Developments in connectivity between corporates, business networks and banks is accelerating due to cloud technology. However, a ‘Tower of Babel’ problem persists.
These systems were developed through innovation at the individual company level. But the tough work of enabling automated accounts receivable and accounts payable systems to ‘talk’ to business networks and to banks is only now being tackled.
In a recent SWIFT paper entitled, Innovate or lose out in a rapidly developing transaction banking space, Andre Casterman, global head of corporate strategy and product development at SWIFT, says that corporates are increasingly centralizing and automating their accounts payable and accounts receivable processes through electronic invoicing, electronic documentation and purchase to pay hubs.
Casterman wants SWIFT to play a central role in connecting purchase-to-pay networks. Its move will come in two stages. SWIFT is now working with essDOCS, a specialist provider in paperless trade. The essDOCS Exchange automates shipping documentation.
The piece that SWIFT is attracted to is the ability to create and manage bills of lading and shipping documents electronically, which can help speed up “presentation to banks under trade finance instruments including letters of credit, documentary collections and bank payment obligations.”
Phase two will be to connect the major purchase-to-pay networks to SWIFT. This will allow banks to “secure, finance and process trade flows automatically that are managed through e-commerce platforms.”
But how far away are we from this level of connectivity? It is too soon to tell, as it will take initiative on the part of corporates to talk to one another and to press banks for solutions. It could also pose some interesting challenges for SWIFT governance given that the banks may see these networks as competitors to their own proprietary solutions. But Casterman says he sees a change in banks’ attitude toward corporate-to-bank connectivity.
SWIFT launched its “Beyond Connectivity” initiative at SIBOS in Dubai in 2013. Until recently, however, Casterman says “it was probably true to say that may banks’ attitude toward SWIFT for corporates was more reactive than strategic.”
Now, however, mounting compliance pressures are prompting greater participation. Compliance is pinching budgets, and banks are looking for new income flows to compensate. The ability to crafts solutions for corporates via information made available, post-connectivity, could become a lucrative source of income. “Banks are more aware than ever before,” says Casterman, “that information and solutions, rather than connectivity itself is a strategic differentiator.”