SWIFT announces exceptions and investigations pilot

Six banks to participate from this October with a rollout expected by June 2006.

On the payments side of the back office, staff members have never really warmed to the exceptions and investigations components of their jobs. It is time consuming and every transaction that goes wrong costs a bank capital and a slice of good standing in the area of customer service.

Although definitions for exceptions and investigations depend largely on the institution, the gist of the process rests in the query stage, where questions regarding a transaction are posed by clients, and the investigation element, where there is a required adjustment, repair or enrichment in the transaction carried out by banks.

This process used to be completed manually through a telephone and telex, but advancements in straight-through-processing (STP) technology have made the process simpler. However, those dealing with exceptions and investigations say the ills have not entirely been cured.

SWIFTNet's exceptions and investigations solution is hoped to be a remedy for what several Sibos delegates have called a "sick industry". Developed in conjunction with 19 banks and two third-party applications, SWIFTNet exceptions and investigations is almost ready for roll out and is expected to be fully available by June 2006.

Between now and then, six major banks consisting of global and local players, will participate in a pilot scheme to test and refine the solution's components.

Announced at Sibos 2005, the banks participating in SWIFT's exceptions and investigations pilot scheme will be JPMorgan Chase, Belgium's KBC, Bank of Austria Creditanstalt, Germany's Commerzbank, ABN AMRO and Australia's ANZ.

Four vendors, including SwissRisk and SunGard are also involved with the unveiling of the new exceptions and investigations protocol. SWIFT is also setting a time line of three years to finalize migration by 2008.

According to some of the pilot banks and vendors, other banks and clients should sign on the dotted line as soon as possible in order to fully benefit for the increased efficiencies in exceptions and investigations. Aside from increased efficiency and opportunities for greater customer satisfaction in the payments space, members of the panel also pointed to the cost component as a clear advantage of implementation.

"We estimate a Eu128 million in cost savings for those that sign-up, in terms of not only expense reduction, but also in new revenue opportunities," says Thomas Halpin, senior vice president, USD clearing strategy and development at JPMorgan Chase. "For banks that sign up to the service sooner rather than later, they have the unique chance of shaping the future of the exceptions and investigations protocol, rather than being part of it. Nowadays it is not enough to simply respond to clients' demands and the early adopters will set the parameters."

Others point to the implementation of XML messaging and its 16 message types as clear benefits of SWIFT's new protocol and further justification for mass implementation.

"This is the payments industry's call to arms and this element of risk-based technology will take a lot of the pain out of processing," says Colin Day, director, product and strategy at SunGard STeP. "Efficiency in the back office needs to improve and compliance is forcing the industry to have an effective back office. SWIFT exceptions and investigations is a natural progression and we encourage banks to work with the vendors to increase the benefits."

As a further justification for implementation, SunGard also stressed that the cost of processing individual transactions will drop significantly from its current level of Eu1,000 per transaction.