Before SWIFT service bureaus came along, the only way that a corporate could connect was by going direct. There are still reasons why a corporate would choose to host SWIFTNet connectivity in-house, such as the desire for full control or to avoid the risk of an intermediary between themselves and their bank.
But even for corporates with sizable IT departments, maintaining SWIFT-specific expertise in-house would entail training up their own IT personnel and security officers, as well as sending them on SWIFT courses just to maintain the system, which are all costly and time consuming.
“When we set up our service bureau, we certainly thought that it was going to be for the smaller end of the market - those companies that couldn’t justify the expense of the direct route. But what we quickly learned that it was more down to company culture,” says John Ballantyne, UK sales manager at SMA Financial. “Very large corporates have made the decision to outsource the infrastructure simply because they didn’t want the hassle and expense of running it inhouse.”
He says that less than 5% of the corporate implementations that SMA Financial has done over the past two to three years have been direct implementations. SWIFT service bureaus fulfil an important role by offering SWIFT connectivity without major and recurring investment in technology, infrastructure and specialist personnel.
Differentiating Between Service Bureaus
Not all service bureaus are alike: some solely provide the connectivity while others offer a fully-managed outsourced solution, which includes hosting the infrastructure and supporting technical operations. This reduces the cost because corporates are linking into a shared environment across multiple clients.
In addition, many service bureaus are developing value-add services, such as cash reporting, funds transfer, electronic bank account management (eBAM), reconciliation, payment exceptions and investigations (E&I), anti-money laundering (AML) filtering, etc.
When selecting a service bureau, the most important part is to ensure that the link is not weaker than SWIFT itself - does the service bureau meet the same parameters as SWIFT in terms of availability, security, resilience, nonrepudiation, and guaranteed message deliveries?
Ballantyne says that the first port of call is SWIFT certification. SWIFT lists in which areas the service bureaus are accredited, as well as the certification level of the consultant teams, etc.
Elie Lasker, head of corporate market, SWIFT, says that a service bureau should exhibit corporate-specific experience and expertise. “What we see now is that many service bureaus have gained more experience with corporates - and clearly some service bureaus are more specialised in the corporate market. One of the typical questions that a corporate should ask is how many corporates does the service bureau already work with?” In addition, ensuring that the service bureau has a disaster recovery site is critical to maintaining the 99.995% reliability and resiliency that SWIFT pledges.
“Corporates should also ask about the service they provide in terms of onboarding banks. The process involves both technical and administrative aspects for which a corporate doesn’t always have the bandwidth. Therefore, it is usually better that a third party provides this kind of assistance. It will simply make onboarding faster,” says Lasker.
Franklin Van Weezendonk, senior vice president, Axletree Solutions, adds that a corporate should check if the service bureau uses SWIFT products. “For example, SWIFT has a product called SWIFT Alliance Integrator, which a service bureau will pay a fee to use. Some service bureaus have developed an integration solution in-house - a proprietary product - which makes it cheaper.
“But when SWIFT makes a major or minor upgrade - let alone a whole new SWIFT release - are those proprietary products going to meet the new requirements? Whereas if a service bureau uses SWIFT-approved products, then you don’t run that risk,” he says.
Lastly, service bureaus distinguish themselves through value-added options, in terms of data enrichment, transformation, reporting, or light treasury applications to overlap with existing systems in the treasury back office to provide an overall solution.
Ballantyne believes that although corporate treasurers like to hear about sophisticated additional options that a service bureau can provide, fundamentally they select their bureau based on the core function of simply connecting them to SWIFT.
“Most treasurers already have this value-add within their trading applications and internal treasury products, and so I think it is a bit of a red herring, actually,” he says. “What the corporate treasurer really wants is to feel very confident that a service bureau can provide the core services."
Factors to consider when selecting a SWIFT bureau service
1. Accredited resources.
2. Depth and breadth of experience.
3. Scale up or down.
4. Long-term client care.
5. Proven track record.
6. Value-added services.
7. Disaster recovery.
8. Independent partner.
10. Financial stability.
Source: SMA Financial
First published on www.gtnews.com
- Joy Macknight
- I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.