Monday, September 15, 2008

SWIFT on a stick

"SWIFT on the offensive" at Sibos in Vienna took the form of SWIFT CEO Lazaro Campos holding up a USB stick, heralding the official launch of Alliance Lite, a new means of connecting to SWIFTNet, which "is as easy as logging onto a web site".

Having addressed the total cost of ownership issues for large volume SWIFT users last year at Sibos in Boston with the announcement of fixed pricing schemes, which 55% (32 banks) of FIN traffic now uses, Campos said Alliance Lite was aimed at "low volume" users and would get them "up and running [on SWIFT] in days."

Alliance Lite will be initially rolled out to banks and corporates from 27 October, but Campos hinted at offering it as yet another channel for all SWIFT customers and partners.

Looking pretty pleased with himself, Campos then rolled off a host of other initiatives SWIFT had instigated to reduce total cost of ownership. Alliance Integrator will help banks map SWIFT standards to their back office formats. According to Campos vendors on the Sibos exhibition floor are already touting alternatives to Alliance Integrator, which is what SWIFT wanted to see. "Multiple middleware options" all the way, says Campos.

SWIFT is also looking at "fast tracking" standards implementation by developing a data dictionary and structured schemas, as well as guidance on target syntax (ISO standards)to help reduce the cost of deploying SWIFT ISO standards.

It has to be said, these are significant announcements that go beyond SWIFT's annual rebate announcement, which usually results in a resounding, 'whoopee' from most banks as it does not deliver any real cost savings to them. Finally, SWIFT appears to get it that most banks do not care about annual rebates, but are more concerned with reducing the total cost of ownership of SWIFT.

Although rebates (20% in 2008) were of course on the agenda again, with SWIFT chairman Yawar Shah saying he had pushed the SWIFT Board to achieve an overall 50% reduction in SWIFT pricing ahead of schedule by the end of 2009, instead of 2011. "We need to make this co-operative more competitive," said Shah.

A 50% reduction however will not be enough if SWIFT is to seriously compete with the commercial telcos that claim they can offer cost reductions up to 90% less than SWIFT. And in the current economic climate where banks are continuing to be impacted by the credit crunch, one has to ask is a 50% reduction in the cost of SWIFT really going to have that much of an impact?

Campos boasted that the SWIFT network now carries 16 million messages a day, and has 360 corporate users interacting with 900 banks on SWIFTNet. However, that took 20 years to achieve. Is it going to take another 20 years to have all SWIFT member banks interacting with thousands of corporates on SWIFT?

Furthermore, SWIFT traffic stats pale into insignificance when you think of the traffic that is carried over the internet and on commercial telco networks every second. In that respect SWIFT is a small fish in a rather large pond.

Shah made a cryptic reference to SWIFT competing with third party vendors around shared services, saying that it presented an opportunity for everybody. There are those, i.e. the major telcos, that believe SWIFT should not be in the network space, as it can never come close to the economies of scale and cost savings large global telcos can provide simply through the sheer numbers of customers they connect.

"We [SWIFT] need to be seen as lean and mean as you are," said Campos, although it has to be said SWIFT's idea of "lean and mean" is far removed from the commercial realities of banking, where consolidation and rationalisation appears to be the order of the day

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