Once the decision was made to use SWIFT, $51 billion Caterpillar didn't take small steps. "We chose the big bang approach," Lupien says. Caterpillar uses SWIFT to collect its bank balances and send payment initiation files to banks for all its global treasury centers.

Caterpillar chose Trax, a SunGard product, for its front-end cash system, and for its SWIFT connection, it picked a service bureau. "Using Trax and SWIFT allowed us to work toward a common process worldwide for making payments and collecting statement information," Lupien says. "We have been able to stop using most bank proprietary platforms at our treasury centers, and we've set the stage for having a single pipe to connect to all our banks and connect our banks to our to-be global ERP system."

When Caterpillar joined SWIFT, Alliance Lite was not yet available, and "we could not justify making a direct connection," Lupien says. "We didn't have the IT resources or the volume. Connecting to SWIFT is technologically very intensive, and something for experts to handle. It was an easy decision to use a service bureau."

But using a service bureau has its downside, he concedes. "We were not in control of the connection, yet we depended on it for our critical daily cash operations. If the connection went down, there was nothing we could do except call for help," Lupien says. Connections did go down in the beginning, but things have improved, he reports. "We started with a number of complex connections within the Caterpillar IT infrastructure and to the service bureau.

"All of the connection points were opportunities for breakdowns," Lupien says. "We had some challenges at first, but we streamlined the process, eliminated a lot of connections and now outages are down significantly." The SWIFT network was never down, he explains, only the intermediate connections.

Using a service bureau cut Caterpillar's up-front costs considerably and the project will definitely have a positive ROI, Lupien says.

Early adopters' case studies show "a tremendous ROI," agrees Paul Trozzo, group product manager for the EFT product group at PNC Bank. But companies now are reluctant to take on the cost and responsibility of owning all the equipment and are turning to service bureaus as a way to tap into a ready-built conduit, albeit one they share with other users, he observes. "It's becoming a popular way to get your feet wet."

As SWIFT's popularity grows, service bureaus are bulking up. "We've seen some large players emerging as very credible providers," says Manish Jain, managing director for electronic channels in the treasury technology group at Citigroup. As the market moves beyond small, local providers, corporate treasurers have more confidence about using service bureaus, he notes.

Like Caterpillar, many treasuries move to SWIFT as part of a broad re-engineering. However, there are little bang initiatives as well as big bang ones, and for those, the Web-based Alliance Lite option is just right. Henry Schein, a $6 billion healthcare distributor, is one company that has chosen this option, which is offered directly by SWIFT.

"We're using SWIFT selectively where we can cut costs or reduce maintenance," says Shin Young Park, manager of treasury operations for the Melville, N.Y., firm. For example, Henry Schein needs balance and transaction reports for its accounts with JPMorgan Chase in London.

Chase London had been generating SWIFT MT940 messages and sending them to Chase New York, which converted them to BAI format and provided them to Henry Schein along with its Chase U.S. balances. Chase charged a fee for receiving and converting the 940s. Now, with Alliance Lite, Henry Schein gets the 940s directly from Chase London and pays no fee.

The company also uses SWIFT to get 940s from HypoVereins, its bank in Germany. Having the SWIFT connection "gives us flexibility," Park says. "We are looking at other uses. We may expand the balance and transaction reporting to more banks in Europe."

While there is some software to install initially to make the SWIFT Lite connection, it's simple, Park says. Rather than go to the SWIFT Web site to download messages, she says, Henry Schein uses the AutoClient feature of SWIFT Lite to "grab the messages when they arrive and bring them to our server and download them to our treasury workstation.

"We make high-value, low-volume payments, so even if we started using SWIFT for payments, we wouldn't need more volume than we can get through Lite," Park says. SWIFT Lite is economical, easy to use and presents no volume constraints that would hamper Henry Schein, so the company plans to stick with that SWIFT connection for the foreseeable future, she says.

