Financial Technology

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Leading Corporations are Adopting SWIFT We talk to BofAML's Global Head of Integrated Channels about the latest SWIFT trends and drivers of adoption, as well as speaking with Cargill about their recent SWIFT implementation project.

Leading Corporations are Adopting SWIFT

An Interview with Tom Durkin, Global Head of Integrated Channels, Bank of America Merrill Lynch

In this month’s Executive Interview, Helen Sanders, Editor, talks to Tom Durkin, Global Head of Integrated Channels at Bank of America Merrill Lynch about the opportunities that SWIFT offers for efficient, secure corporate-to-bank communication. Tom is joined by Sundeep Singh, Bank Technology Consultant at Cargill, who describes Cargill’s SWIFT implementation and some of the outcomes so far (see page 2 of this article).

What trends are you seeing in the use of SWIFT amongst your corporate clients?

Tom Durkin

While the ability for corporates to communicate with their banks via SWIFT has existed for well over a decade, it was generally only been the global multinationals with tens or even hundreds of banking providers that first took advantage of this opportunity. This started to change with the growth of service bureaus that provided outsourced SWIFT connectivity services, and more recently with the advent of SWIFT AllianceLite2, SWIFT’s cloud-based connectivity offering. Pricing models have also evolved, making SWIFT a more realistic connectivity proposition for a wider spectrum of organisations. For example, as mid-cap companies expand their geographic reach, they often need to expand the number of banks and manage counterparty risk more effectively, which makes the value proposition of SWIFT more compelling. There are now around 1,500 corporations using SWIFT for bank connectivity, but there is still enormous untapped potential amongst both large and mid-cap corporations.

The ability to connect to multiple banks through a single, bank-agnostic channel has traditionally been the most commonly cited reason to use SWIFT for bank communications. Is this still the biggest driver for SWIFT adoption?

While bank independence remains an important element of SWIFT’s value proposition, our dialogue with corporate clients has evolved significantly in recent years. The importance of managing bank risk has never been higher, both in the aftermath of the global financial crisis and also as a result of the geopolitical and economic volatility in a number of markets, and the decision by some banks to revise their geographic footprint. This is resulting in some clients being forced to change their banking providers, often at short notice, which creates significant strategic and operational issues. Treasurers and finance managers recognise the value of a bank-agnostic platform to which over 8,000 banks globally are connected in supporting their bank risk strategy, and enabling them to channel transaction and information flows to an alternative bank quickly, efficiently and securely.

While managing bank risk is clearly one important driver, to what extent should SWIFT be the connectivity solution of choice to address other types of risk?

Some of the most important benefits of SWIFT are its level of resilience and security features. While these have always been corporate priorities, these issues have become even more important as a result of growing cybersecurity risks. The use of SWIFT, particularly when outsourcing to a third-party service bureau, also helps to insulate the company against technology obsolescence. For example, each bank has a different ability and appetite to invest in technology development, which leads to the risk that clients will be locked into solutions that provide sub-optimal security, integration capabilities or breadth of functionality. In contrast, SWIFT is a pioneer in developing and promoting industry standards in security, formats and integration, and facilitates a growing range of transaction and information flows between financial counterparties.

The use of outdated, inflexible, proprietary technology for cash and treasury management is already becoming a major disadvantage for corporate treasuries and IT departments, a trend we expect to grow. Not only does the use of outdated technology exacerbate the risks we have already discussed, but it also discourages talent. The millennium generation that is now entering the workforce is accustomed to highly functional, open and standardised technology, so corporations that rely on inflexible, legacy technology will find it increasingly difficult to attract the best talent, who will be put off by the need to develop skills that are obsolete and non-transferable. Instead, by using SWIFT, with industry-wide formats and a consistent data-centric approach, companies can attract employees by offering the ability to develop highly sought-after skills, and gain access a wider pool of resources.

SWIFT adoption should not be primarily viewed as a defensive strategy as it plays an essential role in facilitating globalisation and supporting growth. In particular, as a fully scalable platform, treasurers and finance managers can increase volumes and add both banking providers and services seamlessly.

With mergers and acquisitions (M&A) on the rise, treasurers and finance managers need to integrate financial processes, formats and connectivity quickly to minimise cost and risk, and leverage the advantages of the combined business. This becomes far more straightforward to achieve when using SWIFT. Similarly, demergers are far easier when using SWIFT, allowing the new business to start its cash and treasury operations quickly, securely and efficiently, without interruption to the original entity.

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