Zanders NGO Event December 2014: Zanders

1 Liam Ó Caoimh 4 December 2014

Bank Connectivity: SWIFT

“Ideas get Implemented”

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Agenda

1 Introduction to SWIFT

3 Business Case Drivers

2 SWIFT Connectivity Options

5 Q & A

4 Implementation Guidance

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• Society for Worldwide Interbank Financial Telecommunication founded in 1973

• Founded and owned by banks, developed for bank-to-bank communication

• Provides messaging service in a secure, standardized and reliable environment

• The financial standardization body (e.g. ISO 20022)

• Is considered one of the backbones of the international banking system

• Since 1998 the Swift network has been gradually opened for corporate customers of the banks.

SWIFT Organization

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• SCORE – Standardised Corporate Environment

– SCORE is a participation model (rules and legal framework) specifically created by SWIFT to allow Corporates to join and to connect to financial institutions

– Once registered to use SCORE, a financial institution can interact with any corporate that is also registered (and visa versa).

• CGI – Common Global Implementation

– An initiative defined by major banks, corporates, system vendors and SWIFT to simplify the implementation for corporate users

– Promotion of ISO20022 as the common XML standard

SWIFT Developments for Corporates

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Corporate Access to SWIFT

Source: SWIFT

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SWIFT for Corporates: Single Standardised Gateway

Corporate

Accounts payable

Accounts receivable

Treasury

Other

Standardised gateway

Corporate

e-banking Y

host to host X

e-banking Z

VAN

Internet

Leased line

Accounts payable

Accounts receivable

Treasury

Other

Multiple bank channels Single, standardised gateway

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SWIFT elements

Treasury

Counterparty MA-CUG

MT ISO

FIN FileAct

Private Infrastructure

Connectivity

Messaging Channels

Standards

Membership SCORE

Shared Infrastructure

Alliance Lite

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Agenda




5 Q & A


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SWIFT Connectivity Options

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2 Very large corporate (1–25 bn Rev.) Hundred thousands payments/year Outsource SWIFT connection

Service bureau

Large corporate (0.5-1 bn Rev.) +/- 200 transactions/day Simple solution

Global corporate (25+bn Revenue) Millions payments/year Manage your own SWIFT connection

Swift

Network partners

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SWIFT Connectivity Options

1


Service bureau



Swift

Network partners

3

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• Outsourcing of the SAG network connectivity to a certified Swift Service Bureau

• In the past decade SWIFT Service Bureaus have developed their services

• In order to connect via a SSB, a company would only need a VPN or leased line connection with e.g. industry standard encryption technology

• Some SSBs are more experienced in connecting ERPs (SAP / Oracle) infrastructures to SAG. This experience helps reducing project risk at implementation

• SSBs audited regularly by SWIFT

• New compliance conditions introduced by SWIFT under the Shared Infrastructure Programme (SIP) (April 2013)

SWIFT Service Bureaus

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Minimum Operational Practice

Standard Operational Practice

Premier Operational Practice

Requirements (amongst others)

Ownership and operation of shared connectivity components

Training and certification in SWIFT connectivity and onboarding processes

On top of Minimum Operational Practice: Maintaining a disaster

recovery site at a separate location

On top of Standard Operational Practice: A fully redundant

disaster recovery site with cross-site replication

SWIFT-like security controls between the SSB infrastructure and end users

Compliance Mandatory by end of 2013 Mandatory by end of 2015 Optional

Control Remote checks On-site inspection

On-site inspection On-site inspection

Publication SWIFT Service Bureau Directory

SWIFT Service Bureau Directory

SWIFT Service Bureau Directory with premier label

Validity period

Until end of 2015 3 years unless criteria significantly change

3 years unless criteria significantly change

Shared Infrastructure Programme (SIP)

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Swift Connectivity Options

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Service bureau



SWIFT

Network partners

3

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• Direct competition to the SSBs

• An Internet-based solution aimed at any SWIFT customers that want to connect to SWIFT easily and securely

• Access to SWIFT via web, connectivity established through AutoClient which must be installed on a PC or Windows server

• Connectivity - Internet, VPN and Leased Line are all options

• Security is established through a personal USB-token

SWIFT Alliance Lite2

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Alliance Lite2

Work flow

SwiftNet Interface USB Token to sign messages

SSL

Browser Interface

SWIFT Security

SWIFT Community

SWIFT Managed

SWIFT Messaging

AutoClient automated file transfer

Customer Premises Network (Internet or VPN)

SWIFT Network

Counterparties Alliance Lite2 Central

Infrastructure

Web server

SWIFT Alliance Lite2 Process

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SSB SAL2

+ Help with managing complex on-

boarding process

+ Auxiliary services

+ No/limited in-house expertise

required

+ Customized service

+ Cost in function of your volume

+ One-time implementation cost

+ Increased security as PKI

certificates stored on HSM

- Sharing of financial

data/information with 3rd party

- Counterparty risk towards single

provider

- Sometimes own propriety software

installation required

+ Cost efficient solution for

corporates with limited volumes

+ Easier implementation

+ Fewer links in the chain

- No dedicated support team

- No priority to customer base

- Building experience with

connectivity to ERP/TMS systems

- Customised support excluded from

initial price

- Security certificates stored on USB

token

Service Bureau versus SWIFT Alliance Lite2

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Agenda




5 Other SWIFT aspects


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• One interface to banks:

– SWIFTNet offers a single window, standard secure platform for messaging

– Cost reduction in maintaining various EB systems

• Process efficiency:

– SWIFT will lead to automation, standardization of process and communication channel and full STP integration

– Reduce operational cost of retrieving balances from multiple EB systems

– Enhanced confirmation messaging status (e.g. ACK/NAK messages)

• Efficient use of liquidity:

– Implementing SWIFT will have a positive impact on cash visibility via one system

• Transparency & Control:

– Implementing a SWIFT solution can increase internal and external compliance

Benefits of SWIFT

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Agenda




5 Q & A


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SWIFTNet

connectivity

Defining your project scope

Payment factory/

middleware

FIN for payments (MT101), statements (MT940/2) and FX confirmations (MT3xx)

FileAct as file transfer to transport any format: domestic, ISO 20022, ACH, BAI, …

SWIFTNet

ERP(s)

Treasury Workstation

Which applications to connect to SWIFT?

What formats & messaging to use?

Which banks to connect to?

How to connect?

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High-level implementation areas

Define business requirements

Define functional specifications

Explore SWIFT channel with banks

Identify tools & integration reqt.s

Join SWIFT

Order & implement SWIFT connectivity (direct or bureau)

Interface to back office applications

Train personnel

Implementation to live : 3 – 6 months

2 - 6 months 2 - 5 months 1 month

Connectivity with ONE pilot bank

Interfaces with applications

Back-up infrastructure and procedures

Analysis & design Implement Testing Live

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Agenda




5 Q & A


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Q&A

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1404 GV Bussum The Netherlands

T: +31 35 692 8989

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Zanders Switzerland Bächtoldstrasse 5 8044 Zurich Switzerland T: +41 44 256 81 70

Contact Zanders Offices

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Disclaimer

This presentation was prepared exclusively for the benefit and internal use of the recipient. It does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by Zanders. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of Zanders.

Economy & Finance

Zanders NGO Event December 2014: Zanders