SWIFTNet migration a key issue for Asian banks in 2003

Mick Fennell of Misys IBS discusses the migration to SWIFTNet, the new IP-based network from SWIFT, and explains why it makes an attractive business proposition.

Mick Fennell is business development manager of the MultiSolutions Group at Misys International Banking Systems.

How are banks placed in terms of introducing SWIFT's new IP network?

Fennell: from our point of view, it's simple. All people who send SWIFT messages are going to have to switch over to SWIFTNet over the next two years. There is no choice.

At the moment there's about 5,000 connections worldwide and about 7,500 SWIFT bit codes, because some banks run branches in different countries through a regional hub. But with 5,000 connections having to switch over in two years, and the process only starting over the next few months, that's a total of around 200 a month worldwide. And right now there aren't that many people accredited to do this, with the technical skills to do the migration.

Where does Misys IBS fit into this situation?

We've got about 1,500 back office systems out there generating SWIFT messages – the current SWIFT FIN type messages. All those sites are impacted by the change, but on the face of it, for the current FIN messages that they're doing, the actual technical change they need to make to migrate is done purely on their SWIFT interface device. So therefore our back office systems aren't impacted in terms of FIN messages. But they will definitely have a role in the important new services on SWIFTNet.

Traditionally we haven't worked much with the interface device. We've been more focused on the back-office systems that feed into it. But for SWIFTNet migration we've realised that lots of institutions will need assistance because of the shortage of qualified people to help. Because of the size of our customer base we are in a prime position to help SWIFT gain a critical mass of support for the new services that are being offered on SWIFTNet, which should be one of the key drivers for banks to meet their migration window. We are also getting our consultants accredited to help banks with this.

Why should banks get excited about these new services?

Spending all this money to connect to the new network but sending the same old FIN messages is not what it's all about. There's a question of where the ROI would be in this case. The messaging will be cheaper, but in some cases this is only marginal. The real benefit of SWIFTNet is the new services that it supports. FileACT and InterACT are the mechanisms, but on top of those there are new business messages and processes, the first round of which have been defined. One of them is called TrustACT, a new XML-based definition of messages that can be exchanged between banks to digitally certify customers and it uses Identrus as the root key.

This also plays a big part in the ePaymentsPlus initiative.

Yes, on top of TrustACT, or in conjunction with it you can go a bit further and use ePaymentsPlus, which provides a mechanism for electronic payments that comes after you've certified someone. This stuff is still at a relatively early stage. There are a number of business exchanges that have started to trial and use it. The first one was actually a fish market linking Scandinavian countries and Japanese fish buyers. But these services need critical mass.

What new services are you gearing up to support with your back-office systems?

The one we're looking at supporting in real depth, for our own back-office systems and also for banks with other systems, is the new cash reporting message. Being defined by a working group of about 12 banks. It's based on InterACT and takes advantage of the query and response functionality of that new mechanism. Currently banks exchange information on nostro accounts and cash positions on a delayed basis. But the new messages aim to support a more real-time exchange of information so banks can find out now what their cash position with a correspondent bank is, for example. This moves banks into more real-time cash management and the biggest advantage for banks here is they pay less if they're overdrawn because they can move their cash around. They can also gain more interest because they're able to put the cash in higher interest accounts.

Will 2003 be a busy year for banks in Asia looking at SWIFTNet migration?

In the migration schedule there's a window for each country. That window just says SWIFT has a dedicated team to help banks with their testing during that period of time. Any bank can really choose to do it at any time over the next two years, but they won't get the advantage of thorough testing. SWIFT have also announced that they will impose additional charges on banks that continue to send FIN messages over the FIN network after a particular country has completed its allocated migration window.

Most of the major markets in Asia have a window in 2003, and I think Asia may be more impacted than any other region this year.