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Crisis tests SWIFT’s resolve
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11 September 2009
Yawar Shah, chairman, SWIFT |
Barring a last-minute surprise, the mood among the SWIFT community as it gathers for Sibos at the Hong Kong Convention and Exhibition Centre will be noticeably calmer than on ‘Lehman Brothers Monday’, coincidentally the first day of Sibos in Vienna in 2008 which few who were there are likely to forget.
That does not mean, however, that the community is returning to ‘business as usual’ – far from it. “The financial crisis remains global,” says Yawar Shah, chairman of the SWIFT Board. “I don’t think there’s any part of the world that is not affected by the crisis in some way. This is a time when customer centricity and listening to and understanding customers is most critical.”
Shah’s reference to customer centricity is telling. When Lázaro Campos assumed the role of CEO of SWIFT in April 2007, he put the concept of customer centricity front and centre in his plans for the cooperative. Has the crisis challenged his resolve in that regard? “The crisis is testing how serious we are about customer centricity,” he says. “If at the first big obstacle, everything we’ve said about customer centricity goes out the window, then clearly there’s something wrong.”
From SWIFT’s vantage point nothing has changed, says Campos. “In fact we have launched initiatives that further increase our obsession with customer centricity,” he adds. “For example, we’ve now worked with upwards of 20 of our top customers and have surveyed more than 5,000 individuals to measure their levels of customer delight in concrete terms. We’ve also launched a significant efficiency gain and cost reduction programme, putting customers at the centre.”
Diverse challenges Both Shah and Campos point out that while the economic upheaval may be universal, its effects are far from uniform across the community. “When we talk about ‘the crisis’, we are often looking at it from a European and American perspective,” says Campos. “From an Asian perspective, it looks very different. There, they see opportunity. In China, the feeling is that the worst of the crisis was passed in October last year. If you look at domestic institutions in Singapore and Sydney, they see this downturn as an opportunity for them to gain market share from the major foreign players.”
Shah agrees. “Every country and region is in a different situation,” he notes. “The savings rate is also very different by geography so the ability to rebound will be different.” This applies equally to the institutions within each region.
“SWIFT is fortunately in
good shape managerially,
operationally and
technologically.”
Yawar Shah, chairman, SWIFT |
This diversity places a particular obligation on SWIFT, says Shah. “Our customers expect us to be with them in the crisis. That means they expect us to dramatically reduce our costs to them, provide more automated risk management information and be fl exible as they adapt to the economic environment,” he argues. “Many, for example, are going through major changes in business mix, divestitures and/or acquisitions. They want SWIFT to be able to help them get those integrations or divestitures done.”
Shah confirms that from a Board perspective, the scope of SWIFT’s future activities needs to take these expectations into account. “We are increasingly hearing that customers would like SWIFT at the table with them as the environment shifts dramatically,” he says. “Not everybody knows what the end game is going to be, but they would like SWIFT to help as a partner. That is a big challenge for SWIFT, because, while the word ‘partner’ sounds good, we need to be sure we can fulfi l these expectations.”
Campos acknowledges that while SWIFT itself has not changed its fundamental purpose, “our customers’ perspectives on what SWIFT can and cannot do have changed.” The concept of shared services is gaining ground. “There are domains where, two years ago, our customers would have encouraged us to stay away; the message now is, ‘maybe you should do it’,” he says. “There is an appetite for the cooperative to do more while they concentrate on core business.”
To ensure that SWIFT aligns its energies with customers’ expectations for the future, the Board and Executive are revisiting the strategy development process as they work on SWIFT2015, the cooperative’s new strategy blueprint. “We are engaging in dialogue with our customers in multiple forms to make sure we’re getting their input,” says Shah, “but outside of that, the Board is investing its own time – because remember, the Board are both governors and practitioners – looking at where we think SWIFT can help our clients.” These ideas will then be validated with business cases.
“The benefit that SWIFT has is that its Board comprises a diverse group of practitioners,” says Shah. “I run shared services for a major bank; other board members specialise in their own institutions in other domains. We have the common challenge of achieving benefi ts for hundreds of thousands of our own customers in a tough environment and can pool the benefi ts of those diverse skill sets in guiding SWIFT.”
