Change or disruption, both are necessary, but

Sibos 2016 in Geneva is now a distant memory, many of us have just returned from EuroFinance in Vienna and, more recently, the ACT Conference in Dubai.  High on the agenda of all events this year and a hot topic in many discussions is how to deal with the impact of change or disruption.  It’s not new, we have always been subjected to change, but it seems all businesses these days are being hit harder and faster by relentless change that is coming at us from all directions.  Whether it is geo-political challenges, currency fluctuations, business growth, mergers and acquisitions or technological evolution, the list gets longer by the day and the pace of change is unlikely to slow down any time soon. So on the face of it, it is tempting to see this as bad news, but ironically, with the right mindset, it’s good news!

Change and disruption create opportunities and breed innovation.  OK, there will be some pain along the way and the timing may not always be ideal, but we can’t afford to stand still, so we all need to embrace what’s being thrown at us and demonstrate our ability to be truly agile.

In the midst of all of this change, treasury teams have to keep businesses not only ticking along, delivering goods and services, making payments, collecting payments, effectively managing cash pooling etc. etc. and also coping with the ups and downs of business requirements too!  I certainly do not envy the role of today’s treasurers and their teams, but their very demanding role is absolutely vital in helping to steady the ship.  In this context, I honestly believe we make a very real contribution towards helping them achieve stability, particularly in their back office, whilst their front of house continues to forge ahead, grasp opportunities and embrace the challenges, confident in the knowledge that their core financial processes and systems will provide the reliability and performance that they need.

If we look back, in 1999 SWIFT had only 2 corporate groups connected to the network, yet today there are over 1,621 corporate groups, representing tens of thousands of entities across the globe.

What is also very interesting is that this growing number of corporate users has created further demand for significant investment and the delivery of additional financial messaging standards for both banks and corporates using the SWIFT network.  In recognising the opportunities that exist for financial messages to be automated, we can see that this can then lead to improved operational efficiency and reliability in processing payments, reconciling receipts and providing financial reporting with speed and accuracy, all of which is simply not possible using manual systems.

Taking this a step further, the SWIFT global payments innovation (gpi) initiative, launched in 2015, combines financial messaging standards with the adoption of a new SLA (service level agreement) rulebook. Banks around the world are working with SWIFT to deliver gpi and create the next era for correspondent banking.

The initiative is a robust response to evolving bank and corporate needs for enhanced customer service and operational efficiency.  And it delivers an enhanced value proposition for correspondent banking by addressing key challenges facing the industry. Designed to help corporates grow their international business, improve supplier relationships, and achieve greater treasury efficiencies; SWIFT gpi will enable corporates to receive a faster, more transparent and traceable cross-border payments service directly from their banks.

To get a grasp of how SWIFT for Corporates has evolved over the years, and the significant role that the automation and standardisation of financial messaging are now playing in treasury management, it is interesting to review some of the statistics from our recent “Corporates on SWIFT” report.

Looking at corporates by turnover, we see that 17 of the Top 25 Fortune Global 500 are connected to SWIFT. Moving beyond the top 25 we see that229 of the 500 are taking advantage of the network for their financial messaging needs.

Significant growth in the number of messages sent and received by corporates points to the value that corporates are getting from adopting standards and automating their messaging processes:

• FIN Messages – Sent by corporates up 18%, received by corporates up 26% over 2015 figures, representing almost 12,000 relationships between corporates and Banks.
• FileAct messages – Sent by corporates up 21%, received by corporates up 32% over 2015 figures, representing 5,120 relationships between corporates and banks.

It is interesting to note that 60% of files sent via FileAct are in ISO 20022 format and 30% of files received via FileAct are ISO 20022. The growth of ISO 20022 traffic is also significant, with ISO 20022 messages sent by corporates up by 30%, and received ISO 20022 traffic up by 46%.  The number of corporates using ISO20022 is predominantly in the Eurozone (61%) but is also growing in other key regions such as North America (16%) and Asia Pacific (6%).

We believe that one of the key enablers and drivers of this adoption is the availability of the MyStandards testing portal where corporates can now create and test their messages before putting them into production, saving significant time, reducing the effort required and thereby reducing the risk of payment failure.

Another useful innovation is the Bank Readiness Program where corporates can quickly check the SWIFT message capabilities of their bank partners.  Banks are realising that in order to attract corporate business, having their information up to date in this system is essential and it is particularly helpful when corporates need to transact with regional and international banks.

722 banks in 133 countries are now certified as part of the Bank Readiness Program and there is an ongoing effort to encourage banks to participate and promote their capabilities through this service.

Trade and BPO messages are now increasingly being adopted by the Top 20 trade banks; in fact 13 of 20 are implementing MT798’s and 19 of the 20 use BPO.  This has enabled corporates to engage with these banks and automate the processing of these messages.  It’s still early days, but there are clear indications of a sharp upward trend.

There is no doubt that the demand for standards is increasing exponentially, particularly as the benefits of automation are more evident.  There is much more we can do to ensure treasury teams are operating at maximum efficiency and there is no doubt that as financial messaging standards permeate across our industry and the benefits are extended to more corporates, the whole global financial ecosystem will become more robust as a consequence.