SWIFT introduced Alliance Lite in 2008 for low-volume users like Henry Schein, but it is also popular with large companies that want to test the waters with Web-based access and then move on to direct or service-bureau connections once the value proves out, Gjertsen says.

And of course there is the direct connection favored by large multinationals like Dow, GE, Microsoft and DuPont. When Dow began its migration to SWIFT in 2004, there was no Lite option and service bureaus were not yet ready for prime time, Unterste notes, so connecting directly or waiting were the only choices. But he says the company would probably still go direct if it were choosing today. "We'd be reluctant to outsource something that important to us. It was costly up-front, but now we have the in-house expertise to make any modifications we need. I do think that it is easier to join today because SWIFT has had more experience with corporates and the account managers there are smarter because of it."

Connecting directly is a big job that involves a lot of tasks that must be done in the right sequence, Unterste says. Companies sometimes push to make a direct SWIFT connection in six months, but it's more realistic to allow a year, he suggests.

"It's a huge advantage to have a single connection with the features that allow it to communicate with all banks in the world, but getting all those features to work over one connection is about as complex as such things can get," he cautions.

Since Dow–after its Rohm & Haas acquisition–is installing a single ERP system worldwide, it is not upgrading legacy systems. The new system will provide 100% ISO 20022-formatted communication and is designed to be bank agnostic, Unterste says.

With all three channels operating successfully, SWIFT is making several expansionary moves. When the Score model was introduced in 2005, only public companies whose stock was actively traded on exchanges were eligible. Now private businesses and governments that are recommended by a SWIFT member bank can also join, Gjertsen reports.

Meanwhile, two new message sets that have reached the testing stage are generating interest among companies. One is messages for enquiries and investigations (E&I) (see sidebar). The other is the electronic bank account administration (ebam) message set.

Ebam lets companies open, close or change bank accounts through a series of SWIFT messages. "This has been a major corporate pain point," Gjertsen says. "Being able to communicate with all banks in one standardized set of messages will be a great value-adder." The ebam initiative uses the new XML ISO 20022 format, which has been gaining traction slowly so far, in spite of support from SWIFT, SEPA and leading corporate treasurers who want to push richer data through SWIFT and "eliminate the second 's' in standards," she notes.

The ebam initiative has been driven by corporations but is generally welcomed by banks. "We like to see corporations use SWIFT for commoditized services, and opening or closing a bank account is a very commoditized service," says Jonathan Ashton, global head of channel management and integration services for global transaction banking at Deutsche Bank.

Ashton predicts companies will continue to open new accounts at new banks face-to-face to establish the relationship, but says that add-on accounts, account closings and signatory changes will be done electronically through SWIFT. Digital certificates that take authorization to the personal level will be part of ebam, he says.

The ebam initiative has a lot of companies thinking about SWIFT that weren't considering it before, says Laurie McCulley, a principal at consultancy Treasury Strategies in Chicago, noting that bank account administration is "a real pain point for a lot of treasury staffs, whether they have 60 bank accounts or 6,000." The promise of standardized administration across all accounts at all banks anywhere on the globe now has an enthused following.

Companies like GE and Microsoft that adopted SWIFT quickly when Score was introduced are leveraging their investment and getting ready to use services like E&I, which will be rolled out later this year. The ebam program will soon go into pilot testing, and a cash reporting solution that provides richer data using the XML standards for cash became available this summer.

Not everything is moving briskly in the SWIFT world. For all its heralded benefits, the switch to XML messages is proceeding slowly, says Louise Gorman, managing director of electronic channels for treasury services at JPMorgan Chase. "SWIFT is adopting XML for its next-generation products. Vendors are accommodating it. But it's change, and in this economy, corporations that have communication channels that are working generally are not interested in the cost and work of making a switch just to get the latest message standard."

