SWIFT (Brussels) has played a vital role in streamlining the transmission of payments messages and data among banks. However, one piece of the process still needs fine-tuning - the exceptions and investigations (E&I) messages that accompany payments when issues arise.
According to Bud Wolfe, a VP and senior product manager, U.S. dollar clearing, with JPMorgan Chase (New York; $1.3 trillion in assets), most clearing banks now have a straight-through rate for transaction processing of nearly 90 percent or more; but the story on the customer service side is quite different. "There are no standards by which banks can communicate problems," he says. "That's where our cost is. ... Only about 4 percent of these messages are automated."
After being approached by several banks for help with the process, in April SWIFT, along with JPMorgan Chase, ABN AMRO (Amsterdam; US$1.2 trillion), ANZ (Melbourne; US$220 billion in assets), Bank Austria Creditanstalt Bank Austria Creditanstalt (Vienna) and Banque Nationale du Canada (Montreal; US$97 billion in assets), launched a pilot program designed to increase the efficiency of E&I messages. As part of the project, SWIFT created an E&I standard in XML format.
The goal of creating a standard for E&I processing, according to Wolfe, was to address four scenarios that represent 60 percent of service-related issues: beneficiary claims non-receipt, unable to apply, request for cancellation and request for modification. "The business case was that by delivering standards for these four cases, you could automate 76 percent of traffic today," he states.
The banks made some tweaks along the way, relates Wolfe. For instance, the number of mandatory fields in a message were increased to clarify the inquiring party's request. Additionally, definitions of messaging code words were expanded and new definitions were added. Further, the International Standards Organization (ISO) was asked to scrutinize what SWIFT and the banks created.
According to Wolfe, the messages contain suggested uses for code words. However, each bank tends to interpret them differently, so it became difficult to automate the process around the code words. "So we're keeping the code words relevant and to ISO standards," he relates.
Results of the pilot were favorable, Wolfe reports, and, as of press time, the system was slated to go live in September. Early adopters include The Bank of New York (New York; $108 billion in assets), Banca Intesa (Milan; US$347 billion in assets) and Barclays (London).
"This was a significant undertaking," Wolfe explains. "Each bank had its own findings as we modified our underlying messaging protocol to handle the new XML format. There was also new hardware and software each bank had to install," he adds, pointing to automation technologies and middleware applications. "You also have to have a significant amount of volume to justify those expenses," Wolfe says, noting, "We could have done this in the existing infrastructure, but we used XML since the industry is moving in that direction."
Wolfe stresses that the program is about more than automation - it's about customer service. "We're providing faster service," he says. "We hope to front-end this to our clients eventually so they can tap in directly and view their cases."
For now, banks should prepare to run the new system in tandem with existing message programs. "It will take some time before everyone is on board, but SWIFT's goal is for standard [XML] messages to replace existing free-format messages," Wolfe explains. " This is probably SWIFT's biggest standards undertaking in the last 15 years."