As global payments messaging organization SWIFT looks to continue growing its network of corporate participants, banks like J.P. Morgan Chase ($2.2 trillion in assets) are taking it upon themselves to continue educating their clients on the ins and outs of SWIFT.
On March 10, J.P. Morgan hosted a one-day SWIFT Corporate Workshop at its headquarters in New York. Approximately 130 participants from a variety of corporations joined J.P. Morgan, SWIFT and vendors to learn more about using the messaging network. Attendees included both clients and non-clients of the bank and were provided with a forum to listen to what their peers had to say about their experiences using the SWIFT network.
"The objective was to gather clients and non-clients to give them an opportunity to ask us, SWIFT, their peers and vendors questions about the basics of using SWIFT, the details of making it work. It was an opportunity for them to do so in a comfortable environment," says Louise Gorman, a managing director in J.P. Morgan's treasury services area. "We have to vow to really listen to our clients about their pain points so we can simplify the way they do business with us and make life easier for them."
Gorman says corporates are seeking to understand the options they have to join SWIFT and the technical considerations they must evaluate to connect to the SWIFT Network. "We wanted to show [corporates] how they can talk more efficiently with existing bank relationships and new ones."
To help corporates better handle their payments and banking relationships, Gorman says J.P. Morgan is prepared to do business the way the client wishes. She explains there are hands-on channels for transacting payments, like the Internet, and hands-off channels, such as treasury workstations that send files through secure phone lines over proprietary networks. "Many [corporates] continue using the Internet while others use file-based channels. Some even do a bit of both where they push a file through to us but want to go online to release it or see if it has been processed," she explains. "That's where the industry is going. The clients will determine which method they want to use. We want to make it easier for them and that's where some of the J.P. Morgan treasury investment is going."
Gorman's role during the SWIFT workshop was to discuss future and current trends and strategies that might impact the SWIFT corporates initiative. Two areas in particular that Gorman says will make a big difference to how banks and corporates interact with each other via SWIFT are the electronic bank account management (eBAM) project and plans around security.
The eBAM initiative is designed to help streamline and quicken the process for managing and opening accounts for corporates, especially the multinationals that can have hundreds of accounts and bank relationships. Gorman says this is an issue the corporates brought to the banks. "We all need more automation here," she comments.
In response to this problem, some of the world's largest banks and corporations gathered last January to come to an agreement on a new message type for communicating eBAM in an ISO format. "Corporates are starting to implement these systems and we're doing some pilots with them," she explains. "When the system sends JPMorgan a message to open an account, we understand it. This message format isn't just for SWIFT but can be used on proprietary pipelines as well."
Security is another area of great concern in corporate payments as business transactions move more to an electronic format. J.P. Morgan and the other banks have taken security very seriously, relates Gorman. Corporates are issued security tokens that generate random access codes upon each use. However, they need to receive one token from each of their banks, so managing the tokens is becoming an onerous task for the banks' clients.
"They sometimes had spreadsheets or notes on their desks with IDs and passwords," she says. "This was obviating the security we banks had implemented. So the banks gathered to develop a model for all banks where we could give clients one secure mechanism they can use across all their financial institution relationships. Corporates looked to the SWIFT community to develop this global solution. We hope to see a pilot some time this year."
Security needed to be simplified for clients and more interchangeable, according to Gorman, who also believes it is possible to have a convenient security solution that doesn't compromise the strength of the mechanism. Building such solutions using an open model is also important for raising the convenience factor for clients. "We need to take security to a place where it's simplified for clients, yet still secure. It also has to be agnostic to all banks and systems. J.P. Morgan has an open model for our file-based channel today. Clients use it with security certificates they can either issue themselves, through a third party like VeriSign or through us. But it's completely open. You don't want it to be vendor specific."
She also says it was important to develop a model with little in the way of upfront investment so that banks would not be discouraged from using it. "Security is fundamental. It's expected by our clients. It is not a for-profit business for us."
Still, whether more corporations jump on SWIFT during the current climate is still a question that remains to be answered. "It really depends on the client," relates Gorman. "I don't know if the financial situation will change the argument [for joining SWIFT] but it may change funding to the project. It's just dependent on whether a company is in a position to do that investment at this time."