Swift Connectivity & Swift Business Connect

Advantages of SWIFT services for Corporates

However, for more than 25 years, corporates have increasingly been granted access to SWIFT services, which offer them several advantages: 

• Secure Messaging: SWIFT provides a secure platform for sending and receiving messages related to financial transactions, such as payments, confirmations, and trade finance.
• Multibank reach: SWIFT connectivity enables corporates to transact with banks and financial institutions around the world, giving access to a wide network of participants. As such, with one click, corporates can access all their banks.
• Standardization: The SWIFT messaging format (e.g., MT, MX) is standardized, allowing for interoperability amongst different financial systems and technologies. From 2025 onwards, all the SWIFT messages will be in ISO 20022 format (MX).
• Integration with ERP Systems: Corporates often integrate SWIFT connectivity into their Enterprise Resource Planning (ERP) systems to automate payments, reconciliation, and cash management processes.
• Compliance and Security: SWIFT ensures compliance with international regulations and provides state-of-the-art security features like encryption and authentication to protect sensitive financial information.

Traditional Swift Connectivity options

1. Connection through a private infrastructure (also called a direct connection):

In this case, corporations set up their private infrastructure, which includes hardware, software, and the necessary network components to ensure secure and efficient communication with the SWIFT network.

The main benefits thereof include the following:

• A private infrastructure allows corporates to implement their security measures, such as advanced encryption, firewalls, and intrusion detection systems, reducing the risk of unauthorized access to sensitive financial information.
• Corporates can control data flow, access privileges, and message formats, ensuring that their processes align with internal policies.
• Corporations can customize their systems and processes to suit specific business requirements, enabling them to adapt rapidly to changing market conditions or internal operational changes.

However, there are some aspects to consider:

• Establishing a private connection to SWIFT requires a very sizeable upfront investment in hardware, software, and networking infrastructure, as well as the maintenance thereof.
• Setting up and configuring a private infrastructure can be complex and time-consuming, requiring specialized technical knowledge and resources.

For this reason, this solution is more suited for very large corporates who have a solid business case justifying this investment.

2. Connection through a shared infrastructure (also called an indirect connection):

In this case, corporates work with banks or specialized financial service providers that are members of the SWIFT network (Swift Service Bureaus). These providers offer platforms (usually cloud-based) that enable corporations to send and receive messages through SWIFT. Some providers also offer specific features such as format conversion, user management, etc. 

Corporate users do not have to build their infrastructure. The cost of establishing and maintaining the infrastructure is shared among multiple users, making it more cost-efficient for corporates, especially those with lower transaction volumes. The implementation process is also quicker. In addition, corporate users will benefit from the upgrades of the Swift Service Bureaus. 

While the shared infrastructure may imply less direct control over security, most service providers have robust security measures and protocols to ensure the safety of transactions and communication.

Although the cost of setting up and maintaining this solution is lower than in the private infrastructure connection, it remains sizeable. Hence, this approach is more suited for medium-sized corporates, wishing a state-of-the-art and scalable solution.

3. Swift Alliance Lite

SWIFT Alliance Lite2 is a cloud-based messaging solution that enables smaller corporates) to connect to the SWIFT network without needing to establish a complex IT infrastructure. This service allows users to send and receive financial messages securely over SWIFT.

This is a cloud-based service, meaning users can access it through the internet, or through laptops, hence eliminating the need for extensive local installations or dedicated resources.

Users can access the SWIFT network via multiple channels, including the web application and available APIs, allowing businesses to integrate the service with their existing systems easily.

However, when considering this solution, corporates need to consider the dependency on internet connectivity and the operational limitations, in case of very high volumes.

Hence this is a good solution for corporates with limited budgets and/or lower transaction volumes.

4. Swift Business Connect.

Connecting with the traditional connectivity methods requires setup and administration by Swift. As a Swift client, you must store and maintain personal tokens by yourself.

The traditional connectivity options also require the corporates to adhere to the SWIFT CSP (Swift Corporate Security Program). The SWIFT CSP is an initiative by SWIFT aimed at enhancing the security of the global financial community and its participants. This requires quite heavy assessments and controls at the side of the corporate, including also third-party audits.

As a workaround, Swift has created the possibility for certified vendors to provide Swift‘s Business Connect service to their clients, in other words, to embed this in their services. The SWIFT Connect is a plug-and-play solution that enables businesses to achieve reachability to global payment schemes like SWIFT without making immediate major investments in infrastructure.

To be able to provide these services, the vendor has to qualify through an accreditation process aimed at determining technical and functional suitability capability (including security), as well as compliance with certain legal financial and business criteria.

The new Alliance Cloud is API-based and offers additional services thanks to the flexibility of APIs. Alliance Cloud can be accessed via Business Connect, provided by certified vendors. They undergo an approval process of SWIFT. They handle certificates and guide customers through the onboarding process, taking the responsibility of managing the Swift solution off your shoulders, such as Nomentia.

The main benefits of this solution for corporates are the quicker onboarding process and the low maintenance footprint. The entire process – from joining the Swift network to implementing the solution and onboarding – is outsourced to vendors. Hence customers can consume connectivity and services without any need for Swift training, USB tokens, or certificates.

However, when considering SWIFT Business Connect, corporate organizations must carefully consider the potential drawbacks, such as the dependency on third-party providers, the vendor-lock-in costs, the compliance risks, limitations in customization, and the transition cost to move to another provider. Hence the choice of the right provider is crucial.

Conclusion

For corporates, the SWIFT Connectivity provides an interesting solution to connect with banks. However, the choice of the right solution and the right provider is important. It requires a good analysis.

One needs also to consider alternative solutions, such as host-to-host solutions (including EBICS), interactive banking solutions, and PSD2 API-Based solutions. Building a solid business case is crucial and external advice can be useful for this.