This is the twelfth topic and thirteenth article in a series on leading practices in corporate treasury.

Corporate treasury teams communicate with banks through host-to-host connections, consolidators/service bureaus and financial messaging networks – the global interbanking network, SWIFT, and regional or country networks like EBICS, Zengin and many others – for payments messaging, bank reporting, bank fee analysis and to collect data for cash positions.

Networks are an essential requirement for corporate treasurers to achieve visibility and resiliency of their financial processes and information. Many organizations find that connecting to banks and other counterparties through a financial messaging network is efficient, prudent and far less stressful.

Treasurers leverage networks to get all or a majority of their domestic, regional or global cash balance information centrally, reliably and securely. They also access networks for investment, debt and hedge information.

Being able to view where the company’s funds are coming from and where they are going requires a multipronged approach. Pulling items such as balance information and debt and investment activity for many global organizations means connecting to a number of different networks and systems. Selecting varied networks and then maintaining compatibility and connectivity with an array of messaging formats and networks can be overwhelming.

Here are our recommendations on the attributes you should consider when selecting a suitable financial messaging network.

Resiliency of the network

Selecting messaging networks that are resilient, reliable and secure is an imperative. Organizations should ensure that if they use a network or a consolidator, they are aware of its uptime and resiliency. Maximizing the uptime is critical to the network’s success, as it is for enhancing the corporation’s efficiency.

“A chain is only as strong as its weakest link. More links in the chain may indicate less reliability, and most firms are making thousands of multimillion-dollar trades every minute that require constant real-time connections. SWIFT, as a network, has a ‘five nines’ (99.999 percent) uptime record. Additionally, it sits on a secure network that is not part of the mainstream internet. It is extremely resilient and has multiple levels of redundancy and failover,” said Craig Jeffery, managing partner at Strategic Treasurer, a leading treasury consulting firm. ⃰

It is pertinent to bear in mind that certain organizations’ counterparties distribute their data and manage transactions through different channels. Being aware of the priority of those channels is crucial to the goal of ensuring reliable access to the data the treasurer needs.

Reach and functionality

According to Strategic Treasurer’s Treasury Technology Analyst Report 2021, “A network’s value is built on two primary foundations: reach and functionality.”

Part of the value of a network relates to the participants in that network. When selecting networks  and consolidators, the treasurer must ask the unrelenting question: Does the network have the connections his or her organization needs?

“A network is only useful if it can connect you to enough of the right people or organizations.  For most networks, participants are at least somewhat geographically delineated, with many networks having prevalence in a specific region, such as EBICS in Europe or Zengin in Japan. While a few networks are aiming for more global participation, even the largest of these, SWIFT, has not yet seen adoption in all major nations,” states the Analyst Report.

The power and the versatility of a messaging network depend on its functionality. “As key as participants are, the functionality that draws them and allows them to interact is equally foundational. Payment messaging networks typically include ways of moving funds as well as additional security, tracking and visibility features,” explains the Analyst Report.

Each year, some countries and groups are joining or switching, and the capabilities of various networks are expanding and improving. Which is the right cross-border choice for a company: EBICS or SWIFT?

There is no easy answer to this question, as it depends on the company and its particular needs. SWIFT involves communicating globally with banks’ back-office systems and forwarding files to the international branches. Many considerations can drive companies to SWIFT, such as the choice of message types for their overall business activity. Connecting to it makes sense when a corporation uses multiple banks worldwide. However, if a company works with many banks in France, Germany, Austria, Switzerland, or all of these countries, and has set up EBICS, it adopts a single, common and open standard for corporates to connect and communicate with all of their banks in the above-mentioned countries. In such an instance, using EBICS may save employees time, decrease system complexity, and prove more cost-effective than SWIFT. Alternatively, treasurers can use a combination (hybrid solution) of these two networks.

The uptime of information partners and the ability to recover are critical

The responsibility of gathering accurate, timely and complete information for achieving comprehensive visibility (enterprise-wide or group-wide view of liquidity) is imperative for treasury-intensive corporations.

“If information partners do not get information to the location needed and when it is needed, you will be disappointed. The data they provide may have to be run through their systems in real-time or via a nightly batch process. Then data or transactions are delivered or received through their own proprietary reporting database, communication hub, or via other channels, such as their SWIFT connection. Their level of uptime and ability to recover is important to corporations needing end-to-end visibility over the organization’s cash flows,” observed Jeffery.

“A bank, for example, should be able to explain how it ensures the highest degree of information availability through design, monitoring and recovery processes,” Jeffery further added.

Conclusion

Accessing the information that is necessary in order to perform proper analysis and make useful projections and forecasts has long been a thorn in the side of treasury. Securing, validating and organizing needed data can become an enormous time-absorbing process for a treasury group. Consolidators and messaging networks serve as conduits for communication, streamlining the flow of data and information.

Treasurers can also leverage messaging networks and their degree of detail for enhancing process efficiency, mitigating risks and achieving clear visibility into the organization’s liquidity.

There are challenges in network adoption, but being able to connect to a single and prioritized source that is secure, reliable, resilient and versatile can make life a little easier for the corporate treasurer. Fortunately, our recommendations will help you in selecting an appropriate financial messaging network to shift the focus away from operational activities onto integrated analysis.

 

⃰⃰ Disclosure: Strategic Treasurer owns CTMfile.

 

Read more from this series:

Part 1: Bank account management

Part 2: Bank relationship management

Part 3: Cash concentration

Part 4: Liquidity structure

Part 5: Treasury owns cash

Part 6A: Staff development

Part 6B: Staff development

Part 7: Risk management

Part 8: Treasury owns working capital

Part 9: Cash forecasting

Part 10: Compliance

Part 11: Process mindset