Swift’s new CEO, Lázaro Campos, talks to Frances Maguire about his plans for Swift in the immediate future and beyond, including regionalisation, courting US institutions and working on the integration of portals.
Lázaro Campos is no newcomer to Swift. When he took over from Leonard Shrank in April this year, he had already clocked up 20 years with Swift and was well versed in the importance of listening in order to grow the business of the banking co-operative.
The former head of Swift’s banking industry division has only one priority in his new role and that is to make Swift a more customer-centric organisation than it has perhaps been in the past. “If there is one thing that our customers would tell you that we could do better at it is in engaging with them in a simpler way. I am not saying that the Swift of the past was wrong, just that the Swift of the future can be better,” says Mr Campos.
As a result, the first issue on his agenda has been to decentralise and reorganise Swift to give each of the three regions – the Americas, Europe, the Middle East and Africa (EMEA) and Asia-Pacific – more control over the entire customer experience. Each regional executive will be responsible for all the relationship management activities, commercial development activities, customer support, and local and regional market management.
Close to the customer
“I will regionalise everything that I can,” says Mr Campos. “I do not want any customer to be waiting for a headquarters decision. I am putting decision making as close to the customer as I can. And, in so doing, I am expecting the regions to be more active and effective at letting us know what customers really need. So, expect to see a good marriage between the development of global solutions and local flavour.”
The organisation that Mr Campos oversees today is very different from the shared worldwide data processing and communications link established in 1973. Although payments messaging still continues to grow (up 16% this year), securities traffic now makes up almost half of Swift’s business, helped by the recent volatility in the stock markets. According to Mr Campos, Swift is no longer just a payments company but a transactional business involved in all asset classes in that banks trade. It is from securities, foreign exchange (FX) and derivatives messages that Swift’s future growth will come.
For this reason the focus for newly developed services is on these markets and Swift is developing further new services for reference data and carrying standard settlement instructions (SSIs).
“We believe that it is part of our remit to provide the quality information that our customers require in order to execute transactions end-to-end. Swift is not only about providing messaging validation and straight-through processing [STP], but [also about] the data needed to put together those messages,” says Mr Campos. A new securities reference data service is under development and Swift may partner to deliver the service.
E-trading impact
Swift is looking closely at the impact that the growth of e-trading is having on its banking users. “The integration of e-portals into banks’ front, middle and back offices has been a source of significant development in terms of optimising their operations and reconciliation processes,” he says. “Another impact has been in terms of capacity growth. E-trading portals have helped to create a buffer between the portals and the back office but the challenge is both in the integration and capacity growth. In some cases, portals have helped with capacity increases and in other cases they have hindered it.”
According to Mr Campos, customers have approached Swift about hooking up the portals into the Swift network to enable them to capture trades as closely as possible to the source, and then go all the way to clearing and settlement. “This is a strategy that we have had for many years, that we want to host transactions end-to-end, so there is a role for us to play here to help with the integration of portals.
“This could minimise disruption to back offices and optimise the allocation process of block trades and the aggregation of algorithmic trades – which is fast becoming a part of FX trading. There are opportunities for us to work with our customers and market infrastructures, such as CLS, to help with integration,” says Mr Campos. Reference data and SSIs would also be part of this. SSIs for FX are one example of where a significant building block is missing, he says. “There are several sources for SSIs and quality is lacking.”
Volume growth
Last month, the fastest growing volume came from Swift’s category 3, which includes messages for FX, derivatives and money markets. Year-on-year this category has grown 37%. “Is that sufficient growth? Do we have the right solution for FX? Possibly not,” says Mr Campos. “The more we move into increasing not the value of trades but the volume, like with algorithmic trading, we will see a greater need for us to do something different in FX whether it is to do with integrating with new partners, such as the FX portals or CLS, or with creating the right messages and the right structure for those trades. We are in the middle of reviewing our FX messages in the context of XML and in the context of increased volumes to come up with a different proposition.”
Swift is also heavily involved in the harmonisation and standardisation needed in Europe for both payments and securities, and was charged with removing the first of the Giovannini barriers for securities clearing and settlement. “The challenge for global securities markets is to be able to handle massive increases in scale efficiently and safely, and how to make sure we become less fragmented when we talk about the settlement of securities transactions in Europe. It is not only about the payments but also about the harmonisation of book-entry transfer across Europe. What is clear is that something needs to change,” says Mr Campos.
Target2 for Securities
Like most of the industry, Swift is waiting for further definition on how Target2 for Securities would work so that it can begin building a solution to enable single access and easy integration for its customers. But, according to Mr Campos, the role of Target2 for Securities is much harder to predict because the European Central Bank has yet to define how it will take the project forward. “Is it going to create a redefinition of what a CSD [central securities depository] and ICSD [international CSD] is or what a global or regional provider of custody or asset servicing will look like? What we do know is that book-entry transfer in Europe will be harmonised, more standardised, more cost effective and less risky,” he says.
While this is being hammered out, Mr Campos has much to keep him busy at Swift. He identifies two challenges for Swift. The first is to improve its delivery of an all-encompassing straight-through processing platform with the provision of the right transactions data to enable end-to-end processing. “This is why Swift was established, and it is as relevant today.”
For this to happen the second challenge is to bring along all the different players to that platform. “We have seen a significant take-up by corporates in the past few years but in securities there is more work to be done. We need to bring in more asset managers and fund managers than we have, and even in the banking space, there are many domestic environments where our presence is almost negligible,” says Mr Campos.
The US, for a start, has tens of thousands of financial institutions, of which only 600 are connected to Swift. “These are significant challenges for Swift – to make sure our platform grows to deliver value and STP in all markets and get all the players connected, and that push into the regions will help us with this,” he says.
