Swift for Corporates: a way to build the global treasury of the future?

The ultimate goal and Nirvana of Corporate Treasurers is to achieve instant and frictionless transactions end-to-end. And we should never forget that we as corporate treasurers, play a key role in making this a reality. All means are at our disposal providing we decide to digitalize our bank account management and payments. In a complex world, business priorities evolve extremely fast. Therefore, operational efficiency, use of data, and compliance and security (when it comes to cybersecurity) must evolve as fast to preserve the company. Today, SWIFT is part of the corporate digitization, and we should consider it as an important and inevitable business partner. How can it help us, that’s the question we want to address.

How SWIFT help corporate treasurers in getting better treasury management efficiency?

The “Society for Worldwide Interbank Financial Telecommunication” (SWIFT – we always forget what this acronym means) plays a crucial role in enhancing treasury management efficiency for corporate treasurers. SWIFT contributes to this improvement through different ways. For example, let’s list couple of ways useable by corporate treasurers.

1. Standardization of Financial Messaging

SWIFT provides standardized financial messaging services, which ensure consistent and accurate communication between corporate treasurers and their banking partners. This standardization reduces errors and misunderstandings, leading to more efficient transaction processing and reconciliation. Who could contest today they master financial messaging? Although bank connectivity may be achieved by other channels, it remains the safest and most comprehensive mean.

2. Global Connectivity

SWIFT connects over 11,000 financial institutions in more than 200 countries. It means they cover the world. This global reach enables corporate treasurers to manage their treasury operations seamlessly across multiple jurisdictions, enhancing their ability to manage global cash positions, foreign exchange, and liquidity, their “raison d’être”.

3. Enhanced Security

SWIFT offers a highly secure and reliable network for transmitting financial messages (of course at a certain cost and with certain technical IT constraints). The robustness of SWIFT’s security protocols helps protect sensitive financial data, reducing the risk of fraud and cyber-attacks, which is critical for maintaining the integrity of treasury operations.

4. Real-time Payments and Reporting

SWIFT’s initiatives such as SWIFT GPI (global payments innovation) provide real-time tracking of cross-border payments. Corporate treasurers can receive immediate status updates on their transactions, improving cash flow visibility and enabling more accurate forecasting and liquidity management. It came late but eventually was the tracking solution expected from corporates for ages…

5. Automation and Straight-through Processing (STP)

SWIFT enables automation and straight-through processing, which reduces the need for manual intervention in transaction processing. It should be the common goal of every front-office operation, isn’t it? This automation streamlines workflows, reduces processing times, and minimizes the risk of errors, thus improving operational efficiency.

6. Treasury and Risk Management Solutions

SWIFT offers a range of solutions specifically designed for corporate treasurers, including SWIFT for Corporates, which integrates treasury and cash management operations with their banking partners. This integration helps treasurers manage payments, collections, liquidity, and financial risk more effectively: that’s the banking connectivity, first treasury priority for digitization.

7. Data Analytics and Reporting

SWIFT provides tools for data analytics and reporting, enabling corporate treasurers to gain insights into their transaction data. This information can be used to optimize liquidity, manage risks better, and make more informed strategic decisions.

8. Regulatory Compliance

It helps corporate treasurers comply with regulatory requirements by providing solutions that ensure transparency and traceability of financial transactions. This compliance support is vital for avoiding regulatory fines and maintaining good standing with regulatory bodies.

9. Cost Efficiency

By using SWIFT’s services, corporate treasurers can achieve cost efficiencies through reduced transaction fees, lower operational costs due to automation, and minimized risk of errors and fraud. But secure is not a synonym of cheap.

10. Innovation and Adaptability

Eventually it continuously evolves to address the changing needs of the financial industry. Its commitment to innovation, such as exploring blockchain (DLT) technology and APIs, ensures that corporate treasurers have access to cutting-edge tools and services that can enhance their treasury management capabilities. SWIFT significantly improves treasury management efficiency through standardized messaging, global connectivity, enhanced security, real-time payments, automation, data analytics, regulatory compliance, cost efficiency, and continuous innovation. These capabilities enable corporate treasurers to manage their treasury functions more effectively and strategically.

News from SWIFT for corporates…

Swift standardizes payments end-to-end and gives banks ready-to-use tracking services to enhance corporate experience. In May 2024, SWIFT announced new features.

·?????? The extension of ISO 20022 across payment chain will capture rich data at source, enhancing speed and transparency and marking significant point on journey to instant and frictionless transactions.

·?????? Banks given ready-to-go, white-labelled tracking services to enhance corporates’ treasury management.

·?????? Plan developed in collaboration with leading cash management banks and twenty sector-leading corporates, including (for example) Roche and Saudi Aramco.

Swift has today set out plans to help financial institutions streamline the cross-border payments experience for their corporate customers, by extending ISO 20022 across the entire payment chain and giving banks ready-to-use, white-labelled tracking services that can be activated for customers at the click of a button. In what marks a significant milestone in delivering its strategy for instant and frictionless transactions, Swift will enable financial institutions to capture rich data at source, by standardizing the payment end-to-end with ISO 20022. Swift will also help banks offer their customers ready-made and white-labelled payment tracking services by API or messaging channel, giving complete transparency on a payment’s status as well as confirmation of its receipt. Currently, corporate payments are complicated by competing standards and proprietary formats, while multi-banked corporates face a fragmented landscape as they interact with a multitude of banking providers with varying features and services.?

