The process of joining SWIFT should start with an internal cost/benefit analysis, says Bryan Kirkpatrick, vice president, senior product manager for treasury services and SWIFT expert at Bank of New York Mellon. What do you want to use SWIFT for? How much would it cost to do that? How much would you save? Some of those answers will come from talking with SWIFT sales or consulting people. Some may come from treasury peers. Together, you should be able to figure out if the business case is there.
Don't expect those triple-digit ROIs you may have heard about. Some of the earliest case studies claimed ROIs of several hundred percent, but those were special cases. Routine ROIs have now flattened out but are still attractive in many cases, says Brian Wedge, executive director and global product manager for SWIFT at J.P. Morgan Treasury Services.
When sizing up the business case for SWIFT membership, think enterprise-wide, not just about treasury. For pioneers like General Electric, the interest always went beyond treasury because GE is both a huge multinational industrial corporation and a financial institution. Both the industrial and financial segments would have reasons to join SWIFT, notes Tom Nelson, cash management specialist for Wall Street Systems, about his client. Put the two segments together and a single direct connection to serve both can make sense, he says.
There's plenty of information out there for companies considering a move to SWIFT. Treasury staffers should attend SWIFT sessions at trade shows, read trade journal articles, talk to peers who have joined already, and then talk to SWIFT.
"When we find a new prospect," explains Eileen Dignen, SWIFT's managing director of banking accounts and initiatives for the Americas, "we send in a sales person to explains all the options--direct connectivity, service bureaus, Alliance Lite--and help the prospect see which would work best for them. If it's a service bureau, we give them a list of certified bureaus, but the due diligence is up to them."
If you decide to proceed, you have to pick whether to join directly, use a service bureau or start with Alliance Lite. If you choose a service bureau, as many do, then it's time to assess the candidates and conduct a formal or informal RFP to find the one that offers the best fit, Kirkpatrick explains. Together with the service bureau, you should approach the company's key banks and start working out the details of how to exchange SWIFT messages with them, he says.
Then it's on to testing. Start simply, Kirkpatrick advises. Send payment instructions and get credit and debit confirmations. Once the company masters that, it can move on to receiving account statements in FIN 940 messages. Once you're comfortable with that, try sending ACH files or positive pay files, using FileAct. Once the company has gotten high up the food chain, where the big players are, it can start thinking about electronic bank account management (eBAM) and exceptions and inquiries (E&I). Companies can also use FileAct to receive account analysis statements. FileAct is a standardized SWIFT envelope that can contain data files in a variety of formats.
Order is important. Too often a company commits to a technology approach before it has thought through its format and data requirements and has to revisit technology or live with an inferior data formatting solution, notes Mary Ellen Putnam, vice president of the international business unit at BankServ, a SWIFT service bureau in Las Vegas, Nev.
Don't overlook the SWIFT functionality resident in the company's ERP system or treasury workstation, advises John Cowart, senior product manager for global transaction banking at Deutsche Bank. Those systems, which have been upgraded to be in compliance with Sarbanes-Oxley and Basel 2, will eventually lead many mid-market and smaller businesses to SWIFT, he predicts. "They will have the infrastructure to take advantage of SWIFT, and the consistent record-keeping required for compliance will encourage them to adopt SWIFT."
It's good news that SWIFT has expanded its advising services for corporates into a full-fledged consultancy business line. Its Professional Services Group has been renamed SWIFT Consulting Services. "We have a large group of direct employees working as consultants, and we may bring in some of our consulting partners in engagements," Dignen says. "It has become a broader product offering."
Some corporations bring their own consultants into the mix, which is fine with SWIFT. "We are careful of existing relationships," Dignen says. "We will subcontract, but we still manage the project."
Practitioners who have gone through the experience of joining SWIFT testify that it is feasible and rewarding, but harder than they expected. BMC Software, a Houston-based, $1.9 billion software company, tried to move quickly to implement a SWIFT connection with seven banks, four of them primary, in 2008. The company found it had to wait because not all of its banks could meet its deadlines and because it was trying to do too many things at once, including implementing new treasury and ERP systems. Nevertheless, BMC achieved a single consolidated SWIFT protocol and system for all payments, including treasury and AP payments. It also reduced labor and operations costs, speeded its execution of transactions, and gained visibility and control over its cash, according to its case study.
When John Emerick was treasurer of $631 million Fair Isaac Corp., before leaving the company last December, he had his two treasury staffers connect to SWIFT through a service bureau, largely to do FX trading with its banks, he says. Picking a service bureau meant issuing a standard RFP to a group of SWIFT-certified bureaus. While Emerick thinks the SWIFT connection probably saved the company money through opportunity costs, Fair Isaac is a light user of SWIFT. Customer service was adequate, and the effort was not a major drain on staff time, says Emerick, who is now a principal and co-founder of consultancy Raven Road Advisors.
The setbacks don't lie in message transmission glitches. Actually transmitting standardized SWIFT messages is not all that difficult, says C.J. Wimley, executive vice president for corporate solutions at SunGard AvantGard, the treasury software firm that owns a SWIFT service bureau. The challenge comes in getting the corporation set up and working with banks to make sure they can receive and send the messages the company wants to use in the way the company wants to use them. Then the issue becomes getting the right value-added services to keep the process as automated as possible, Wimley says.
Companies that have waited until this year or next year to join SWIFT are reaping the benefits of shared experience. Treasury executives working to service bureaus to connect to SWIFT get smarter every year, BankServ's Putnam reports. "SWIFT has done a good job of educating the market. We've seen steady progress."
Will SWIFT Expand to Corporate-to-Corporate Messages?
In the quest for expedited financial communication, could SWIFT become a network for corporate-to-corporate communication and help to automate supply chains radically? That is remotely possible. If SWIFT gets enough corporations using its trade document messages, it could allow companies within a supply chain to start exchanging messages with each other, but so far that remains taboo. For now, SWIFT is strictly a bank-to-bank and bank-to-corporate network, says Susan Feinberg, senior research director at Needham, Mass.-based consultancy Tower Group.
That could change. SWIFT is growing and already offers services far beyond the payment and cash management activities that were projected just a few years ago, Feinberg points out.
But such a change remains unlikely. Bryan Kirkpatrick, vice president, senior product manager for treasury services and SWIFT expert at Bank of New York Mellon, sees no immediate prospect that SWIFT channels will be used for corporate-to-corporate messages. "You don't hear it discussed," Kirkpatrick says. "The financial institutions that own SWIFT would have to approve it, and while I can't speak for the shareholders, in my personal opinion getting the network's owners to grant such approval would be highly unlikely at the present time." --By Richard Gamble
For an indepth look at one company's implementation, see Dell's SWIFT Global Connection.