Why Big Corporates Are Skipping SWIFT

Forty percent of Fortune 500 companies are already connected to SWIFT, the global financial-messaging network. That’s according to Gottfried Liebbrandt, CEO of Brussels-based SWIFT, at the organization’s Sibos conference in Boston last week. But that number should be closer to 90 percent, said David Blair, managing director with Acarate Consulting, moderating a panel on banks and corporate customers at the conference.

“Most large corporates are multi-banked and most Fortune 500 companies are in multiple geographies, and SWIFT is the logical and most secure way to have visibility over and connect with multiple banks,” Blair said.

The reasons that so many banks haven’t joined the network largely come down to a lack of standardization among banks on the network, complications due to recent anti-money laundering, sanctions and tax regulations — and a very real hope by some corporates that a disruptive alternative will make SWIFT unnecessary for them, according to ITreasurer.

The first problem: Documentation requirements for connecting with all of a corporate’s banks via SWIFT aren’t standardized. While some baseline requirements are standard — corporates must be listed on stock exchange in a country that’s a member of the Financial Action Task Force — SWIFT’s Standardised Corporate Environment agreements can take six months to three years to negotiate with each bank.

“I am baffled by banks’ different requirements regarding corporate and bank liability for connectivity,” Brooke Tilton, director of treasury operations at Viacom, told Blair’s panel. Another panelist, Roche head of treasury operations Martin Schlageter, pointed out that differing corporate resolutions can explain some of the documentation issues, but 80 percent are common to all and should be standardized.

Once corporates are finally onboard, the core ISO 20022 standard for payment messages is far from standardized in practice, due to varying requirements from country to country that require messages to be populated differently.

Another part of the challenge is that anti-money-laundering and financial-crimes regulations hang heavy over many banks, which can create documentation nightmares for corporate customers. While SWIFT created a Know Your Customer (KYC) registry in January 2014 to help banks share KYC information through an updated central repository, banks are leery of outsourcing KYC compliance.

And while the corporate interface to the SWIFT network is improving, it remains a far cry from the level of convenience that banks provide to their own customers — such as through mobile apps.

Those issue leave an opening for startups who might make SWIFT unnecessary for some corporates. When Blair’s panel polled the audience at the SWIFT Corporate Forum, 56 percent said they would prefer SWIFT be their payments solution, but were open to other alternatives — and 12 percent said an alternative would be their first choice.