Tuesday, October 02, 2007

SWIFT - eat as much as you like

Guest blogger, Ted Iacobuzio, managing director and practice leader, payments, TowerGroup, shares his views on SWIFT's "eat as much as you like" opening plenary speech.

Well, another SIBOS, another opening plenary. On the surface, the same old, same old - rebates, price cuts, we really work hard for you, etc., etc. Not scintillating, but a good old-fashioned crowd pleaser--a typical "new broom" speech.

But scratch the surface, and it was actually far more interesting. The actual reductions in price were indeed old news. But the changes in pricing structure--three-year agreements for large banks, for example--and, just as important, the change in SWIFT's own attitude to pricing, and, hence to its customers, indicate that the consortium has perceived threats to its business. For the first time, SWIFT seems to be acknowledging the fact that the world has evolved and that it needs to address this as well. It has finally realised that it has competition.

This can only be a good thing for the industry. There is nothing like a competitor breathing down your neck to focus your mind. The expected price cuts for the big banks were there and in reality only a small proportion of SWIFT users--the very largest--will even consider this new flat-rate deal, even though these largest users account for 80% of SWIFT transactions, and the majority of growth, as SWIFT's head of pricing Andre Boico has pointed out.

But there was a significant shift in creating a "eat as much as you like" deal at a flat-rate. This could work effectively to drive volumes and more important, tie users into SWIFT. And addressing the issue of "total cost of ownership" for the rest of the community will address the George Orwell issue: some members of the community are more equal than others. The cost of just being connected has long been an issue, and so the industry will be watching with interest.

The other interesting thing to note was the devolution to a regional structure. The slide said it all--Sibos is taking place in the heart of the US mutual fund business, yet over half of the attendees, are European. The US banking session spent a considerable time trying to discuss SEPA. SWIFT is betting on regionalisation to get more traction, and needs it, er, swiftly.

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