SEPA and SWIFT; a marriage made in heaven?

SWIFT is nearly always part of a discussion when industry wide STP is the topic, but does it deserve this high status? It maybe almost sacrilegious to question SWIFT, but with the 21st Century well underway and umpteen changes hitting financial services, it is worth examining what future SWIFT has going forward.

There is no doubt, about the value that SWIFT has brought to the market, over the decades, but we are now living in an age where non proprietary, open networks are becoming an integral part of any business. This appears to be against the technical design of SWIFT and its structure. To be fair SWIFT has tried to become more vibrant, but although there has been planning to open up the SWIFT network to corporates, it is a zillion miles away from attracting the range of banking clients necessary to make SWIFT anything other than a very modest player in the long term.

Even the payments industry, which is where SWIFT originates, has cheaper more attractive point to point solutions in its immediate sight. Pay Pal and World Pay can provide most of what many businesses are looking for and with the web becoming the biggest world market for many firms, does SWIFT look as an alternative? Probably, it doesn't!

SWIFT was designed as a bank to bank payments network and as far as I can see, there it's likely to stay, whatever plans they implement. There have been numerous problems with SEPA implementation between the banks and their corporate customers and SWIFT has been presented as a key part of the solution. But corporates have been reluctant to move on mass to the network. Much of the SEPA problem has been because of the issues between the banks and their customers. Not directly a SWIFT problem, but SWIFT is still deeply involved in the banks presentations to their corporate customers.

The plaudits of achieving the SEPA live date are well deserved, but must be kept in proportion and a real success only in terms of actually going live. There are still many problems for the corporates with what's on offer as SEPA stands. The trumpeting of how many SEPA credit transfers are going through, must be measured against the size of the overall market and what potentially could go through. But politically it's a worthy achievement.

The finance industry must be on their toes in the future as competition could be arriving from new sources, its worth noting that Microsoft are looking to add Yahoo into its technical architecture and with Google and EBay pushing business through Pay Pal, we could see the beginning of payment services that actually meet the business needs of the corporates, at a cheaper cost, with more business flexibility and of course choice. This looks a million miles from the closed concepts and controls offered by SWIFT and their banking masters.

A few years back Tim Jones, the then head of Retail Banking at National Westminster bank, produced the concept of Purseus, as an Inter-bank clearing and settlement system, which was also operationally cheap and gave the added benefit to banks of utilising a margin system, which at a stroke would positively impact their balance sheets. However, this was a vain attempt by Tim, as it was probably just a little to soon for the banks to take up and it was subsequently shelved, but in today's environment of change, could it be dusted off?

This is by no means an exhaustive list of the potential threats looming up, towards SWIFT and it's more than likely that some of them will become very successful, if they attract the market users. So how does SWIFT respond, that is the question? On the face of it SWIFT appears to be in control, but can this last, if the industry makes a concerted move towards open network alternatives? There is a growing list to choose from and it's not going to be very long before the battle lines are drawn. SWIFT has succeeded to date to some degree, but the future might be a race they simply can't win and it may be that the result is already a forgone conclusion and out of their hands!