The SWIFT Future

The excellent article Chris Skinner wrote re: SWIFT numbers intrigued me.

Essentially the spreadsheet takes the figures Chris gave and extrapolates them over the next ten years showing year on year growth.  Now, I know that SWIFT haven’t said they’ll maintain these rates of growth for ten years but that isn’t the point.  Once the spreadsheet is created and the correct formulae are entered you can then conduct what-if scenarios.  I did just that and even with moderate increases, an analysis of the figures tells us the following:

• SWIFT will remain a European focused payments network.  But the payments share of daily traffic will drop from 66% to 55%.  This may have an impact on the society as the American influence increases by 6% over the same 10 years to 25% of the daily traffic.  The Asian share is also predicted to drop by 1% to 6%, but this is surprising given the generally accepted economic predictions of Indian and Chinese growth – they seem to have not much impact on SWIFT.
• If Europe is still providing over half of SWIFT’s revenues then shouldn’t they see more investment in providing solutions for the local markets, STP, GSTP, Corporate Actions and the like, as Heidi Miller questioned at SIBOS in 2004.  Her questions have even more relevance when you analyse these figures than it did in 2004, “So what next?  What have you done for me lately?  How does SWIFT justify its existence for the next 30 years?”
• In all areas the prediction is to see a doubling of daily traffic in 4 or 5 years time with the biggest growth coming from Europe.  SWIFT obviously has high hopes for the impact of SEPA on traffic volumes.  What is surprising is that Treasury messages (where most of the corporate activity will come from) only rise from 1% of traffic share to 2%.  This will be disappointing when turned into revenue and again poses the question; does the predicted growth warrant the expenditure that is being made in the ‘corporate’ industry?  Asia is predicted to decrease to 6% of daily volumes in year 10 – again, does this revenue stream warrant the attention that Asia gets from SWIFT with the number of staff based there and the proliferation of offices throughout the region?
• If you subtract the specific region and message types given from the daily traffic, I was left with a new category which I have called ‘the rest’.  In geographic terms ‘the rest’ rise from 8% to 14% of traffic share, which includes an eight-fold growth in traffic from 950,000 messages a day to 7.5 million.  Types of message for ‘the rest’ increase six-fold over the same 10 year period.  Who are ‘the rest’ from whom this significant increase is coming from?

You can go on forever crunching the numbers, analyzing them and wondering what they mean – but there are some important observations to be made:

• The predictions bear out what many of us SWIFT-watchers believe, that SWIFT should be concentrating itself on the Americas and Europe and on payment messages primarily – this is its core business. 
• Everything SWIFT does should be geared to ensuring this core market is protected and developed.  Marketing basics say that when you do have a large core customer base, you must constantly provide new and innovative products to keep those customers satisfied.  Is this the challenge Heidi Miller was setting out for SWIFT?
• The core business is in Europe and the Americas, but is there really the business out there to warrant such predictions, a doubling of payments traffic in 4 years and a huge 300% growth over 10?  Even if you halve the predictions, they are still impressive.
• Why is the predicted economic boom in China and India not reflected at all in the figures?  Why do they have such little impact on the figures?

SWIFT’s own predictions tell us they should concentrate on their core market; that they should provide solutions not connections to Europe and the Americas, and should simply provide connectivity to the rest; and finally, they tell us not to expend too much energy on corporates as the  predicted  treasury growth isn’t there, nor is the will to join in the payments revolution.

SWIFT should put all its energies into protecting and growing its core business and not be distracted into high profile ventures like email that offer little or no revenues.  SWIFT should follow the money.