Grim picture for cash management market

Banks and corporates are as far apart as ever when it comes to corporate cash solutions. Is SWIFTNet the answer?

Banks and corporates have revealed the deep level of division between them at various Sibos sessions on the state of the corporate to bank payments and cash management market. The main sticking point is the plethora of legacy proprietary systems that banks have built over the past five years to lock in corporate accounts.

"There are too many proprietary platforms that have been built by banks and corporates," said Julie Monaco, a senior vice president for cash management at JPMorgan. "It is a cumbersome, inefficient environment for both the banks and their corporate clients. It is time to change the approach and abandon those business practices which are based on the technologies of yesterday."

More cooperation is needed between banks themselves as well as between banks and their clients, delegates were told. In particular there is a crucial need for compromise if the deadlock is to be broken. "We need a harmonization of the international payments system," said Charles Paris de Bollardiere, group treasurer of Total. When it comes to finding common standards, "we need organized dialogue between the different actors," he said.

Moving to a standardized approach based on common platforms that are interoperable is not as easy as it sounds. The costs involved are huge and the first movers face clear disadvantages. Moreover, the volumes would have to be big to justify the costs and until everyone is involved these look likely to be absent. It is a classic chicken and egg situation.

"We have to stop competing on standards and start competing on service quality," said Robert Heisterbord, general manager of cash management for ING. "We need new standards and then make them work regionally and globally."

A solution for unraveling this gordian knot of proprietary systems and bruised egos may lie in SWIFTNet, other delegates heard. Raffi Basmadjian is the group treasurer of France Telecom and his company has been moving onto SWIFTNet for over a year. He said his company was looking for an online, standardized and dynamic way for sharing information with its banks. Moreover, the service he was looking for had to be global. "SWIFT is the only communication system in the world that is truly universal," said Basmadjian.

However, under the current system of MA-CUGs and Treasury Counterparties, the ways that corporates can access SWIFTNet and harness its benefits are very limited. Establishing a number of MA-CUGs with different banks, replicates the problems of the past. Moreover, it limits the actual business that corporates can do with their bankers.

Bankers are starting to realize that they cannot continue to lock in their clients through proprietary systems and instead will have to allow them access to the global capabilities of SWIFT without being the gatekeepers to that access. "Corporations are not seeing yet what SWIFT can do for them and that is because we as banks are not showing them," said Monaco. "My vision is for us to go from bilateral to multilateral, so that we can get the corporates into SWIFT."

Challenges remain for this to happen. Firstly corporates will have to commit to investing in the move to SWIFTNet and will have to actually use it. Banks themselves will have to compromise on the standards that are eventually set. The value proposition for the move to standards and SWIFT will also have to be clearly set out, both for banks and corporates.

But it looks like whatever happens with SWIFT adoption, the days of the bank proprietary payments system are long gone. "Total will choose banks based on their service and their costs, not on their proprietary tools any more," said de Bollardiere.

SWIFT has a clear focus on finding the right way for getting more corporates into its system, although it has had limited success so far. There are only 44 registered corporates in the system, roughly half of which are in as part of MA-CUGs and half as Treasury Counterparties. Of these, none is from Asia. "We still have some work to do in Asia," admitted Elie Lasker, from the banking industry division of SWIFT.

Nevertheless, there is a clear desire on the part of companies to use SWIFT to find a way out of the current mess of the payments market. Lasker cited a recent study that showed 37% of $1 billion or bigger companies were considering using SWIFT in the next 12 months.

The trouble for SWIFT is that as it is a cooperative owned by its members, it does not want to compete with those members. Giving corporates direct access to its network would be a direct competition to many of those bank members' existing services. Work on actual standards and harmonization cannot begin until common ground can be found for the very idea of letting corporates into the network in the first place. But the general feeling in Sibos seems to be that banks realize that they will have to accept that the old ways of doing business are no longer good enough.