At Sibos 2006 in Sydney, financial messaging co-op Swift will unveil its strategy document for 2010, which focuses upon growing the corporate userbase, getting into derivatives and grabbing a slice of China, India and other emerging market economies. How effective is this strategy and what are its challenges? Chris Skinner takes a view.
Swift has embarked on a new strategy, Swift2010, which will be launched in earnest at Sibos. This strategy, like the predecessors, is in the public domain and available to all Swift customers to analyse at Swift.com
However, unlike the previous strategies, the new programme is designed to grow the organisation outside the banking domain and into the corporate community. This is very different to the previous versions which focused upon changing the operational footprint into securities (Swift2001) and then rearchitected the network for the 21st century through SwiftNet (Swift2006).
The essence of Swift2010 is about growing the business.
Growth is sought in four key areas:
(1) Europe through facilitation and close involvement in standards for Sepa and Giovannini;
(2) the corporate community by capturing 500 of the 2000 largest corporations in the world as Corporate Participants on the network by 2010;
(3) extending Swift’s representation in the derivatives and capital markets arena by carrying FpML messages over the network; and
(4) gaining a stronger presence in the Bric (Brazil, Russia, India and China), African and other emerging market economies.
These are aggressive targets and potentially stretch Swift away from its core founding base of correspondent banking and into the end-to-end messaging space of supply chain automation. This 21st century version of Swift envisages a transactional network enabling everything from the buying and selling of goods in large corporations through to investing and trading all sorts of instruments in the investment markets.
All of this sounds fine on paper but in practice will cause friction between the core community, who can exercise a vote on the direction of the company, and newer classes of participants, from the Merrill Lynch’s and Goldman Sachs to the General Motors and Exxon’s. Equally, new constituencies will be created as China Construction Bank, the Bank of Baroda, Alfa Bank and others from the Bric and emerging market communities join.
At this point, one question pops into the head as a fundamental area of concern in this expansion: what will be the structure and nature of Swift’s corporate governance ten years from now?
The question arises because Swift’s Board today has a few major league players, such as the new chairman, Yawar Shah of JPMorgan Chase, but lacks the total global reach it seeks, especially from US bankers like Chuck Prince or Jamie Dimon. Equally, Swift is putting a great deal of effort and emphasis on growing its franchise into the emerging Bric – Brazil, Russia, India and China – economies, but currently has no base in these countries or representation of their banks on the Board. Finally, the consortium wants multinational corporations on board and, in so doing, will have to seek to have these firms represented in the decision-marking process. Imagine a board comprising a few more Americans, a smattering of Brazilians, Russians, Chinese and Indians, and a few corporate CEO’s such as Michael Dell, Richard Branson and Donatella Versace. Now that would be interesting.
What does that mean for today’s bankers and bank community? Not much actually. If anything it should be good news. Good news in having a broader range of global bankers represented, and good news for including a few of the banking community’s key customers.
However, there are some other questions raised. For example, part of Swift’s 2010 strategy aims to plant the co-operative firmly into the capital markets by carrying FpML messaging over the SwiftNet network. That is OK, but what happened to the Unify Standard of ISO20022 that should have incorporated FIX Protocol Ltd, FPL. Although Swift might want to engage with FPL, there are questions as to whether FPL want to engage with Swift and, until such questions are resolve this is a potential gap if Swift really wants to get into derivatives.
Equally, if the Society expands into new geographies: the Brics; new customers: the corporates; and new products: derivatives; is it a stretch too far? Some would question the breadth of Swift's ambitions, especially as the organisation lacks depth in some of these areas, such as capital markets. However, Swift would brush off such critique as purely a matter of investment. As a mutual community owned by its members, the last thing Swift’s Board wants to hear is that they made a profit, so the organisation will be investing big time in hiring capital markets expertise.
The new strategic plan really plays into expanding the breadth and depth of Swift across a diverse field of players and will stretch the community and the organisation further than ever before. Therefore, unlike the previous strategies, the real challenge for Swift lies with salesmanship. Selling Swift to the Merrill’s and Goldman’s, as well as to all of the other broker-dealers, asset managers, fund and hedge fund managers out there. Selling Swift to the Huaxia Bank in China and Canara Bank in India who may think it is some strange European IP network provider. And selling Swift to the Coca-Cola’s and Nokia’s of this world who probably know as much as about bank clearing and settlement as Swift does about making fizzy drinks or mobile telephones.
This is a big challenge, but not insurmountable. For Swift it means getting feet on the street. After all, people buy from people so, to sell something, you need sales people. That is why Swift will be hiring hot-shot Wall Street and City brokers to sell to the Merrill’s and Goldman’s; influential native Indians to sell to the payments decision makers in Mumbai, Chennai and Delhi; and major league corporate financiers who can go and talk to the Richard Branson’s, Michael Dell’s and Donatalla Versace’s in their language.
That only leaves one question.
If Swift’s governance expands to include the full range of stakeholders in the financial community – corporates, banks, fund managers and so on – what role do governments have in their governance? After the recent issues of the US government tracking Swift messages for indications of terrorism, Swift’s biggest challenge for the next few years is not investing in headcount, but keeping its’ head below government sightlines. Should the world’s governments ever get their paws on Swift’s messaging to target money laundering, espionage or other criminal activities, then Swift’s role really will have been compromised away from being a trusted and secure financial messaging service to just being another network.
Regardless of all these questions, Swift has risen to major league challenges before: the rise of the Internet, the increase in terrorism, the impact of 9/11, the demands of correspondent banks and corporate clients … the list is long and has always been addressed by the very nature of Swift’s open communications, inclusive strategy and dialogue, and supportive network and community.
Therefore, the real bottom-line of Swift’s 2010 strategy is headcount. Lots of headcount. Swift needs feet on the street across the world’s capital markets, emerging economies and corporate treasurers. Champions who will pound down the doors and the barriers in these markets and bring them on board as new markets and new users. That is why Swift’s strategy is all about hiring big guns and, as Swift invests in getting guns for hire, I recommend all of you brush up your CV.
You never know. This time next year, you might be working for them.Chris Skinner is a director of TowerGroup and founder of Balatro.
Web links: www.towergroup.com
Author's email: Chris Skinner