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SWIFT’s Exceptions and Investigations Automation Push Lacks Widespread Adoption

SWIFT's exceptions and investigations STP initiative promises improved service and efficiency, but adoption is lacking.

Two years ago, SWIFT (Brussels) announced a pilot program around automating payments exceptions and investigations (E&I), a manually intensive process. Although some banks have signed on, the program lacks the numbers to make E&I automation viable for the industry, says James Henderson, VP and product manager, U.S. dollar clearing/service and manual payments with New York-based JPMorgan Chase ($1.8 trillion in assets).

JPMorgan was one of the first banks to test the program, which leverages XML to create a standard messaging protocol for E&I management to facilitate interoperability with downstream systems. "Banks have spent so much time getting STP on the transaction side, but not really on the exceptions side," Henderson notes. "As a result, SWIFT developed an XML protocol for investigations to help this along."

According to Henderson, more automation of exceptions means better service for customers. "This is where we should all be headed," he relates. "For back-end investigations, why not look to automation to achieve STP? We'll provide better customer service, and we'll have more revenue opportunities."

While the SWIFT service is ready to go live, it currently has only 49 participants — including 45 banks and four corporates. "These participants comprise [more than] 30 percent of the [E&I] volume in the system," Henderson reports. "But everyone will benefit when others join."

Since SWIFT comprises 2,000 member banks, the current level of participation leaves much to be desired, in Henderson's eyes. In fact, until adoption reaches critical mass, the service will remain on standby, he notes.

Automation Adoption Stunted by Myths

Henderson attributes the lack of adoption to three myths: Banks see a lack of momentum in the project, and they believe that implementation costs are too high and that testing will be difficult. But, he says, SWIFT is working to make the service more appealing to its members. For example, the organization is developing a simulation tool, known as STaQS (simulated testing and quantification services), to streamline the testing process.

Furthermore, SWIFT is working closely with the vendor community to help it develop products that are XML capable, Henderson relates. "SWIFT is working with them to package XML with their investigations solutions," he says.

According to Henderson, by 2010 SWIFT will require all of its member banks to be capable of receiving messages in XML, which already is used for a number of messaging protocols. They must be able to send messages using the protocol by 2011. "No one is being forced to speak in XML yet, so they won't do it," Henderson says.

Henderson notes that banks must implement software capable of supporting XML messaging while they continue to support the current FIN messaging format, which is based on an older ISO standard, as the two protocols will have to run in parallel for a time until all messaging uses XML. "That's why SWIFT is recommending the vendors who have built the XML logic into their systems," he says.

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