of multiple payment channels for corporates is still highly challenging. Würth joined SWIFT back in 2006 to streamline increasingly complex payments into one simple channel. The old system relied on e-banking and making local payments via a global banking network of multiple relationships. “We don’t have one cash management bank for the whole world, and it was easier to integrate SWIFT and get rid of e-banking than build a host-to-host connectivity,” recalls Muñoz.
“As a corporate we have to balance the technology offerings and efforts against our overall strategy,” continues ABB’s Meyer. “After doing some initial investigations, we have not jumped on the bank API wave as an alternative routing channel. As the technology and offerings become more secure, standardised, and able to prove their reliability, we will adapt.” He argues bank APIs might be an excellent fit for corporates with a smaller handful of integrations, but flags reliability issues particularly. “If an API was down for two hours during operating hours, our alarm bells would be ringing,” he says.
Mellado also highlights the importance of new regulation in alternative payments before available payment routes are safe and offer equivalent levels of transparency and standards. Alternative payments still need to follow origin and destination transparency rules and adopt minimum standards, he says. “We need even ‘rules of the game’ so that all payments have similar levels of security. The alternative will be a more complex and fragmented world for payments.”
A call for cooperation that Treasury Today interviewees agree signposts the best path ahead. The payment ecosystem requires all players work together from banks and the software houses, SWIFT and corporates. Corporate treasurers don’t want to reinvent the rails, but they do want their payments pain-points heard and resolved. “Despite the various challenges and bumps in the road, the Volvo gets us there,” concludes Meyer.