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Is SWIFTs strategy working?

February is the time for many of us to visit SWIFT for the annual Partner meeting.  It was nice to see some new faces this year and it’s also a great opportunity to catch up and discuss SWIFTs strategies with the regular crowd.

SWIFT is a unique organisation in the midst of change, it is trying to become more commercial but it is also a standards body and a ‘not for profit’ organisation owned by its members, to me this is a bit of a dichotomy.  On one hand SWIFT tells us how much they value the partner community, but on the other their strategy is to increasingly compete with its partners.  The main reason for this we are told is cost, i.e., that partner products are too expensive and limit the adoption of SWIFT.  So one part of SWIFT wants to sell products and services and make money, whilst the other part (including partner management and standards) is trying to reduce cost and complexity with products like the SDK and MyStandards, but they are still products you have to pay for. 

Other standards bodies such as FIX and FpML have succeeded in achieving massive adoption of their standards by being open, inclusive and providing easy access to tools that allows the market to produce cost effective solutions, encouraging the adoption and use of their network and standards.  

My questions then concern SWIFT’s priorities, should they be to make money, to be more sales led and competitive, which entails competing with partners and ultimately reduces competition, or in fostering the adoption of SWIFT and other financial messaging standards for the benefit of the community?

As an example, take a look at the CBT market, 30+ solutions 10 years ago, now just a hand full with SWIFT Alliance owning 80% of the market.  A follow up question then, is Alliance a cost effective product that enables SWIFT usage?  The answer to this may influence your views on the main question of SWIFT’s strategy.

I look forward to reading your views.

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Comments: (5)

Stanley Epstein
Stanley Epstein - Citadel Advantage Ltd - Modiin 12 March, 2011, 18:17Be the first to give this comment the thumbs up 0 likes

You have hit the nail on the head Barry. SWIFT needs to decide what it wants to be and then to focus on whatever that decision is.

As a consultant, who is a staunch believer in SWIFT's product offerings, I am totally disillusioned by the organization's inability to think commercially. SWIFT's products have huge potential to deliver automated, efficient, and money earner services for its clients. The problem is that financial institutions are not innovators and SWIFT is locked into the standard setting mindset. So there is a gap, which for years now has been unbridgeable.

It's much the same as the old story of IT vendors in the 80s and 90s which went; "we have a great IT solution for you - you, Mr Bank, just need to find the problem to use it on."

Financial institutions just don't work that way. SWIFT needs to bridge that gap by providing practical hands on guidance as to how specific business issues can be addressed. Until they do that it's just going to be more of the same.

 

Barry Kislingbury
Barry Kislingbury - ACI Worldwide - London 14 March, 2011, 17:07Be the first to give this comment the thumbs up 0 likes

Thank you for your comments Stanley, whilst we may come at this from different angles we see the same problems, SWIFT is great at standards and running a rock solid network, but being good at these things seems to be in opposition to developing innovative and commercial products, they are very different things.  Perhaps they should be run as two separate businesses which would make them have to stand on their own, much like what they have done with Arkelis and AMH.

Fiona Hamilton
Fiona Hamilton - Volante Technologies Inc. - London 14 March, 2011, 17:12Be the first to give this comment the thumbs up 0 likes

Speaking personally, I believe Barry makes some valid points, which probably won't surprise many as I have voiced similar concerns both to other SWIFT partners and to SWIFT employees many times over the past few years.

I do also admit that the situation is not quite as straight forward as comparing SWIFT to FPL FIX and ISDA FpML. SWIFT is different in that it is not only a standards body like those two others but also provides a highly secure and resilient infrastructure for the transmission of its standards. SWIFT in its guise as an ISO RA also bears some additional costs and responsibilities. As such it would be not only unreasonable but also unfeasible for it to exactly fit with the models that FIX and FpML are promoted and maintained by.

I have also like many, been and will continue to be an advocate of financial institutions using SWIFT standards where they are the obvious choice within the transaction lifecycle. Let's face it a substantial part of my career has been built on promoting exactly that; the last 23 out of the past 25 years in this business to be exact.

I have also over the past decade become more involved with the FpML and FIX world and I agree with Barry that SWIFT could learn much from those organisations in the standards domain. Both standards are open and the specifications are free to use and now are the defacto standards within their asset classes and functional domains. They have also achieved this without recourse to major infrastructure, instead leveraging of the expertise that exists within their membership. As Barry states they enhance that adoption by supplying free to use tools that in some ways would be analagous to the SWIFT SDK which is a commercial product.

I believe that the root issue is that, as has been pointed out, there are the two contradictory objectives, the creation/maintenance/promotion of the standards and the requirement to fund the overall operation of the network and business. I certainly have no issue with SWIFT being commercial and I can see a very good reason for trying to drive commercial software and services revenues that could potentially at some point in the future significantly cover the costs of running the network, effectively making it free to use for it's members. That makes a lot of sense but it does then mean that that same drive to be commercial and cover costs leaks to the standards operation. 

Personally, I would like to see SWIFT revert to the type of structure that it had when I first started dealing with it in the late '80s. You had SWIFT that you spoke to on standards issues, SWIFT Terminal Services (STS) that was the overtly commercial arm, selling interface devices like the ST200 and ST400 and then there was SWIFT Network Services (SNS) that ran the network. Back then you knew what the drivers where in each part of the business. Access to standards was with one piece and accreditation to connect to the interface devices with another. In this structure I can see that it is much easier to maintain an altruistic albeit cash neutral position for standards maintained mostly through membership and voluntary participation and an application and services business that can largely fund the network.

