bank connectivity with SWIFT

1 July 2009

With centralisation in treasury and other similar departments, such as Shared Service Centres or Payment Factories, a problem that very quickly shows itself is that of bank connectivity.

Staff end up spending a lot of time each day logging on to bank systems for information and to give payment instructions. While there might be a trend to reduce the number of banks dealt with in these departments, there is always a limit. No one bank can service all the countries now found in multinationals and the credit crunch has highlighted some of the risks in focusing on just a few banks.

SWIFT has long been seen by corporates as an alternative to the proliferation of proprietary electronic banking products, each requiring signatory support, interfaces and so on. The first corporate joined SWIFT in 1998, using it for treasury confirmations, and this was followed in the early part of this decade with Member-Administered Closed User Groups (MA-CUGs), sponsored by banks, which allowed a fuller access to the secure information and payment instruction messaging capabilities. These were managed under a Standardised Corporate Environment (SCORE).

Since then SWIFT has expanded the connection choices available to corporate members as the complexity often made it suitable only for the largest clients. In addition to the bank sponsored MA-CUGs a Direct Connection is available for the largest corporate, indirect bureau connections for the next tier, and most recently Alliance Lite, a manual based connection for internet use for the smaller corporate with around 200 transactions a day.

SWIFT is essentially a very secure pipe, only transmitting messages and therefore not having some of the features of a bank’s proprietary system. Accordingly information must usually be managed by a treasury management system and implementation may be difficult.

“SWIFT implementation is not for the faint of heart” (Microsoft)

Another feature is that the corporate must assume responsibility for payment security. The tokens or devices now regularly used in bank systems for individuals are obsolete, although many will be grateful for that.

Conceptually, SWIFT has many attractions and it is quite possible that for those firms with a treasury, shared service centre or payment factory, it will become the norm to use SWIFT for corporate to bank communication.