SWIFT challenged banks to concentrate less on proprietary products and more on simplified services that are client-oriented in a new white paper released Monday.
In “Correspondent banking 3.0,” SWIFT said banking services, chiefly payments, cash management and trade services provided by banks to customers via other banks, are central to the business of over 3,700 banking groups in 200 countries. These correspondent banking serves are the primary channel to deliver cross-border banking services, the white paper noted.
In its new white paper, SWIFT argues that the current model is too bank-product-centric, based on inherently tangled multiple agreements. Banks are under pressure to make profits, adhere to new regulations and face increased competition, all the while bracing for another financial crisis/economic downturn. Meanwhile, corporates are pushing for more integrated solutions, and the entire industry is going mobile. For example, SWIFT believes corporate treasurers want a real-time view about the liquidity available across the firm’s multiple banks and accounts on an iPad.
Thus, SWIFT is pushing for a new, customer-centric, ‘experience banking’ model, in which customers use a simple banking service as needed, and banks string together the best components to create a dependable customer experience.
David Bellinger, CTP, AFP’s director of payments, believes SWIFT is on the right track. “I think if banks are willing to take more customer direction and become more client-centric, they will not only uncover new revenue opportunities, but they’ll also be more efficient at identifying, developing, implementing and maintaining new services—which is a win-win for them and their corporate customers. If their first questions continue to be ‘Where’s the business case?’ or ‘How come I’m not hearing that from my customers?’ they’ll continue to struggle.”
To achieve its new model, SWIFT concludes that banks will need to make improvements and engage in collaborative projects. SWIFT conducted 35 interviews with banks over the past year, identifying four possible collaborative projects that could have a significant impact on the industry. The cooperative is advocating for:
- Business intelligence services that are better equipped to identify new market opportunities, understand end-customer behavior, and monitor liquidity;
- An interbank EBAM (Electronic Bank Account Management) central utility to more efficiently manage accounts and relationships;
- A bank-owned, mobile enabled global service for person-to-person payments;
- An international market infrastructure that can reach a multitude of small banks, without needing to establish correspondent bank relationships and accounts with them.
According to Luc Meurant, head of banking, supply chain and corporate markets at SWIFT, the purpose of the white paper is to inspire conversations in the banking industry on the new model and proposed projects, as well as identify other projects. “Our objective is in the end to gain consensus and focus on implementing one or two concrete new collaborative services that can bring significant benefit to the industry. The world is changing rapidly. To keep their payments franchise, banks must take charge of their destiny and lead the way,” he said.
Previous correspondent banking models focused on automating the telex with a large network of banks (1.0) and centralized global transaction processing via fewer but deeper relationships and tighter performance management (2.0), SWIFT said.