Thanks to GE, straight through processing is coming to a treasury near you
When you’re the deputy treasurer for a company as big and spread out as General Electric Co.—$164 billion in annual revenue and over 17,000 accounts at 200 banks in 110 countries—you simply have to push for a solution that can simplify, standardize and automate payments, cash flow and bank communication. And for years, that’s exactly what Dennis Sweeney did—with any bank or multinational that would listen. Finally, Sweeney and his counterparts at a few large European companies got the ear of the ultimate bankers-only club, the Society for Worldwide Interbank Financial Telecommunication (SWIFT). With a secure and reliable global messaging system, banks had simplified their own inter-network communications years earlier, and now it is the corporates’ turn.
With GE in the lead, large multinationals have gained direct access to SWIFT through its new Standardized CORporate Environment, or SCORE. In fact, SWIFT is now rapidly redesigning products and services to make them corporate-friendly. But is Sweeney satisfied? Not yet. He and the Fairfield, Conn.-based industrial and financial giant still have not reached their ultimate goal—total straight through processing of any payment, at any time, to anywhere. “It has taken time, but we’ve made progress,” Sweeney points out. “There are still a number of initiatives under way that promise to bring important operational efficiencies.”
Sweeney’s next target? GE’s deputy treasurer has his sights fixed on greater acceptance of SCORE and greater refinement and adoption of new XML messages (ISO 20022 format) by banks. “We want to deploy this connection to more banks around the world, and we want to expand our bank communication beyond payments and balance reporting into things like the Bank Billing Standard being promoted by TWIST, account openings and other financial messages,” Sweeney says.
In the meantime, GE is enjoying the spoils of its first victory, having completed the migration from its old EDI solution for payments to its new SWIFT connection. “As of the end of February, we’re 100% SWIFT,” reports Paul Burstein, GE’s managing director for treasury services’ strategic initiatives. “All GE treasury payments, and most of the GE corporate and business payments, are running through SWIFT today. We’re also getting 70% of our balance reporting through SWIFT, and that will soon be 100%.”
Now, the GE treasury is concentrating on bringing local banks that serve its far-flung subsidiaries onto SWIFT, Burstein reports. “We’re doing live communication with 57 banks, and we have 24 more that we are in the process of bringing onboard. That will bring us enormous additional coverage in Asia, Latin America, Africa, Eastern Europe and the Middle East,” he says. While GE’s ROI has not been calculated recently, it was reported to be 406% in a SWIFT case study published in 2005.
GE’s success is helping to draw a crowd. Over 230 corporations are now directly connected to SWIFT—about 35 of them under the new SCORE model and the rest under an older bank-sponsored arrangement, known as MA-CUG (member-administered closed user group). Even more impressive is the pipeline of companies wanting to connect. While SWIFT attracted corporate interest sooner in Europe, “we now have over 40 large corporations in North America in our pipeline,” reports Andrew Hazen, SWIFT senior relationship manager.
For Toyota Financial Services in Torrance, Calif., direct access to SWIFT has paved the way to creating a true global treasury. “Our old model of proprietary bank interfaces simply wouldn’t work on a global scale,” notes Jeff Carter, assistant global treasurer for liquidity, sales and trading. “The only way to get an efficient global treasury is through an interface with SWIFT.” So, now, Toyota will parlay SWIFT and its new Wall Street Systems treasury workstation to that efficient global setup.
All Toyota’s banks in the U.S. are already reporting through SWIFT, Carter says. “Balance data is waiting for us when we come into work in the morning. There’s no more polling or parsing through a workstation. We can now make real-time decisions. Our vision,” he adds, “is that all Toyota data going to and coming from all banks and broker/dealers will be via SWIFT, including wires, payment instructions, ACH files, debit and credit advices, bank statements and all our trade data for securities and derivatives.”
SWIFT for corporates will usher in a new era of bank competition and lower prices, Carter hopes. “Banks will have to compete on service and rely less on sticky interfaces,” he says. “Once we get the independence of the direct SWIFT interface, we’ll be set up to deliver our ACH and wire transfers to any of several banks. On any given day, we can use the one that offers the best price or service.”
While most companies start with cash management and use SWIFT as a pipeline to collect bank balance and transaction reports, some corporations are using SWIFT to support trading activities, reports consultant Dave Robertson, a partner in the Chicago office of Treasury Strategies Inc. One corporation TSI studied had been getting trade confirmations by fax from its dealers and manually keying them into its treasury system. “They found they could get all their confirmations through SWIFT in an automated straight through process. It’s working today,” he reports.