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Time to Become SWIFT Savvy…

by Colin Digby, Head of Treasury Solutions and Markets, EMEA, Global Transaction Banking, Deutsche Bank

SWIFT’s corporate model is now, more than ever before, a realistic option for a lot of corporates considering a bank agnostic connectivity model. The associated costs (upfront and ongoing) and the process to implement a SWIFT solution are now a lot more appealing to many corporate treasurers. In addition to SWIFT doing their part in making this happen, banks are also taking a different attitude towards SWIFT for corporates; historically agnostic at best or lukewarm at worst, many are now embracing SWIFT more as simply another option in the armoury of connectivity models to support their diverse client base, rather than viewing SWIFT as any threat of disintermediation.

Even with many of the jigsaw pieces falling into place, it would appear that a considerable number of corporate treasurers have yet to fully grasp the SWIFT corporate approach and assess whether it could apply to their business model now or in the future.  Admittedly this subject has been something of a moving target, as SWIFT’s corporate solution has evolved over the years.  I am more convinced that the lack of clarity on this subject is based on a number of factors relating to the evolution of the various SWIFT corporate models over the years and the plethora of rules and standards that have changed with each generation. However, ultimately it has become an issue of perception. A perception of: 

• SWIFT being an inter-bank club
• SWIFT equating to high levels of complexity & cost
• SWIFT requiring specialised knowledge
• SWIFT historically failing to establish a broadly appealing corporate model

MA-CUGs in effect became an entry point to SWIFT for corporates via a bank.

Whilst SWIFT achieved some initial success with its earliest corporate business models, signing up some of the largest corporates like General Electric, DuPont and Microsoft, the actual volume of clients and associated messages were modest. The SWIFT corporate models historically failed to deliver sufficient appeal and applicability to ever develop in to any real critical mass. But times have changed.

More recently it is has been the perceived weakness, or threat of weakness, of some if its bank members that have driven new customers to SWIFT and along with the more recent development of corporate friendly and affordable business models by SWIFT there is now real momentum.

To understand fully the initial modest uptake and to appreciate the more recent renaissance it helps to reflect upon the evolution of SWIFT and its corporate models over the years:

1973 : SWIFT formed by the banks for the banks.

1977 : SWIFT goes live.

1998 : Corporates were first allowed to participate in SWIFT with the Treasury Counterparty (TRCO) Model. This simply facilitated the processing of deal confirmations for FX and money market (MM) trades. Banks were happy for SWIFT to provide this service as it did not directly compete with the cash management services they provided through their proprietary systems. Whilst SWIFT had created a niche service, they recognised that trade confirmations were not enough of a draw to the broader corporate community and the TRCO model would only ever appeal to the largest companies who traded heavily in FX and MM.  This said, it was still a major and very expensive undertaking for those with deep enough pockets, and only 15 large corporate clients adopted this model. So for the remaining 99%+ of the corporate market seeking a deal confirmation service, the TRCO model was not a realistic option.

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