Presentation on Zanders NGO event, 4 dec 2014. Liam Ó Caoimh (Associate Director Zanders) “Bank Connectivity: SWIFT”

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Liam Ó Caoimh
4 December 2014
Bank Connectivity: SWIFT
“Ideas get Implemented”

2. 2
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
1 Introduction to SWIFT
3 Business Case Drivers
2 SWIFT Connectivity Options
5 Q & A
4 Implementation Guidance

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SWIFT Connectivity Options
1
2Very 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
3

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SWIFT Connectivity Options
1
2Very 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
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
1
2Very 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
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 InterfaceUSB 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
CounterpartiesAlliance 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
1 Introduction to SWIFT
3 Business Case Drivers
2 SWIFT Connectivity Options
5 Other SWIFT aspects
4 Implementation Guidance

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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
1 Introduction to SWIFT
3 Business Case Drivers
2 SWIFT Connectivity Options
5 Q & A
4 Implementation Guidance

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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
1 Introduction to SWIFT
3 Business Case Drivers
2 SWIFT Connectivity Options
5 Q & A
4 Implementation Guidance

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Q&A

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1404 GV Bussum
The Netherlands
T: +31 35 692 8989
Zanders UK
26 Grosvenor Gardens
SW1W 0GT London
United Kingdom
T: +44 207 730 2510
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1000 Brussels
Belgium
T: +32 2 213 84 00
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.