Are you in the process of upgrading your Treasury Management System (TMS)? So are many other Global 1000 organizations. Dozens of multi-national corporations each year embark on treasury transformation projects. Some are seeking better information about
offshore cash balances. Others are focused on hedging currency and interest rates. But one common consideration that all treasury project teams need to address is the optimal approach to bank connectivity.
A TMS is only effective if it is fed with real-time data about cash positions, interest rates, payables, receivables and foreign exchange rates. As a result, most finance organizations rethink their approach to bank connectivity along with a TMS upgrade.
The good news (or bad news depending upon your point of view) is that there are many different options for connecting to your bank. You can connect over SWIFT, via direct Internet connection, or simply use your bank’s web-based application. There are also
many different message standards available to exchange data with your financial institutions. You can choose from global standards such as ISO 20022 XML and EDI, or regional file formats such as BAI2.
Below are five of the most common questions that multi-national companies ask about bank connectivity.
1. What messaging standard(s) should I use?
There are three considerations. First, what standard does your treasury workstation vendor prefer? Increasingly vendors are adopting the newer ISO 20022 XML standard. Some treasury vendors support a mix of messaging standards including BAI2, EDIFACT, EDI,
SWIFT FIN and SAP IDOC messages. While your treasury vendor may be flexible, your financial institution may not be. An important secondary consideration is what standards your banks support. If your primary cash management banks cannot send or receive ISO
20022 XML then you may want to stick with EDI or traditional SWIFT FIN messages.
The issue of standards may become less of an issue if you have access to a strong team of integration experts. Therefore, an important third consideration is what proficiencies your internal IT organization has. Many larger companies have partnered with
a “B2B Managed Services” vendor that staffs hundreds of mapping and integration experts. These Managed Services vendors can quickly and cost effectively transform data from one format to another. Other companies provide similar services in-house with “Integration
Competency Centers.” Using one of these two approaches, the issue of standards can often be effectively neutralized, eliminating manual intervention in payment initiation, receivables posting, bank reconciliations, and cash forecasting.
2. Should I consider replacing my one-to-one bank connections with SWIFT connectivity?
GXS recommends implementing SWIFT either before or during a TMS upgrade to eliminate unnecessary host-to-host bank connections and bank-specific online cash management systems. Corporates who have implemented SWIFT cite benefits such as improved visibility
of worldwide cash as well as the ability to receive acknowledgements and confirmations. Using SWIFT also can simplify integration with standardized connectivity and file formats. With almost 10,000 financial institutions connected to SWIFTNet, many corporates
cite the ability to add new banks easily as another key benefit.
In recent years SWIFT has expanded the breadth of services available to corporate clients. Both securities and international trade transactions can be exchanged over SWIFT. Those already using SWIFT for payments and cash reporting may want to consider expanding
into value added services such as electronic bank account management (eBAM) or exceptions and investigations (E&I).
3. Should I migrate all of my bank connections to SWIFT?
Implementing bank connectivity through SWIFT is not an “all or nothing” proposition. You should perform a cost/benefit analysis of your current connectivity approaches to SWIFT on a bank-by-bank basis to determine the most cost effective integration method
for each institution. How does the cost of your current proprietary host-to-host, online cash management, and multibank data aggregation solutions compare to SWIFT?
It may make sense to use a combination of both approaches. For example, you might use Internet-based secure FTP for information reporting data and bulk payments with your top two cash management banks. Additionally, you could use SWIFTNet for payments and
reporting related to international bank accounts. Another consideration is whether all of your banks are SWIFT-enabled for the services you require. For example, many financial institutions lack flexible capabilities for FileAct. For those banks that are not
SWIFT-ready, you will need to establish direct connections or work with them to implement SWIFT.
4. What is the best option for me to connect with the SWIFT Network?
So you have completed your cost/benefit analysis and are considering migrating some or all of your bank connections to SWIFT. The next question then becomes how best to connect to SWIFTNet. There are three options; the appeal of which will vary depending
on your needs. The first option is direct connectivity. In this scenario your own IT organization manages all aspects of implementing, testing, and maintaining your SWIFT software and infrastructure. Many IT organizations lacking experience with SWIFT are
surprised by the level of effort required. Direct connectivity necessitates the deployment of SWIFT’s proprietary software, implementation of specialized security procedures and completion of extensive testing programs.
If you are not fully sold on the SWIFT value proposition but would like to experiment with the service, then Alliance Lite may be the best option. Alliance Lite is a packaged offering providing connectivity through a web browser on a standard PC. Alliance
Lite is best suited to companies with basic requirements and limited volumes.
The third option is to use a SWIFT Service Bureau provider to manage your SWIFT connectivity. A SWIFT Service Bureau eliminates the need to invest in the infrastructure, maintenance and personnel to support your SWIFT messaging needs while still allowing
you to tailor the implementation to meet your specific needs.
5. For the SWIFT Service Bureau option, how do I choose a provider?
Up to 70% of corporates are connecting to SWIFT through a service bureau because it is usually more cost-effective and doesn’t require highly specialized in-house SWIFT experts. Even those organizations that end up using another option typically evaluate
this alternative prior to deciding their implementation approach. Choosing a SWIFT Service Bureau can be a daunting task, with more than 140 organizations worldwide with service bureau offerings. A list of SWIFT Service Bureau providers can be found using
SWIFT's Partner Locator. This tool also highlights those bureaus who have earned the "SWIFTReady Connectivity" label, awarded to providers that meet best-in-class operational requirements. SWIFTReady vendors must meet more stringent requirements for availability,
security, resilience, non-repudiation and guaranteed message deliveries.
Most corporates issue a SWIFT Service Bureau Request for Proposal (RFP) or Request for Information (RFI) tailored for their organization’s unique needs. Typical criteria includes the ability to handle bank on-boarding, provide 24x7 global support, meet audit
standards (SAS 70 Type II, SSAE 16 & 3420), employ SWIFT-certified experts, and support file translation and transformation.
Maximize your TMS investment by automating, integrating and optimizing financial data gathering for complete, timely and accurate TMS analysis and action.