oLower bank fees and

oA reduced need to borrow.

"In tight credit times like these, informed liquidity management is critical," she points out.

The current credit and liquidity crunch has fed the already strong trend for corporate treasuries to re-engineer their operations, bringing automation and straight-through processing (STP) whenever possible. And that activity nearly always includes finding a role for SWIFT (the Society for Worldwide Interbank Financial Telecommunication), especially among large multinationals, reports Manish Jain, director of information products in the treasury and trade solutions group at Citi.

So a growing group of early adopters like DuPont is finding gold in SWIFT. As of June 30, 330 corporates had connected directly to SWIFT, up from 181 at the end of 2006, reports Luc Meurant, who heads the corporate program for the Belgium-based consortium.

While SWIFT connectivity is usually regarded as a tactical tool, it has important strategic value, Stalnecker points out. "Treasury has to provide the business units with the right infrastructure to support their shareholder-value-adding activities," she says. "The businesses generate and collect critical cash and rely on treasury to help them do that most effectively. SWIFT is essential to treasury's ability to efficiently and effectively advance the business units." One of the benefits, she notes, is that STP frees treasury staff to get more involved in helping business units.

While direct links to SWIFT definitely produce tangible rewards, corporates are also discovering some unintended consequences, reports Linda Haddad, senior vice president and global integration product manager at Bank of America (BofA). For example, when the corporation uses SWIFT's MT940 message to get balance and transaction reports, some of the useful information contained in traditional banking formats like those developed by banking trade association Bank Administration Institute (BAI) is left out, she notes. The useful BAI detail can be retained in the process, she says, by using FileAct, a SWIFT communications vehicle that essentially acts as an envelope that can be wrapped around bulk files, regardless of file format, and sent to and from banks through the SWIFT pipe.

Another unintended consequence comes when corporates encounter the esoteric world of lifting fees and discover that a payee in Asia received only 90% of a wire payment because a Japanese bank took the other 10% as a lifting fee. "Banks know how this works, how to use charge-backs, bilateral agreements and price negotiation, but corporates don't and are often surprised," Haddad says.

So, as the first wave of enthusiasm passes, treasury managers are finding that "there is a lot more work to be done," Citi's Jain observes. "SWIFT works well for the financial institutions for which it was built, but it needs to be more corporate friendly." For example, the 30-plus- page standard legal document that was produced to be comprehensive and used by all banks is "way too complex," he says, adding that it should be revised, shortened and simplified. "We need a move beyond SCORE (Standardized CORporate Environment) to SCORE 2″ to address the problems now coming to light, he argues.

For companies like DuPont that aren't waiting for a SCORE 2–and didn't even wait for SCORE 1–the wrinkles just need ironing out. Three years ago, when DuPont decided that joining SWIFT was an essential milestone on its journey to STP, the global bank communication game was SCORE-less and even the member-administered closed user groups (MA-CUGs) were few and new, so DuPont found itself a pioneer.

Connecting to SWIFT through three MA-CUGs meant building three separate bridges to SWIFT. If Dupont had waited a year or two for SCORE to become available, DuPont treasury probably would have elected to build one bridge, but its three bridges are now carrying the traffic well, reports Larry Boyer, the science company's global treasury chief information officer. DuPont has no immediate plans to convert to SCORE, he says.

STP has been DuPont's goal since it re-engineered a centralized global treasury operation around three regional banks and two enterprise-wide systems–an SAP enterprise resource planning (ERP) system for the accounting side and a SunGard Quantum workstation for the treasury side–in 2001, Boyer says. Then, SWIFT was still a proprietary network for banks, and while DuPont tried to standardize and automate its banking processes, that part of its treasury operation was still highly manual, and varied significantly by region. "We were working from spreadsheets, and we could generate treasury transactions and formulate a global view of cash, but we hadn't accelerated or automated the flow of information," he recalls.

The treasury staff concluded the solution would be a standardized, automated way to communicate back and forth with DuPont's principal banks. "We saw a way to eliminate proprietary bank connections and leverage the standardized processes embodied in SWIFT," Boyer says. It held the promise that transactions initiated in the workstation could be seamlessly sent through SWIFT to the appropriate banks. "We could see that using SWIFT to get to STP would not compromise the impeccable internal controls around our financial transactions," he explains.

DuPont's original SWIFT goal was leading-edge but modest. "Our business case was predicated on starting with treasury-related payments and getting bank statement information," Boyer recounts. Then an event occurred that changed the game plan. DuPont switched its primary U.S. bank to Citi. "With that change, we decided to standardize as much as we could with Citi," says Boyer.