What we increasingly have is the commercial drive overriding what should be impartiality with respect to the standards and their implementation. As has already been said, the annual partner conference has over the past few years been a room full of SWIFT advocates from software, service and bureau providers waiting to be told which part of their dinner SWIFT were planning to eat next whilst wrapping this up in a delivery which suggested we should all welcome this and that it represented an opportunity for us! As I said earlier in my comment I do not have an issue per se with SWIFT trying to compete with thier partners what I object to is being told that we should welcome it or see it as a level playing field.

I attended a SWIFT open day a few months ago which was attended by both partners such as the one that I work for and also by member banks. Ostensibly each presentation was "market" lead in that it was a presentation on what was going on in Funds or Corporate to Bank Payments and obviously these have a pretty straightforward correlation to the underlying FIN and ISO 20022 message categories. So far so good, all perfectly reasonable and educational. My issue was that each presentation I went to was ended with either a blatent pitch for a SWIFT product such as Integrator or a pitch for SWIFT consultancy services. To the extent that they had wheeled in clients of both to give member backing to those products and services to their peers in the audience. Outside these sessions there were rolling demos of products throughout the afternoon. 

Once again I reiterate that I have no problem with this from a commercial perspective, I would run the open day the same way if I could. My issue is that in no way can that be deemed a level playing field as we don't get a chance to pitch our alternative solutions which we should do as SWIFT partners. Wouldn't it be so much easier if when you turned up to a SWIFT open or partner event you knew you were going to a standards oriented event or if you were going to a SWIFT Inc event you were going to hear product and service related info. 

SWIFT have already launched the Arkelis brand seperately as a SWIFT Company, why not go the whole hog and put the other products and services under the same banner. We can then all decide if we want to have relationships at the standards level, prodct/services or both. Arkelis can then decide where it wants to spend it's profits, subsidising the network for example. Nice and simple, everything out in the open.

And as a result SWIFT standards could perhaps start to leverage the approaches that have made FIX and FpML dominant in their space without recourse to charging for every tool that might enhance the adoption of the standard.

As stated at the top these are my personal views and should not necessarily be assumed to be that of my employer.

 

A Finextra member
A Finextra member 15 March, 2011, 16:02Be the first to give this comment the thumbs up 0 likes

 

Ha! As SWIFT head of marketing I of course have my views on this, let me see if I can get them across.

SWIFT is a cooperative and its goal is not to maximize profits; at the same time we run our organization commercially because we find that is the most effective way of realizing our goal of creating value for our community: we produce goods and services that our banks are willing to pay for while keeping the costs as low as possible. And clearly, we focus our efforts on those areas where a common approach makes most sense. I am not sure I see a dichotomy in this.

 So what about our view on partners in all of this? A few thoughts: 

  1. Clearly we love our partners and we count on them for delivering our strategy. For example, partners will be a key distribution channel for products like reference data, SDK and  our new sanctions screening solution. They also will continue to be a cornerstone for serving smaller customers.  
  2. At the same time, our partners are for profit and not owned by our community. SWIFT plays a role to keep the partners "honest". At times this could be by providing our own product. Our Alliance strategy is a case in point, and by the way there are more than a handful of other providers in this highly competitive market.  
  3. Many products and services are subject to gradual commoditization, meaning suppliers have look for new sources of value add. This applies to SWIFT but also to our partners. Take SWIFT connectivity for example. Pure SWIFT connectivity is no longer distinctive. Our more successful partners offer connectivity as part of a larger value add service. This means our partners that rely mostly on connectivity will have to adapt and evolve.

In summary, we are a cooperative but we operate commercially and we do not see a paradox in this. The relationship with our partners is complex and evolving. They are crucial for our strategy, but they are not our customers and owners. At times we may compete with them to provide cost effective alternatives to our owners, and/or when products have become commodities. And as the market evolves we may focus on new types of partners at the expense existing ones.

 

A Finextra member
A Finextra member 19 March, 2011, 19:59Be the first to give this comment the thumbs up 0 likes

I agree with these comments and have for some time wondered how SWIFT is allowed to exist under its present structure. SWIFT is in anyones eyes a monopoly. I have no problem with SWIFT becoming more commercial and the huge costs of SIBOS is a case in point. SWIFT can charge huge ammounts of money and treat vendors with disdain putting them in the basement this year because SWIFT does not care and feels comfortable in a elevated position not have the normal threats other bussinesses have

SWIFT as the agent for ISO is a nonsence and here SWIFT can set the agenda for the industry and hold firms captive. SWIFT accreditations for example are set by SWIFT and SWIFT decides who or what is accredited . Another example of monopoly

SWIFT must be broken up

SWIFT standars should be a utility organisation and not for profit

Event organisations and training should be an organisation run commercially

SWIFT now they are buying software and competing with its partners should also be seperate

SWIFT is an old organisation set up for an age long ago it now is a organisation that is no longer providing value in fact it is confusing development by having a place on both sides of the fence

In giving this opionion i am fully aware that there is no mechanism to change. Banks will propagate SWIFT position as it gives great control of the agenda and who or what is going to challenge SWIFT position. Someone should but i doubt it will happen and we will still see these Quasi monoply organisation still frustrating real development in the market

Sad bit true 

Barry Kislingbury

Barry Kislingbury

Lead Solutions Consultant

ACI Worldwide

Member since

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Location

London

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