The theory goes: connect to SWIFT and all your bank connectivity problems are solved. This one connection replaces multiple bank channels with a single, secure and standardised window to some 11,000 bank and financial institution members on the SWIFT network, as the figure below shows. 

SWIFT Connectivity Replaces Multiple Bank Channels

Source: SWIFT

Certainly a SWIFT connection greatly simplifies connectivity to much of the financial services industry and can be operationally more cost-effective for many corporations. SWIFT have many impressive case studies of the cost savings and operational efficiencies of a single SWIFT connection. BUT: 1) a SWIFT connection is relatively expensive and is not necessarily beneficial for ALL corporate users, 2) a SWIFT connection is certainly not simple to implement, 3) not all banks and financial institutions and the dealing platforms are connected to SWIFT, and 4) banks use the fields in SWIFT messages slightly differently. Corporate treasury departments will always need other network connections as well as SWIFT.

The Options
There are two basic options for connecting to the SWIFT network (SWIFTNet):

• Direct connection, which is typically used by global corporations with $25bn annual turnover and millions of payment per year who manage their own connection to SWIFT using either:
  1. SCORE – Standardised Corporate Environment (launched in 2007) which is for publicly listed companies who have a single agreement with SWIFT for all their connections to SWIFT members
  2. MA-CUG - Member Administered Closed User Group (launched in 2001) which is for bank's corporate clients who do not meet the criteria for participation in SCORE and are required to have a separate agreement for each SWIFT member connection
  3. TRCO - Treasury Counterparty (launched in 1998) which is for exchanging treasury confirmations with any financial institution, via SWIFTNet. Service is still available but confirmations are also available through SCORE and MA-CUGs.

• Indirect connection using a third party:

1. a commercial service bureau;
2. SWIFT's cloud-based Alliance Lite2 service, which connects corporates directly to SWIFTNet and supports higher message volumes than its predecessor, Alliance Lite; and
3. SWIFT bank members who host the SWIFT connector and offers a service bureau type service including administration of the SWIFT contract and the administration of the SWIFT invoices.

One major problem for corporates using SWIFTNet is that banks use the standard SWIFT messages to report bank account balance and transaction data and payment messages differently, e.g. banks format data for MT 101 messages in at least 12 different ways, MT 103 messages in at least six different ways and MT 198 messages in at least three different ways. This is why the majority of corporate users connect to SWIFT via a service bureau who handle this problem.

To give corporate customers insight into the readiness of their banking partners, and allow corporate 'to realise fully the benefits of their SWIFT connection', SWIFT has created the bank readiness certification programme. SWIFT say that 'certification helps banks prepare to participate in the SWIFT for Corporates programme and also offers corporate customers a clear view on the SWIFT capabilities of their banking partners'. Readiness is assessed based on a set of key criteria, some mandatory and some optional. To date, 38 of the Top50 SCORE banks are certified through the programme.

Charges
Charges for SWIFT connectivity include: a SWIFT fixed annual fee of EUR 2,000, bank charges, and possibly service bureau charges as well. For some companies the total SWIFT charges will be higher than the cost of direct connection to their banks' own EB systems.

Overall Cost Benefit
The main benefits of connecting to SWIFT are having a single secure and reliable connection to all financial institutions, independence from proprietary bank EB systems and platforms, opportunities for increased STP, improved transparency in communications and transaction processing, and compliance with regulations and principles of good practice. Although these are significant benefits and SWIFT have many impressive case studies of the cost savings and operational efficiencies of direct connection, SWIFT connection will not suit or be cost-beneficial for all companies and you'll still need other connectivity as well.

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