This is the second of a 2 part post that covers the advantages and disadvantages of SWIFT connectivity. In the post I’ve Got 99 Problems But SWIFT Connectivity Ain’t 1, I cover all the advantages of SWIFT connectivity. But like any solution it is never straight forward and without its flaws. In this post I will highlight some of the challenges of using SWIFT as your bank connectivity solution. Please note this isn’t intended to be a criticism of SWIFT as a bank connectivity solution, but rather to highlight to corporates that SWIFT isn’t always the answer to all of your bank interface headaches.
SWIFT Connectivity Challenges
Again this is with reference to SWIFT connectivity for corporates, and in no particular order…
1. Joining SWIFT
As a corporate it is getting easier to join SWIFT, but it does take time and will involve resources from across your organisation. Resources to complete the joining procedures, review the data and legal documents, and your techies to review how you will access the SWIFT network
Having completed the SWIFT membership procedure you then need to work with your banks to understand their SWIFT set up and procedures. Anything legal and documentation related is rarely straightforward.
2. The first cut is the deepest
In order for you to get the most out of SWIFT connectivity, you have to invest a significant amount of resources, time and money in order to build a secure and automated end to end interface between your ERP system(s) and your banks. You must not underestimate the effort involved in this initial set up, and not be led to believe that any subsequent SWIFT implementations will be straightforward.
While it is true that the first implementation is the trickiest, with the steepest learning curve and most to do, subsequent deployments of SWIFT connectivity are never as straightforward as you would hope.
3. SWIFT Connectivity ain’t plug and play
Continuing on from the above point, we all know that you cannot simply copy and paste a bank interface. Each interface is different, the following list indicates some of the reasons why each interface is unique:
- The ERP system may be different
- The ERP system may be the same, but there may be nuances in its data set up or configuration
- The business needs and requirements may be different
- The interface with the bank may need to handle a specific in-country requirement
- The target bank may be different
- The local clearing system and / or rules and regulations in the country may be different
So even when the underlying SWIFT connectivity is in place, it is never as simple as plugging the new interface into SWIFT and hey presto!
SWIFT is not the cheapest bank connectivity solution available. But as you start to standardise and centralise your bank interfaces into the SWIFT model, you will start to realise efficiency gains of moving to SWIFT. But this does not come cheaply. Also keep in mind there are ongoing per message and per file SWIFT charges that can build up if you’re not careful. Particularly if you are sending a high volume of cross border messages and / or files over the SWIFT network. One solution to consider in this instance is a single BIC solution. Depending on how you connect to the SWIFT network will also impact the ongoing costs.
In the post I’ve Got 99 Problems But SWIFT Connectivity Ain’t 1, I reference SWIFTs 99.999% availability statistic. Thats great, but if your banks SWIFT gateway is down or unavailable for whatever reason – your payments and reporting processes are put on hold! Its not necessarily SWIFT that is the concern here, but all of the sub-journeys that your files and messages need to make on their way to or from the SWIFT network.
6. A Strong Bank Partnership
For SWIFT to work as a successful connectivity solution, corporates need close support and guidance from their bank(s). Banks must provide support from the most senior levels through to the immediate project team to ensure the success of the SWIFT project. Without good bank collaboration, the project is set to fail.
7. SWIFT connectivity is only as strong as the weakest link
Sorry for the cliché! One of the key objectives of any SWIFT implementation is to have a single, centralised, secure and standardised connectivity solution with multiple banks. This also presents some challenges. Namely, dependence across your organisation on this single, centralised connectivity solution.
In this instance you need to think very carefully about your:
- Source ERP system(s)
- Middleware process and software
- The mechanism through which you connect to SWIFT, be it:
- A direct link through internally hosted SWIFT infrastructure
- SWIFT Service Bureau
- Alliance Lite 2
- Banks SWIFT availability
There are a lot of potential points of failure in the above list, and different teams involved in the end to end SWIFT connectivity. If any one of the above breaks down, the SWIFT connectivity process is broken. Now in a centralised and standardised connectivity model a breakdown in one of the above may impact one or more business functions or locations and in extreme cases, it could have GLOBAL repercussions for your organisation – Aaarrrggghhhh!
8. Good Project Management
As you can see from the above, there are many touch points in any end to end SWIFT connectivity solution. For both the initial implementation and subsequent SWIFT implementations to be successful you need strong project management processes overseeing the deployment. There are many moving parts, and like any implementation you are likely to discover new or unexpected requirements. The business case must be strong, with good engagement from key stakeholders, along with a defined list of deliverables. Lastly the project needs to run through the key phases of a project in a timely manner involving resources from both the corporate and the bank.
9. Data Formats
Despite some progress through initiatives such as CGI (Common Global Implementation), the idea of a standard and consistent ISO 20022 XML payment format across many countries is not quite there yet. There are always slight differences in the format requirements due to reasons mentioned in point 3 above. Each of these requirements means that you have to deviate at best ever so slightly and at worst drastically from the standardised model that you had originally envisaged.
It is great that the formats are fairly similar in that they are ISO 20022 XML. But when you start tweaking interfaces in each country you very quickly you start to build a catalogue of unique interfaces. Each of which needs to built, tested, deployed and supported.
10. Understanding the tipping point
You need to review the various and available connectivity solutions and make a solution choice that is right for your organisation. There is a point at which SWIFT becomes a viable option, you need to understand that particular tipping point for YOUR organisation. These 10 Bank Connectivity Questions will provide you with a good start to understanding your existing environment and will help you work with connectivity providers and your banks to assess an appropriate bank connectivity solution.
SWIFT Connectivity for Corporates
As I mentioned at the outset, the goal here is to highlight that SWIFT is not a bank connectivity utopia. It is a complex solution requiring multiple teams and processes, internal to your organisation and external. Each of these needs to be closely considered and reviewed. SWIFT connectivity is clearly a great bank agnostic solution, but it is the way in which you chose to implement the SWIFT solution and the teams that you partner with that determine the overall success of the project. SWIFT is not a magic bullet and embarking on any new corporate SWIFT connectivity initiative offers both opportunities and drawbacks.