Volume contractions
Lázaro Campos, CEO, SWIFT |
One concrete manifestation of the global recession of the past year has been a decline in SWIFT traffic volumes for the first time in its 37-year history. “We saw an immediate impact as of ‘Lehman Brothers Monday’,” says Campos. “Payments traffic dried up, interbank lending declined, and in October money market transactions dried up; the only thing that grew was securities traffic, because market players were reshuffl ing their portfolios.” For a while, the increase in reporting-related traffic masked the broader trend. “Everyone wanted to know their positions,” says Campos. “Reports that investors used to request once a week, they were now asking for several times a day. That drove a signifi cant increase in securities traffic volumes for a period.”
By December, however, securities traffic was also down. “We ended the year where we wanted to be, but much of that was thanks to the securities transactions and reporting activity in September and October,” says Campos. January and February traffic volumes were 4-5% below 2008 levels. “Yearto- date we are 2-2.5% under last year’s volume instead of an anticipated growth of 9%. So we have upwards of an 11% gap in traffic volumes compared to what we had budgeted for,” he points out. Campos believes that gap is likely to be maintained over the rest of the year.
“The crisis is testing how serious we are about customer centricity.”
Lázaro Campos, CEO, SWIFT |
What are the implications of these developments for SWIFT and its community? “The crisis has reset our level of volumes and is also likely to have an impact on the growth rates going forward,” says Campos. The cooperative is, however, far from being in crisis. “SWIFT is fortunately in good shape managerially, operationally and technologically,” comments Shah. “So when we talk about volume decreases, we’re not talking about a fi rm that has fundamental underlying problems.”
A decrease in traffic volumes requires a strategic rather than a tactical response. “Since SWIFT as a cooperative exists only to serve its member banks and customers,” says Shah, “we must all work to fi gure out the right economic answers to produce a win-win for everybody.” While cost cutting must be part of a broader response to trading conditions, “none of the cost cutting should be visible to its customers,” Shah insists. Campos meanwhile confirms that the existing programme of reducing messaging costs to customers by 50% over a five-year time frame remains intact.
Infrastructure initiatives
As customers pay attention to reducing their own transaction costs, Shah believes the opportunity exists to extend the use of SWIFT’s capabilities within the industry.
At the same time, says Campos, SWIFT needs to be sensitive to the capacity of its member institutions to adopt solutions or to change-manage significant efforts in the current environment. “Anything that would create efficiencies longer term but requiring investment now is not something people are enthusiastic about,” he contends. That does not mean, however, that SWIFT is abandoning initiatives that it has identified will benefit the community. “You’re going to hear a lot of news from the SWIFT Boardroom that the financials are in good shape, cost reduction is in place and on target and the financial resilience principles that the Board agreed in June 2008 have proved to be a very good decision in these difficult times,” says Shah. “On top of that, we are still focused on distributed architecture and operational resiliency, so all that continues,” adds Campos.
Sibos
In one sense, the multiple gaps and uncertainties in the global economic roadmap should provide for vibrant discussion and debate during the Sibos conference sessions as so much received wisdom has been shaken by the events of the past year. While SWIFT is necessarily a focus for much of the activity that takes place at Sibos, the cooperative organises and facilitates Sibos for a much broader purpose. “Sibos and SWIFT are very different things,” says Shah. “SWIFT’s day-to-day role is not to create sizzle in its members’ boardrooms. It’s like the payroll department. If it doesn’t work you notice, but otherwise it just gets on with things. Sibos, however, is exciting and vibrant. It is really the non-lenders’ IMF conference. Where else do you get everybody together in these open debates from transaction banking to risk and liquidity with multiple institutions from across the globe, big and small, customers and service providers, financial institutions and vendors?” he asks.
Campos meanwhile highlights aspects of the programme that he is particularly drawn to. “I’m keen to see how the panellists in the Big Issue debate on transaction banking react to all the doom and gloom when they themselves have held up well,” he says. Campos is also enthused by the raft of activities around Innotribe, which aims to spark innovation in the financial services industry. “Through those discussions as well as through the SibosLabs and other sessions, new ideas should emerge, one of which may be selected for further development,” he says. “This is not simply about talking, but about coming up with real investment opportunities at Sibos.”
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