SWIFT: On a Diet but Still Reaching for a Slice of the Corporate Pie

15 September 2009

The two-day corporate forum at Sibos has attracted 490 participants, 122 of which are corporates, with 183 vendors and 185 financial institutions participating in the stream as well. It is the first corporate forum to be held in Asia and also the first that participants battled a cyclone in order to attend.

In the opening session of the corporate forum at Sibos 2009, Marilyn Spearing, chairperson SWIFT corporate access group and global head of trade finance & cash management corporates, Deutsche Bank, gave an update on SWIFT for corporates and future developments. She also identified what corporates were voicing in terms of their needs:

Better implementation support and service from SWIFT.
Reducing the differences in bank offerings.
A clear business case because of scarce investment money.
An enriched proposition.

With just 512 corporates connected to SWIFT, which is more than a two-fold increase in the past three years but still a small drop in the global corporate ocean, these issues need to be addressed. Spearing said that service bureaus, where the technology and management is outsourced to a third party, either a bank or a technology vendor, is key to greater take-up of SWIFT for corporates.

Only 20% of corporates on SWIFT are directly connected, while the majority (70%) use an indirect method through a service bureau or member concentrator, according to Luc Meurant, head of banking, supply chain and corporate markets, SWIFT. What was interesting is that Alliance Lite, the low-cost, low-tech connectivity option launched at last year’s conference, now makes up 10% of corporate connectivity. Meurant said that Lite users were all new to SWIFT and could be divided into two types: smaller corporates that are content with the pricing structure and usability of Lite, and large corporates, which he called testers, that don’t plan to stay with Lite but are using it to test out the SWIFT offering.

In the future, SWIFT plans a number of new products for corporates, including electronic bank account management (eBAM), which will be launched at the end of this year, and also a personal digital identity solution, which will be launched in early 2010. But beyond products that are already in the pipeline, new developments may be slower to come to fruition in the future, due to the new ‘lean’ SWIFT that was promoted by chairman and chief executive Lázaro Campos at SWIFT’s opening plenary yesterday.

Campos spoke about the business efficiency programme, called Lean@SWIFT, which will aim for a 30% reduction in every department. In developing its new plan for 2015, Campos said: “We are weathering the storm. We should look at it more in the way similar to a diet – we are exercising and becoming lean. SWIFT is in the gym, getting leaner for 2015.” Although he promised that this wouldn’t degrade the service SWIFT provides to its membership, it is hard to imagine that this will not have some effect on innovation.

Demystifying SWIFT

The second session in the corporate forum focused on the value proposition of SWIFT for corporates. In a straw poll of gtnews readers taken a few days before the conference, 40% of respondents said they would adopt SWIFT, while 50% said they were not considering this option for bank connectivity. Only 10% said they were already using this method. This shows that the benefits of SWIFT, such as global visibility on cash and cost reduction through rationalisation and automation, are not recognised by corporates.

But momentum is growing and expanding into hitherto untapped areas. Wim Raymaekers, senior market manager at SWIFT, said that although historically SWIFT has been seen as in the realm of the banks and very large multinational corporates only, what SWIFT was beginning to see was greater number of smaller sized corporates with fewer banking relationships using SWIFT, as well as some corporates that are mainly domestic players.

Wolfgang Ratheiser, corporate treasury at Johnson Controls (JC), a provider of automotive interiors, spoke about why his company chose SWIFT connectivity. With three business units, the JC treasury was complex and wanted visibility over its multi-currency cash pools in Australia, Canada, Germany, Japan and the Czech Republic. In March 2008, it embarked on a SWIFTNet infrastructure programme to get SWIFT capability for payment channels and distribution of payments; the single euro payments area (SEPA) also gave impetus to this project. It chose SunGard’s service bureau and Standardised Corporate Environment (SCORE) as its connectivity method.

The advantages of SWIFT meant that JC treasury focussed on the right banks - ones that gave them credit and support - and reduced the number of bank accounts. The challenges the company faced in getting the project going were:

Explaining to the top management and getting buy-in from the business units.
Getting a strong commitment from all partners, banks and internal resources.
Planning and agreeing on a global roll-out.
Local banking requirements.
Involving the firm’s divisions since the inception of the project.
Aligning the enterprise resource planning (ERP) systems of the three different divisions.
Ensuring that the set-up of the solution matches the infrastructure/organisation and that the solution was scalable.

Ratheiser said that the benefits revolved around: the ability to focus on the right things; risk mitigation; efficiency; and a reduction in bank fees and IT costs. “Now the solution is scalable, flexible and bank independent,” he said.

Financial Crisis: Challenges and Opportunities for Corporates Treasurers

The next session in the forum concentrated the financial crisis: challenges and opportunities for the corporate treasurer. Focusing more on the pain of the global crisis, Dennis Tosh, director of global trading and automotive risk, Ford Motor Company, joked that throughout the crisis he slept like a baby: he woke up every two hours and cried.

The other panellists, Richard Martin, head of payments and cash management, international cash and trade, Barclays Bank, Lloyd O’Connor, managing director, regional product executive treasury services, JPMorgan, Tjun Tang, partner and managing director, the Boston Consulting Group, and Peter Wong, founding chairman and president, IACCT China, also spoke of the pain points corporate treasurers faced, such as the tightened credit availability and increased risk and regulation.

Joking aside, Tosh said that the key take-aways for a treasurer to survive the crisis were:

The importance of transparency of exposures and seamless systems of real-time information.
Risk management is an art, not a discipline.
Liquidity and having access to cash is key.
Maintaining strategic relationships with your banks.

He noted that there had been a significant paradigm shift in terms of the role of the treasury in the organisation. “Treasury used to be seen as this black box that treasurers looked after,” he said. “Now boards recognise the central role treasury plays, particularly in a capital-intensive, cyclical business such as the automotive industry.”

First published on www.gtnews.com