Treasuries of global corporations soon will pick up a new banking partner that promises to provide a single view of nearly all cash, streamline communication with banks and ultimately improve liquidity management. That partner is SWIFT (The Society for Worldwide Interbank Financial Telecommunications), formerly an exclusive bankers-only club that dramatically reversed a long-standing policy and threw open its doors to corporate users last June.
Instead of having to buy their way in through individual banks, the new SCORE model allows companies to access SWIFT directly and communicate with all SWIFT banks globally through that single connection. SCORE,an acronym for Standardized Corporate Environment, is a change in gateway policy more than a change in technology, but SWIFTNet, the IP-based network SWIFT introduced three years ago, makes it easier and cheaper to open new access points. SCORE is now in pilot testing with 12 banks and eight corporations. Plans call for making it officially available outside the pilot group in January.
Research shows that it costs multinational corporations between $10,000 and $25,000 to maintain each bank-specific communication connection, notes Julie Monaco, senior vice president for core cash management services in the treasury services division of JPMorgan Chase. Since large MNCs typically have 12 to15 banking relationships, replacing all those connections with a single SCORE connection is "clearly more efficient," she notes. "They can invest once in technology that connects them to all their banks and not worry about interoperability among the proprietary messaging and connectivity systems their banks offer."
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SCORE was good news for Microsoft, one of two U.S. corporations (along with General Electric Co.) participating in the current pilot. "This will give us visibility into prior-day bank account statements that we never had before," reports Ed Barrie, senior product manager in Microsoft's treasury and its point man on the SWIFT project. "We have over 1,000 accounts in
almost every country in the world. From many, we only get monthly statements, and nearly 90% of those statements have to be posted and reconciled manually."
Not surprisingly, the Microsoft treasury has bigger plans for SWIFT. "Long term, we want to expand our use of SWIFTNet beyond banking transactions into investment and capital markets activity," he says, "and use more detailed, up-to-date cash information to support just-in-time funding of subsidiaries and increase our return on investments."
"Before, we had to go through testing and quality assurance and certification with every bank and every branch of that bank that we wanted to communicate with through SWIFT," notes Dennis Sweeney, GE's deputy treasurer. "Now, we'll be able to reach each of those banks and branches with one connection. It's a simpler, more efficient process." In fact, companies can thank companies like GE, which put pressure on the banks to get this direct access.
Today, SWIFT is actively encouraging corporations to join but stopping short of direct marketing to avoid stepping on still-sensitive bank toes. "We won't make direct sales calls on corporations, but we're working with systems vendors like SAP, Oracle, Trema and Wall Street Systems so that their software will generate and receive SWIFTNet messages," reports Luc Meurant, head of the SWIFT Corporate Access Programme. The cost of accessing SWIFT through SCORE will be as low as $5,000 a year or as high as $50,000, depending on traffic volume, Meurant reports.
Traditional structured SWIFT messages include prior-day statements, transaction confirmations, same-day activity, high-value payment initiation (wires) and administrative messages. The new FileAct service, which travels over SWIFTNet, can carry bulk messages in any format, serving as a universal transport device. Susan Feinberg, senior analyst for wholesale banking at TowerGroup, anticipates that companies may use FileAct to send check issue files to banks for positive pay, but go to bank Web sites as they do now to view exception items.
Besides SCORE, SWIFT is also piloting a more automated way to route inquiries and investigations. The new system is being designed to resolve prob- lems quicker and with less human labor, notes Paul Burstein, managing director for operations services at GE treasury.
The SWIFT policy change has flung open the door for software companies that helped banks connect to SWIFT to now go after a big, new corporate market. Companies like Switzerland-based Biveroni Batschetet Partners AG may soon become a name U.S. treasury staffs will recognize. That company, acquired by Fundtech in 1999, runs a service bureau. Now, its outsourcing solution for SWIFT connectivity is a corporate product. "We can offer a simple, quick SWIFT connection that will be significantly cheaper for many corporations than building their own," reports Martin Zimmermann, sales account officer. He predicts that 75% of the multinational corporations that go for direct SWIFT access will use a service bureau and 25% will, like Microsoft and GE, do it themselves.
Despite a near-unanimous vote (98.6% approval), bankers won't necessarily actively push the SWIFT connection to clients, given that a few of them won't qualify because of the stock exchange listing requirement to participate and others will be unwilling to pay for the infrastructure. "We are more than willing and able to support corporates that wish to move over to use the newly available SWIFT connectivity," says Jonathan Ashton, Deutsche Bank's global head of channel management and integration services for global transaction banking-cash management. "However, we continue to believe that the best place to offer our new and, we hope, differentiating services will be via our proprietary channels. Over time, [we may] move the services onto the multibank channel as we see the benefit of the services being [offered] in a more generic fashion."
Even so, TowerGroup's Feinberg sees the bank decision not to protect revenue by excluding corporates as a big step. Policy-setting authority at SWIFT remains exclusive to banks, she points out. But, once corporations get a foot in the door, who knows what might happen in the future?
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