That meant greatly accelerated use of FileAct, which allows files to be sent to and from banks regardless of format via SWIFT. So instead of just the fairly light traffic of treasury transactions, by 2007, DuPont in the U.S. was sending and receiving A/P, A/R and lockbox bulk files and some payroll files through SWIFT. "We would have been remiss to stick with treasury transactions when we had this much greater opportunity, but it was a challenge," Boyer observes. "We were not necessarily ready mentally and businesswise to take it on, but we got ready quickly."

The bulk files work only for the U.S. at this point, Boyer says, but DuPont expects to add the use of bulk files for Latin America and China later this year. Making treasury payments and getting bank balances through SWIFT already is global, he adds. DuPont now makes most of its U.S. payments by exporting bulk files from the SAP A/P system, putting them in a FileAct envelope and whisking them through the SWIFT pipe to Citi, where the bank executes the wires, prints and mails the checks and delivers the ACH files into the network. DuPont people now touch very few outgoing U.S. payments once they have been entered into SAP, he explains.

Meanwhile, in Midland, Mich., the $53 billion Dow Chemical Co. has been writing another success story. Dow started communicating with SWIFT in 2004 when it installed a new treasury system from Wall Street Systems that was already hot-wired for bank-to-bank communication because of all the firm's bank clients, reports Andreas Unterste, director of financial operations in Dow's corporate treasury. "That kicked us into SWIFT, whether we were ready or not," he observes, "so we started using the MT 940 for account statements, the MT 942 for interday transaction reporting, and the MT 101 and MT 103 for treasury payments." In summer last year, Dow started its first SWIFT bulk file transmissions using FileAct for U.S. A/P payments. Soon Dow expects to make most of its global bulk payments by using FileAct to send files to another three or four banks in and outside the U.S., he says.

Dow doesn't connect to all its banks with SWIFT, but has more than 90% coverage of information that matters, Unterste estimates. But getting there required joining the closed user groups of 16 principal banks. "There was no SCORE in 2004," he points out. But he vigorously disputes the idea that SCORE radically simplifies the process of connecting to SWIFT. "There is no difference technically between MA-CUG and SCORE. They require the same hardware infrastructure, the same software, the same systems work, the same integration. The only real difference is in the legal structure, in how many legal agreements you need to make it work. If you choose SCORE instead of MA-CUG, you can leave a few lawyers behind."

And that explains why Dow, like most other corporate users that already have functioning MA-CUGs, sees little reason to move to SCORE. Dow's big payoff from joining SWIFT is labor savings. "You can't match our degree of automation using multiple proprietary bank systems," Unterste insists.

And adding more banks to an automated solution that has already been built costs almost nothing, he notes. Financial gains from better global liquidity management would be negligible because "we were gathering all those intra-day bank statements and other liquidity information before. It was just a lot more work. Now it's easier."

There's also an unquantifiable payoff in improved security, Unterste says. "It's not necessarily that SWIFT is so much more secure than a proprietary bank interface, but if you're using 16 primary banks, each with its own security model and sign-on routine, you're either overcomplicating your life or you're cutting corners. With SWIFT, there's just one security model to support for all your banks."

DuPont's Boyer also underscores the security role. "You can never be completely worry-free when you're using proprietary bank communication channels over the Internet," he notes. "The security of our assets is still our top priority. We have a lot of transactions and move a lot of sensitive information, so security has to come first."

Those who follow companies like DuPont and Dow will find a growing collection of tools to help smooth the process. Mid-sized companies can look forward to the release next month of SWIFT's Alliance Lite at the Sibos conference in Vienna, says Niranjan Perera, global head of host-to-host and integration services at Deutsche Bank. "It's geared to companies doing fewer than 200 transactions a day. All you have to do is go through a registration process, load software on your PC and you can be up and running," he says.

Another development to watch is the introduction of personal digital signature verification, Perera says. Currently, SWIFT can only authenticate that a payment message was initiated by a corporation. Coming is the ability to trace the initiation back not just to the company but to an individual through digital signatures. That will make it easier to resolve disputes, he notes.

In addition, the development of new bank account management messages will standardize information flows globally for opening, closing and maintaining accounts, Meurant says. "That project started small but has generated a lot of enthusiasm. We'll have new standards by the end of the year or early next year, and people will be talking about it at Sibos."