Monday, September 20, 2010

SWIFT Service Bureaus & Corporate Connectivity

Theodore K. Baxter, Product Manager, EastNets

Implementing a global treasury system involves different channels of communication, via many different standards. SWIFT provides a globally recognized standard for communicating to your bank, reducing the workload of having to implement different banking formats and methods. This provides you with a single, secure, standardized global platform to conduct treasury management on an international level. And, using a single format across your global banks allows you to easily integrate SWIFT into your Treasury Management Systems and ERP.

SWIFTNet provides the following functions as part of its FIN:

• Treasury payments and notifications (MT 101), notice to receive (MT 210)
• Intraday (MT 942)/end-of-day bank statements (MT 940) and credit/debit advices (MT 900/910)
• Deal confirmations for foreign exchange/interest rate/money market deals (MT 3xx)
• Instructions to deliver/receive securities and statements of holdings (MT 5xx)

Using SWIFT in Liquidity Management
Having effective liquidity management allows an organization to gain the maximum benefits of their money at minimal cost. As a corporate you would Request for Transfer (MT 101) of your funds from one bank to another using FIN. Reporting on these treasury payments from each of your banks can be done again over FIN using the Interim Transactions Report (MT 942) or the end-of-day Customer Statement (MT 940) sent by each of your treasury banks. By integrating these end-of-day and intra-day statements into your corporate treasury systems you can better monitor accounts and obtain global visibility on cash. This allows for better control, and decisions on fund management.

The Business Case for Connecting to SWIFT
Corporates wanting to make the business case to connect to SWIFT take into account the costs and weigh them up against the benefits. These costs can include both SWIFT (registration, connectivity and messaging) and Non-SWIFT (project management, operations and applications integration) costs. Benefits can include both Operational benefits from reducing the number of different bank messaging systems and the reduction in staffing costs (either through reduction, reallocation or growth avoidance), as well as improved automation, and the financial benefits that come from working capital optimization and having better visibility of global cash, and transaction processing efficiencies. Other benefits include security, cost, standardization and integration.

Three Options for SWIFT Connectivity
There are three options when it comes to SWIFT connectivity: Direct, Indirect and Alliance Lite. The Direct method means that the SWIFT Connectivity infrastructure is owned and maintained by the company itself.

Indirect connectivity is achieved through a SWIFT Service Bureau or Member Concentrator, where they host and maintain the technical infrastructure for SWIFT connection, and can also provide additional services for the SWIFT connectivity. This is the most popular method for corporates to connect to SWIFT, allowing the Service Bureau to help guide the corporate through the SWIFT process, and taking advantage of the vast knowledge and experience held by some of these Service Bureaus.

Alliance Lite is the newest option for Direct Connectivity for corporates. Alliance Lite provides a simplified, secure, internet-based connectivity to SWIFTNet. It also offers a reduced uptime to get onto the SWIFT network.

Operational Benefits
One operational benefit of joining SWIFT is to reduce the number of communication channels to each of its banks; whether from fax banking, e-banking etc., to one SWIFT channel. SWIFTNet provides a communication platform, and the products and services that allow you to exchange financial information across a highly secure and reliable network. Another major benefit of adopting SWIFT is the reduction in staff costs from the improved automation. Staff can then be allocated for more important core functions. Using a Service Bureau can further extend this benefit, as it alleviates the need to have SWIFT experts on staff.

Financial Benefits
The financial benefits from using SWIFT include faster communication with your banks, allowing for better working capital optimization and better insight to what their money is doing. Reducing the number of cash management channels to one SWIFT channel reduces operational and maintenance costs. It allows for easier integration as a common standard is used.

The Service Bureau Option
One of the benefits of choosing a Service Bureau for your connectivity option is the ability to utilize the company’s experience in helping customers with their SWIFT onboarding process. SWIFT Service Bureau at companies such as ours help corporates join SWIFT by walking them through the process step-by-step. An experienced Service Bureau can help answer your questions relating to the planning of your SWIFT Project as in Figure 1, and the process of going live as in Figure 2. Another benefit of joining SWIFT through a Service Bureau is the reduced time it takes to get onto SWIFT – from months with a Network Provider installation, for example, to weeks with a company such as EastNets.

Providing a common language that banks understand, SWIFT allows you to utilize its standards driven formats such as FIN & ISO 20022 for liquidity and risk management. SWIFT provides the documentation to make sure you understand what information and services you are seeking to use and the messages to send to achieve these.

What do you think?

No comments: