SWIFT corporates prove they’re not just in it for the money
Working on the boundaries of the financial world as I do, one sits on the line where accounting meets real life. This provides a unique vantage point for seeing where cash flows are collected, managed, predicted, hedged, raised, invested and centralised before the cash is finally paid out again into the wider world.
So, what better way to begin my new blog than with some small observations from Sibos, SWIFT’s yearly user group meeting, and the foremost event on the international payments calendar.
As well as being another five letter acronym that may not be well known outside the banking world, SWIFT is a cooperative owned by an international association of banks around the world. It runs the network banks use to send information about payments and securities trading securely and safely.
In the past, Sibos was an event purely for banks and their vendors. But, as SWIFT has opened up its network for corporates to communicate with their banks, the scope of the event has widened considerably.
In fact, this year, the first two days of the Sibos week were dedicated to a special forum for corporates where SWIFT talked about its plans to expand the offering and corporates talked about their experience of using SWIFTNet for bank connectivity. This discussion shed some interesting light on the way SWIFT affects corporates.
For example, one of the main advantages of using SWIFTNet for sending payment instructions and receiving bank statements is cost. Using SWIFTNet is meant to be cheaper. At least, that is what SWIFT says – and it’s a point that vendors supporting SWIFTNet connectivity for corporates often cite.
Some vendors have even claimed that it costs €50,000 per year just to maintain a proprietary connection to a single bank. This figure is probably a bit inflated, but nonetheless, it illustrates the fact that bank connectivity doesn’t come for free.
Interestingly, what came out of the Sibos forum is that cost reduction is not what some of the corporates that already have extensive experience with SWIFT listed as the main advantage. The biggest benefits that they saw were increased security and reliability.
Bank connectivity outside SWIFTNet can also be secured. A host-to-host connection is very safe and can be just as reliable, but if you have many of them – say one for each bank – the administration increases and the risk that something goes wrong is bigger. This scale of effort means that corporates are unlikely to connect to all their banks in this secure way.
A few days later, I was sitting in a meeting where a SWIFT representative was presenting to a small group of potential clients. His aim was to sell the advantage of SWIFT connectivity. His first argument, and the one he spent most time on, was the cost advantage; increased reliability and better security were further down on his list. At this point, I considered jumping up and telling the audience what I had heard from SWIFT users at Sibos, but decided to spare the SWIFT representative the embarrassment.
Admittedly, the customer case studies did mention that with SWIFTNet connectivity in place they would be able to add another bank to their list at a very low marginal cost. So, cost is important - but for the first big corporates starting to use SWIFTNet it has not been the deciding factor.
The point is that corporates should look beyond cost and security to find the real advantages of SWIFT connectivity. Through SWIFTNet connectivity corporates can improve their daily cash management.
They can generally get their banks statements earlier; it is easier to collect intraday banks statements and the cut off time for payments may be extended. Further the formats exchanged with the banks are more standardised.
This means a simpler, faster and more reliable way of managing cash across multiple banks and bank accounts. You can therefore cut the cash reserves you hold and achieve a better interest on the rest that you keep on hand.
