Trends in Corporate Connectivity
by Cédric Dumont, SWIFTNet Product Manager, ING
The last two or three years have seen some of the most important changes and advances in the way that corporates connect with their banks since electronic banking systems were first introduced in the early 1990s. While considerable achievements have been made, such as the SWIFT network being made available to corporates and the launch of SEPA, these are only the first steps in a path of evolution which could transform the way that corporates connect with their banks in the coming years.
Corporate treasurers and finance managers are demanding more from their banks: more flexible standardised connectivity, richer information and greater security. Banks which are at the forefront of current developments in corporate-to-bank connectivity are actively supporting their corporate customers to achieve these objectives. In this article, we will look at some of the current trends and initiatives in this area and how corporates can benefit.
SWIFT corporate access
Until 2001, SWIFT was the network through which banks communicated between themselves. Since then, corporates have also been able to connect to their banking counterparties via SWIFT, enabling corporates to exchange financial messages securely with its financial counterparties through a single channel as opposed to requiring individual connections to each counterparty bank. The first few years saw only a limited number of large companies taking advantage of this opportunity, but new initiatives such as SCORE (Standardised CORporate Environment) launched in 2007 and ‘Lite’ due later this year extend the viability of SWIFTNet access to a wider range of companies. Furthermore, the development of service bureaus and member/concentrators enable corporates to connect to SWIFT without the need to invest significantly in technology, therefore being able to maintain a focus on core activities.
Launch of SEPA
One of the drivers for many corporate treasurers to consider new ways of managing pan-European liquidity, payments and collections is SEPA (Single Euro Payments Area) which was introduced in January 2008. One of the outcomes of SEPA is the ability to use common payment methods across the Eurozone (both credit transfers and direct debits) with all European payments being treated as domestic payments, whatever the source or destination country. While there is still some way to go before SEPA is fully adopted and the SEPA payment products fully replace existing domestic payment methods, there are already substantial benefits which companies can gain, particularly those operating on a pan-European basis with a material volume of cross-border euro payments.
Whenever there are new opportunities for delivering sensitive information such as payments, innovations in functionality and automation need to be matched with comparable developments in security.
Personal digital signatures
Whenever there are new opportunities for delivering sensitive information such as payments, innovations in functionality and automation need to be matched with comparable developments in security. We are all accustomed to providing proof of identity when we travel overseas, make a payment or take out cash from our bank account. Conducting these tasks electronically, at a corporate level, also requires validation that the source and destination of a transaction are valid, and as the value of transactions and impact of any losses is substantially greater, security is a primary consideration. Furthermore, Sarbanes-Oxley and anti-money laundering legislation requires individuals to be identified at an individual level together with their roles and responsibilities. Consequently, while the banks, software providers and industry bodies work towards enhanced standardisation and automation in the way that financial messages are exchanged, validation of transactions using a personal digital signature is a vital aspect of the work which is taking place.
We will not go into detail about SWIFT corporate access and the benefits as this is covered in detail earlier in this Guide. However, until recently, highly automated, efficient connectivity with banking counterparties for payments, retrieving bank statements and confirmations has been the domain of the largest corporates with the greatest resources, infrastructure and leverage with their banks. Today, we see a far wider range of organisations seeking to automate their workflow and connectivity to achieve improved straight-through-processing, efficiency and cost effectiveness, ultimately with a view to enhancing competitive advantage.