Swift answer to the detractors

Few organisations attract as much ­criticism as Swift, the bank-owned industry utility-cum-institution of more than 30 years. Slow to act, commercially clumsy, overly complex and costly are familiar criticisms commonly levelled at the organisation and its services.

It should perhaps come as no surprise, therefore, that Lázaro Campos, the company’s CEO of 18 months, is in the process of overseeing some fundamental changes to the way it operates.

“I’m not about to disappoint anyone who expects change,” he says, in what seems to be tacit acknowledgement of Swift’s historical weak spots.

Provider of the world’s most reliable and secure messaging network, Swift plays a well-established and important role within the banking industry. But in the eyes of many, it has consistently failed to fulfil its potential. According to one former Swift employee, this stems from a fundamental problem: “The organisation really doesn’t know what it wants to be.”

Identity crisis

This seeming identity crisis has been underlined, some feel, by Swift’s slow shift away from its core competencies of networking and standards setting, and its tentative movement into the realm of applications and software products, the success of which has often been questionable.

Far better, say Swift’s users, to stick to what it does best and focus on its core services. “Swift should be playing a critical role in the promotion of standards across the financial supply chain,” says Manish Jain, director, information products, Citi Treasury and Trade Solutions. “We would prefer to see a greater stress on this standardisation effort than on trying to create a charter around creating new products,” he adds. Similarly, Ignace Combes, deputy CEO of Euroclear, says that Swift should build out its messaging and connectivity franchise in other areas, particularly surrounding settlement and asset servicing.

These arguments are familiar to Mr Campos, who is aware that Swift’s expanding role within the industry necessarily brings it into conflict with the commercial interests of some of its members.

“It’s fair to say that everything we do upsets somebody somewhere: we level the playing field and once you do that you are likely to get in to trouble with someone,” he says philosophically.

Mr Campos does recognise, however, that Swift’s approach to product development and commercial positioning is in need of some revision. “In the past, we tended to just build it ourselves and there was a lot of this ‘not invented here syndrome’ at Swift. I don’t buy into that; I don’t think we need to build everything but we really need to create the framework to produce the right functionality collectively.”

To do so, Swift will have to develop closer and more targeted relationships with software vendors in specific spaces, an approach it has traditionally shied away from. “We’ve taken a very neutral stance in the past when it comes to fostering the creation of solutions: you’ll see that change,” he says.

But the notion that Swift should not attempt to expand in this area and, as such, transgress its original remit is one that the chief executive plainly rejects. “I think that the nature of a co-operative is that you are always seeking what your membership wants you to do.”

The boundary surrounding Swift’s remit is therefore not frozen, he says: “It changes over time.”

Good governance?

Not everyone agrees, however, that the co-operative governance structure always serves Swift’s best interests. The strong ­consensus model, in which all strategic decisions must be approved by the Swift board bank members, is regarded by many as a major obstacle to both growth and competitiveness.

“If you have two big banks and one says ‘left’ and the other says ‘right’, then you go nowhere,” says Hugh Cumberland, strategic business development manager, managed secure messaging, BT Global Services, one of few organisations to compete head-on with Swift.

According to former employees, this structure frustrates the emergence of innovative ideas and has reduced the organisation’s ability to respond quickly to change. It also means that unsuccessful projects “take longer to be killed” than in a commercial environment, says Trevor LaFleche, analyst at Financial Insights and former Swift employee.

There is also a sense among some that the governance structure is unfairly weighted towards the biggest banks, although they dispute this. “I think it’s the opposite,” says Curtis Brill, global head of electronic markets for securities and fund services, a business unit of Citi’s Institutional Clients Group. “The big banks are under-­represented in terms of what we’d like Swift to focus on.”

Mr Campos disagrees that the governance structure itself has ever been problematic or unhelpful. Rather, he says, it is the way that Swift has traditionally focused on building generic products and services that has slowed it down.

“That’s a very lengthy process because you need to get everybody to move together and you end up walking at the pace of the slowest.”

Now, the organisation is taking a different approach, and plans to build products and services for segmented customer groups before making them available to the rest of the community. This strategy should expedite product and service development and delivery.

As for the question of representation, this too is clearly a complaint of which he is aware. “Big banks think they’re under-­represented and everybody else thinks that they are over-represented. Different sectors will have different views and nobody ever feels that the status quo is representative of their reality.”

Swift, he says, aims to create value for all members, not just the largest organisations, which is a concept unfamiliar to many of the biggest banks.

“The fact that we don’t do any specials, or exclusive deals, is not something that they are used to,” says Mr Campos. “In the same way, I think they see the value of that approach. In a funny sort of way, I’m happy that that is the case and that they feel that they are under-represented. It means they all want a bigger say – and that’s what we need: active engagement.”

Corporate conundrum

Engaging the corporate community has also been a growing focus for Swift in recent years. But efforts made through the bank-sponsored closed user group model – the awkwardly named MA CUG – and its later slimline version, the Standardised CORporate Environment (SCORE), to bring the corporates onto the network have not yet attracted the vast numbers of users that one source says has long been Swift’s aim.

This is a “terribly difficult” issue, says Arthur Cousins, director at Standard Bank of South Africa and a member of Swift’s board of directors, because the big global custodians have never needed corporate access.

Franchise threat

Many argue, meanwhile, that the vast majority of Swift’s members do not welcome the threat to their franchises that standardised corporate access would inevitably bring.

Mr Campos feels, however, that the ongoing discussion generated by this issue is misplaced. “We never wanted thousands of corporates; it was never our intention,” he says. Both the cost and the complexity of ­corporate – and, for that matter, bank access – have also been talking points for some years and are also cited as reason for corporate disinterest.

Mr Campos agrees that the total cost of ownership of Swift connectivity is an issue, and it is one Swift hopes to address with the launch at this year’s Sibos of the ‘Alliance Lite’ interface, which uses a standard internet connection.

Cost issue persists

Even with Lite, Swift will not be able to put the cost issue to rest, says Giacomo Buico, CEO of Italian payments network SIA SSB, a rising competitor to Swift. “They are lowering the entry point, but the entry point is still too high.”

Furthermore, he adds, in emerging markets, where Swift will inevitably have to venture in future, the entry point will be comparatively higher still.

Mr Campos argues, however, that direct connectivity is only half the story of Swift’s future – Swift should seek expansion by embedding itself in third-party applications and services, which would provide another avenue through which to access those groups, such as fund managers, that have traditionally proved out of reach.

“There are many ways to skin this cat. If the only measure is how many direct connections we have, then that in my mind is the wrong measure,” says Mr Campos.

But the right measure, it seems, remains unclear.