Author: Susan Kelly

Corporates and their banking partners still often speak different digital languages, but new initiatives by SWIFT and SAP should make connectivity easier. And increasing competition will be a good thing for corporates, sparking innovation and driving down costs.

Cloud technology is making it easier for companies to connect to their banks, as evidenced by a couple of recent market developments. Global messaging provider SWIFT said at its annual technology conference, Sibos, that it is teaming up with software vendors to embed its connectivity into their Cloud-based applications, allowing companies to use its network with less muss and fuss. And enterprise resource planning (ERP) giant SAP announced plans to connect corporate customers with their banks via its Cloud-based Financial Services Network.

When companies started using SWIFT’s messaging network to connect to their banks in 2006, they either set up a direct connection, a costly process that required a lot of IT resources, or paid to connect through a service bureau. SWIFT’s Alliance Lite solution simplified connectivity by providing it via the Internet. The latest developments allow companies to link with multiple banks even more quickly and easily, making improved connectivity accessible to smaller, less wealthy companies.

That is timely. More small and midsize companies are starting to do business globally—and thus grappling with international payments, notes Stacy Rosenthal, SWIFT’s head of products initiatives for the Americas. “In order to be relevant in those segments, we need solutions that are simple and obtainable from implementation all the way through.”

By partnering with technology vendors, SWIFT “offers direct connectivity tightly embedded in the application,” Rosenthal says. For companies, the arrangement means “minimal setup time,” she says, and eliminates the need for a third-party service provider. “We see a lot of benefits in the simplicity,” she says. “I think it’s going to become a much more turnkey approach.”

So far, SWIFT has announced six technology vendors with which it’s partnering, including treasury workstation vendors GTreasury and Bellin. Rosenthal says other partners are vendors “in the securities space and payments space.”

For companies that use the embedded link in GTreasury’s workstation solution to connect to their banks, “there’s zero footprint to them, there’s not the big cost of a SWIFT infrastructure and not the big cost of a service bureau,” says Warren Davey, executive vice president at Illinois-based GTreasury. Accessing SWIFT via GTreasury also means companies don’t have to come up with IT resources to implement a connection, he notes.


Rosenthal, SWIFT: "To be relevant in the SME segments, we need solutions that are simple and easy to implement."

SAP’s Financial Services Network offering plays off its sizable base of both corporate and bank customers. The company built FSN in cooperation with some of the big banks, says Sanjay Chikarmane, senior vice president and general manager of global technology solutions at SAP, and it’s expected to go live sometime this summer. The solution connects directly from a company’s ERP system to FSN, and from there to the company’s banks. Citi, for example, is already working with SAP to connect to corporates via FSN.

Chikarmane says FSN also helps companies deal with the different formats banks use. “The number-one challenge corporates and banks have is how to address the diversity of different formats,” he says. “Even though SWIFT has standardized, the data contained by SWIFT messages can be widely different, depending on the bank.” After FSN extracts data from a company’s ERP system, it translates that data into the format the bank wants, and it takes the data banks send to companies and translates that into the native format of the ERP system.

Similarly, Davey says, GTreasury will provide translation services for customers that use the SWIFT link in its solution to connect to their banks.

Other treasury technology providers have embedded links to service bureaus in their applications, in part to help corporate customers deal with different formats. For example, Reval partners with Fides, a service bureau that is part of Credit Suisse, and Justin Brimfield, chief marketing officer at Reval, cited Fides’ “data transformation element” as part of the attraction for corporate customers. Fides “is capable of taking disparate pieces of information from disparate sources and translating them,” Brimfield says. “They can pull in the relevant information and put it into a format that’s digestible. The client doesn’t have to worry about making any kind of translation.”


SAP’s foray into connectivity is seen as a challenge to SWIFT. “If you look at what SAP is trying to do and the pieces of the jigsaw puzzle they’re pulling together, if I were SWIFT, I would be very worried,” says Gareth Lodge, senior analyst at technology consulting company Celent.

Lodge points to SAP’s sizable base of ERP customers, which includes both corporates and banks, and its other capabilities, including procure-to-pay network Ariba and invoicing provider Crossgate. “What SAP now has is pretty much the end-to-end value chain for a corporate,” he says. While SWIFT’s network is “owned by banks and designed around bank processes,” SAP’s “is designed from the ground up around how the corporate does business.” Lodge says, though, that companies are likely to wait to see how FSN does before jumping onboard.

Meanwhile, SWIFT’s move to embed connectivity in technology applications threatens the business model of the service bureaus that many companies have relied on. In recent years 80% of corporates signing up for SWIFT have connected via a service bureau, according to Lodge.

SWIFT’s new partnering model “certainly does create a challenge for service bureaus,” says Craig Jeffery, managing partner in Atlanta-based consultancy Strategic Treasury.

Jeffery notes that one of SWIFT’s goals is to weed out ineffective bureaus. But the bigger service bureaus “have a very good model and all types of enriched services,” he says.

As corporates are offered more ways to connect to their banks, how do they select the best option? Companies should consider whether the software they’re using already has a SWIFT link or connects to SAP’s FSN, and how much work it will take them to achieve connectivity, says Dennis Sweeney, a managing director at Bank of America Merrill Lynch and a former treasury executive at General Electric, one of the first companies to connect to SWIFT.

“The most important issue is going to be around formats: What format I use and how standard is my standard,” Sweeney adds.

Sweeney cites SWIFT’s efforts to promote standards, including its Common Global Implementation group, where banks and vendors work on XML (eXtensible Markup Language) standards. “Everyone should support this,” he says. “We have to have a common language, or none of this is going to work.”

Ed Barrie, assistant treasurer at US energy and water technology firm Itron, decided to use a service bureau when the company implemented SWIFT connectivity. Treasuries can leverage a service bureau’s “knowledge and experience” Barrie says, to handle data translation or data transformation if needed.

“People get really focused on connectivity,” Barrie says, but he argues it’s equally challenging to integrate the data and messages that flow between a company’s applications, such as its ERP system or treasury management system, and its banks. “If I need to translate SWIFT messages or data into or out of my line of business applications, a service bureau often offers that capability.”

He cites an MT101 message, which is a request for a wire transfer. “I’ve yet to see two banks implement it exactly the same,” Barrie says. “Eighty, even 90% of the content is the same, but there are nuances around what different banks require, even different country branches of a bank [can have] differences in terms of fields or values.”

Sweeney sees Cloud technology allowing “any decent-sized company that has a reasonable number of transactions” to connect to its banks via SWIFT. “If you’re doing your treasury on Excel worksheets, you’re not going to be doing SWIFT,” he says. “But once you’re in the workstation environment, the vendors are going to be connected. Why not?”