Wednesday, September 17, 2008

Alternatives to SWIFT

With the credit crunch continuing to bite, a recurring theme at Sibos this year is reducing the cost of ownership of SWIFT. SWIFT has responded with its "SWIFT on a stick" solution.

Alliance Lite is SWIFT's "low cost" solution for smaller banks, corporates and investment managers that want to use a simple internet connection to connect to SWIFT, without having to manage and install a dedicated SWIFT infrastructure.

But if SWIFT thinks it is going to be that easy, it is wrong. Telcos and other network providers say they can connect banks and corporates to a larger user community for considerably less cost than SWIFT - it kind of makes you wonder why SWIFT is even bothering to try and compete in the network space.

Another challenger to SWIFT that is emerging is Italian-based payments, capital markets and network services provider, SIA-SSB. At Sibos this week, it launched its B-Gate solution, a network connectivity solution for bank to corporate communication.

In order to keep costs at the level of a standard internet connection and to leverage the faster speeds of the internet, B-Gate leverages ADSL and purports to offer the same level of security in the bank-to-corporate space as what already exists in national interbank networks.

Giacomo Buico of SIA-SSB says that B-Gate was developed in response to demand from banks in Europe wanting a lower cost alternative to SWIFT in the corporate-to-bank space. This was before SWIFT changed its tune about offering a connectivity solution for mid-sized corporates.

While SWIFT says its network has 100% availability and reliability and has never been hacked into, Buico says there is a need for a "back-up" network in Europe. "There are too many limitations [with SWIFT's network]," said Buico. "They need to stop it for maintenance. We run a card processing business and we cannot stop our network for maintenance."

"If a virus gets on the network, SWIFT is stopped. No one is immune from this problem," Buico continues. SIA-SSB will roll outs it B-Gate solution initially to banks, starting with its home market of Italy.

Its vision is to grow the number of users on the network across Europe, and to increase the number of service providers that can be accessed by partnering with other companies.

Buico is under no illusions that B-Gate will compete directly with SWIFTNet, which has a loyal customer base, albeit one that on a global or European scale is still relatively small in terms of the total number of end users it connects.

Buico claims its B-Gate network is key for the future development of SEPA, as it has the bandwith to carry not only payments messages, but also data pertaining to the exchange of electronic invoices, direct debit and reporting orders, but without the hassle and cost of having to manage network protocols "in a fully secure automated way".

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