Monday, September 14, 2009

The new lean and mean SWIFT

A more sombre tone characterised the opening plenary at Sibos in Hong Kong. Last year in Vienna, the opening plenary coincided with the collapse of Lehman Brothers. This year the only bad news delegates had to face was the threat of a typhoon level eight warning, which meant we may be bunkered down at the Hong Kong Convention Centre for longer than expected.

Also this year there was not the usual announcement by SWIFT of a rebate to its members. With year-to-date volumes on SWIFTNet down by 2.5% and SWIFT 11% off its budget target in view of the banking network's first ever volume decrease, the rhetoric of previous years where one gained the impression that SWIFT was trying to be everything to everybody, was usurped by a more pragmatic realisation that SWIFT needs to focus on those things it is good at.

"What is new [this year]?" asked SWIFT chairman, Yawar Shah. "Not much. It is about making sure SWIFT works. We don't expect SWIFT to sizzle in banks' boadrooms. We are just getting on with things, which should give us peace of mind."      

Like its banking members, it appears SWIFT is going back to basics, and like some financial services companies and even media outlets, in these troubled times where everyone is trying  to get more bang for their buck, SWIFT has called in McKinsey to see where it can make further cost savings and efficiencies. SWIFT's CEO L├ízaro Campos expanded on "Lean@SWIFT", which he said is a two-year project overseen by SWIFT's CFO, Francis Vanbever in conjunction with McKinsey.

SWIFT hopes to make targeted efficiency gains of 30% without downgrading its service. Campos said SWIFT remained committed to price reductions for members and innovation, yet, given that SWIFT's pricing model is geared more favorably towards increased traffic, when volumes are down, the banking co-operative is unable to deliver on its cost-savings promise. However, using other means such as offshoring and vendor re-negotiation, Campos said SWIFT had already saved EUR 30 million.

In future, Shah said there would be no "hobbies" for SWIFT (one only has to think of SWIFT's failed epaymentsPLUS initiative during the boom). I got the impression that there had been some refocusing at SWIFT with Shah saying that 500 corporates on SWIFTNet, while encouraging, was still a dip in the ocean.

Shah also alluded to the potential for SWIFT in the securities space; namely its recent activity in the area of corporate actions. Yet at Sibos last year, and in previous years, the attendance by securities  market participants has always been dismally low, which seems to suggest that gaining traction in that space is still challenging for the Brussels-based co-operative - it is probably hoping that the renewed focus on standards, STP and automation will change that.

Shah also alluded to the role for SWIFT in reinsurance and managed identity services stressing the need for SWIFT to "go beyond messaging services". "SWIFT should be the shared service infrastructure as it is bank owned and governed," he said.

Does SWIFT really need to look that far to realise why banks and other financial market participants are not using it more? SWIFT has always been deemed as expensive when compared with other IP networks and it has to get its own house, in terms of internal cost savings and efficiencies in order, before it can expect banks, corporates and other financial intermediaries to start using it more.

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