Finally, Swift’s plan was developed with a working group of 25 leading cash management banks and 20 sector-leading corporates, including Roche and Saudi Aramco. The goal is to introduce a universal standard that can maximize the benefit of ISO 20022’s richer, more structured data, facilitating automation and reconciliation and drastically reducing integration costs. The standardization of payment tracking data will enable financial institutions to easily offer the same experience across their corporate customer base, regardless of their own geographical reach or local investment. Currently, where multi-banked corporates receive tracking information, it comes through different channels and in different formats. And it is true that standard formats are a pre-condition for enhancing digitization and efficiency. For example, Roche, the global pharmaceutical company, has successfully implemented Swift’s new corporate API channel, with a key banking partner enabling their direct access to tracking information for payments they send and receive. Swift’s new approach undoubtedly offers significant benefits from a corporate client perspective. It enables client and corp’s to enhance and accelerate their payments analysis, giving them a comprehensive overview at pace. Having direct API access to Swift's payment tracking system will provide them with more transparency and strengthen their ability to analyze overall payment performance. It will allow to refine instructions, better identify inefficiencies, and minimize erosion of value in cross-border payments.

Interesting information: Swift has been driving the industry towards meeting the G20’s goals for cross-border payments. - 89% of payments on its network now reach the beneficiary bank within an hour, ahead of the G20’s target of 75% settling in the end account within an hour by 2027.

?Adoption of (new) ISO 20022 provides a unique opportunity to improve cross-border payments.

Capturing rich data at source will enhance the entire ecosystem, driving clients closer to their goals of instant and frictionless transactions. It will help simplify their treasury processes and improve the cross-border payments ecosystem overall. By utilizing a single standard for payment initiation in ISO 20022 and enabling direct corporate access to tracker data, banks can integrate additional services that improve the payment experience for multibank clients across the payment lifecycle. Together with Swift, they can reduce friction, streamline operations, and increase value for their customers.

Benefits of adopting ISO 20022 for Corporates

ISO 20022 offers several tangible benefits for corporates such as:

·?????? Improved reconciliation – By using structured remittance information, corporate finance and treasury teams can accelerate the reconciliation of payments and release goods earlier.

·?????? Working capital improvements – Corporate finance and treasury teams can use richer and structured data to forecast their future inbound and outbound payment flows. This, in turn, enables companies to make better use of the funds available to them.

·?????? Support On Behalf Of (OBO) payments – The current MT structure is not designed to efficiently support OBO payments, which have become very common in recent years. ISO 20022 messages have dedicated, structured fields to support the identification of parties, including ultimate debtor/creditor and initiating party. Corporates can take advantage of these fields to set up virtual account services.

Manage risk and regulatory compliance

The treasurer plays a key role in defending your organization against fraud and cyberattacks. SWIFT provides with the essential tools they need to help you optimize the compliance and manage risk, because secure bank connectivity and effective operational controls are essential lines of defense against fraud and cybercrime. We must optimize sanctions compliance with pinpoint precision. The expansion of international sanctions and governmental efforts to fight terrorism pose evolving challenges for compliance departments. Treasurers are now required to screen transactions against rapidly growing lists of sanctioned individuals and organizations. Automated filtering tools often generate false positives and false negatives, meaning follow-up searches must be conducted manually, which is time consuming and risky. Treasurers must take control of sanctions compliance with maximum accuracy and efficiency using all available modular set of shared services. These include transaction and name screening against standardized sanctions lists, along with integrated reporting and case management. The sanction screening and testing help preventing risks. The continued onslaught of cyber-threats means financial institutions need to reassess the security of their payment environments. The Daily Validation Reports are delivered via a separate and secure channel, providing an independent and complete picture of your transactions over Swift.

SWIFT KYC register is a secure, global platform for sharing KYC data. Customer’s due diligence and KYC are essential to protect the global financial system from money laundering and financing of illegal and criminal activities. The registry is a secure global platform providing predefined data fields and document types to standardize and streamline the data collection process. To date, more than 7000 financial institutions are using Swift’s KYC Registry to both publish their KYC data and receive data from their counterparties. It is recognized as the accepted standard for correspondent banking due diligence. The registry has been extended to corporate and non-bank financial institution customers of Swift to help simplify the KYC process across the community.

As we can see, SWIFT has changed our lives as treasurers and will continue to do so, as will the recent changes to the XT ISO 20022 format. Fintechs have been a catalyst for change (e.g. GPI) and now XT messages. Standardization is an essential element in limiting the risks of fraud, operational risks and improving operational efficiency. We are on the way to a major modernization of the treasury function, and the immense benefits are not yet known or identified by everyone. Yet the revolution has begun.

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Fran?ois Masquelier, CEO of Simply Treasury – Luxembourg – June 2024

Disclaimer: This article was prepared by Fran?ois Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).