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, can play a key role in making this a reality. All means are at our disposal providing we decide to digitalize our Bank Account Management (eBAM)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) 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 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. The richness and the quality of data help making the whole process around payment more efficient (especially with new XML 20022 format).

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. Only if we receive complete and quality pieces of information can treasurers initiate good reporting and analysis.

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 and supervisory 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. The cost of the SWIFT Customer Security Program (CSP) is often underestimated or minimized at inception and can reserve surprises when it comes to implement recommendations of external audits.

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.

But what else at SWIFT? - News from SWIFT…

Swift standardizes payments end-to-end and gives banks ready-to-use tracking services to enhance corporate experience. In May 2024, SWIFT eventually 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 & 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. A highly awaited evolution! 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 leading cash management banks and sector-leading corporates. 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. 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 has provided and will provide 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.

Manage risk and regulatory compliance

The treasurer plays a key role in defending the organization/company 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. Treasurers 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 also 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.

We must also mention the SWIFT KYC register, which is a secure, global platform for sharing KYC data. I do believe it hasn’t achieved its objectives yet. However, it was in principle a great idea. 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.

SwiftRef, another interesting feature

The payments reference data solution should also be mentioned as it enables us to collect and link global payments reference data to help streamline payment operations, serving more than 2,500 customers in circa 200 countries.

Therefore, as we can see, SWIFT remains the leading banking network for large multinational companies.

François Masquelier Chair of ATEL – Luxembourg