Since the banking crisis flamed up last fall, treasurers have made a real push to reduce their dependence on banks and bank proprietary products, and that is feeding interest in SWIFT. "The current demand for visibility of cash is high, and SWIFT can bring that," says Kevin O'Neil, head of file and information services at HSBC Bank USA. "We're seeing large multinationals want to see their balances direct from the banks and not rely on subs reporting up." And in this environment, they don't want to be dependent on any one bank's systems, so SWIFT looks good because it is reliable and makes banking relationships portable, he adds.

"In the current economy, there is great interest in getting global visibility of all cash," Gjertsen says, "not just for liquidity optimization but for control. SWIFT is an appealing source of truth. It gives financial executives confidence in their compliance filings." There has been an uptick in the use of SWIFT for trading activity messages, she notes.

While Dow did not change any of its primary banking relationships during the crisis last fall, says Unterste, "we were prepared to make changes, and having the plug-and-play SWIFT infrastructure made us more comfortable that we could have made important changes quickly if we decided to do so."

Companies need a resilient communication infrastructure, and SWIFT fills that role, says Craig Jeffery, managing director of consultancy Strategic Treasurer in Atlanta. "They need to be able to change banks quickly, so they don't want banks to provide the plumbing," he says. "SWIFT is becoming the plumbing, and banks are becoming the water providers."

Enquiring Minds Are Investigating This Connection

Corporations and banks share an interest in using SWIFT to standardize and automate the process of tracking down what happened to payments that miscarry, a process known as E&I (enquiries and investigations).

Being General Electric means having lots of bank accounts, lots of transactions and lots of enquiries about payments, which all flow to treasury.

"We have 3,500 users on our Web-enabled treasury workstation. Whenever they had questions about a payment, they'd send it to treasury and we'd send it to the bank," explains deputy treasurer Dennis Sweeney. Treasury simply forwards at least 25% to 30% of those questions, he says. "There's no reason for us to be in the middle."

So GE is getting ready to plug its internal system for collecting enquiries into its SWIFT connection to convert many of those questions into the appropriate E&I message and send them straight to the appropriate bank. "It should be a big productivity gain for treasury," Sweeney says.

Susan Boeri, GE's head of product management for treasury, says the company took part in a SWIFT working group with several banks and other corporate treasuries to see whether the E&I messages would cover what it needed. "We're still testing it with two banks," she says. "When more banks come on board, we expect to move into production."

Banks seem eager to automate the manually intensive processing of payments that have gone awry. "We've made great strides in automating the processing of bulk payment files, but dealing with the exceptions remains very manual," notes Bryan Kirkpatrick, senior product manager in Bank of New York Mellon's treasury services group.

Between 3% and 5% of all payments result in some kind of enquiry, he reports. The estimated cost of resolving enquiries is stuck at $15 to $20, and the time they take at 3.6 to 5.5 days.

"The head of our wire department recalls when he used to have 10 payment processors and three enquiry clerks. Now he has three payment processors and 10 enquiry clerks," Kirkpatrick reports. Some 76% of the enquiries fall into five common categories.

Soon SWIFT messages for those common enquiries can go up and down the chain of banks that touched the transaction, traveling electronically until the trouble is found, resolved and reported back to the enquirer. "It brings banks tremendous cost savings and improves customer service," Kirkpatrick says.

Although the E&I messages, all in the new XML format (ISO 20022), were built for the global correspondent banking network, some leading corporations have seen value for their treasuries.

In the past, word that a payment has misfired in some fashion would result in a phone call from a treasury staffer to the originating bank, setting off a chain of telephone calls and e-mails that would take days to resolve.

Now the investigation can be done electronically, and each step is reported back immediately all the way to the corporate treasury that initiated the enquiry, so the status of the investigation is always clear, Kirkpatrick explains.

Even treasuries with no SWIFT connections will benefit because their enquiries will be resolved more quickly once banks activate the SWIFT track for interbank resolution, Kirkpatrick says. –Richard Gamble