No financial enterprise can escape the economic crisis, not even global payments messaging network SWIFT (La Hulpe, Belgium/New York). During opening remarks at the annual SWIFT Operations Forum Americas (SOFA) in New York in March, chairman Yawar Shah and Americas managing director David Pryce told the nearly 350 attendees that even SWIFT must adjust to the new realities of the financial industry.
According to Pryce, late last year and early this year SWIFT began seeing an approximately 4 to 5 percent slowdown in its growth rate. "It's not surprising," he said.
The challenge for SWIFT and the industry is the uncertainty, stated Shah, who is also COO of New York-based Citi. "Cost cutting dramatically is key" to adjusting, he said. But, "Servicing and retaining customers becomes even more important."
Despite a decade of growth, Shah acknowledged, SWIFT must pursue the same cost cutting as banks to keep up with the demands of the new market.
Cost control will be among the organization's top priorities for 2009, Pryce confirmed. But it won't be quite as dramatic as the cuts many banks face. "We're looking to take 10 percent out of our infrastructure cost [approximately US$67 million] over the next couple of years," he explained. "We have a program in place now to do this."
At the same time, Pryce emphasized, SWIFT does not want to damage the reliability and performance of its network. The company will continue to find ways to strengthen the systems, such as implementing a distributed architecture, to remain technologically competitive, he commented. He added that traffic development efforts aimed at corporates, such as various fee structures, and extending the network's reach also are on the organization's agenda. "At the big-picture level," Pryce said, "we're looking at how SWIFT can further enable STP [straight-through processing] and offer a platform for growth, even in these economic times."
The Data Imperative
Beyond cost control, another key to succeeding in the new financial climate will be the ability to do more with data. In a separate panel discussion on the economic crisis, Neeraj Sahai, managing director, global head of securities and fund services, with Citi ($2.2 trillion in assets), suggested one way to help customers manage risk is to customize information packaging to help each client maximize the value of payments data.
For Federal Reserve EVP Bill Barouski, this means providing more information to banks and their customers. Assuming that payments activity slows, Barouski said, providing more granular information around individual payments will be critical. "This is dictating our product extension ideas," he noted.
In fact, Barouski said, payments might look very different as the economic crisis causes banks to pause their payments investments. While technology accelerates the move from paper to electronic payments, he explained, these technologies require substantial outlays. "If it's not core to the financial institution and there's no short-term ROI, then there's a threat of a slowdown in the evolution to a full electronic [payments] environment," he conceded.
Nonetheless, if banks and the other payments players can leverage the abundance of available data, then there is an opportunity to provide value to clients and improve efficiencies, panelists agreed. "SWIFT has a lot of data," noted Citi's Sahai. "The more they can mine it and present it to stakeholders, the better these stakeholders can manage risk."