Despite the tremendous push towards fully automating trade confirmations between banks and corporates in recent years, many transactions are still confirmed manually.
Manual confirmations are slow and error-prone, putting both sides of the trade at risk. In addition, many international regulations such as EMIR and Dodd-Frank have demanded an increase in automation.
Corporate treasurers often use SWIFT to standardize their confirmation messages. SWIFT is a cooperative that connects the financial community by providing highly secure financial messaging services that eliminate manual processing and makes inefficient paper confirmations redundant. More than 11,000 financial institutions, corporations, and other financial entities use SWIFT to exchange confirmations (SWIFT, 2019).
This article will explore several ways to confirm foreign exchange, money market, and currency option settlements through different solutions connected to SAP.
SWIFT Connectivity Over the last several years, the SWIFT Network has experienced growing popularity with corporates of all sizes, stretching from large corporates with a high volume of transactions to small-to-medium corporates with a lower volume of transactions. As a result, corporates have several options when deciding on a connectivity solution:
Direct in-house connectivity, where access to the SWIFT Alliance Gateway (SAG) is managed in-house by your IT (Information Technology) department. However, this solution is not recommended by SWIFT due to its high complexity and requirement for specialist SWIFT knowledge.
Figure 1: Direct Connectivity (SWIFT, 2019)
2. Alliance Lite2 is a packaged offering from SWIFT providing connectivity through a web browser or the embedded Lite2 for Business Applications (L2BA). Alliance Lite2 offers a simple, secure, cloud-based SWIFT connection. It connects to SWIFT through HTTPS and enables users to access the Alliance Lite 2 GUI. Since 2015, 61% of new corporate customers have opted for Alliance Lite2 (SWIFT, 2019).
Figure 2: Alliance Lite 2 (SWIFT, 2019)
3. SWIFT Service Bureaus (SSBs) provide a connection to the SWIFT network without the need to have an in-house IT department managing and maintaining the SWIFT connectivity. Furthermore, using an SSB can eliminate the need to undertake extra audit and compliance procedures. SSB providers vary in price but tend to be less expensive compared to direct in-house connectivity. It is still important to mention that initial investment is needed to set up the connectivity solution.
Figure 3: Swift Service Bureau (SWIFT, 2019)
4. Finastra Fusion Confirmation Matching Service (CMS) supports a hosted SWIFT connectivity through a Software as a Service (SaaS) application. It provides a confirmation matching solution for FX, Money Market, FX Options etc. This requires no upfront investment in infrastructure or implementation from the corporates availing of their services. It is directly hosted and managed and maintained by Finastra. Their File Transfer Service (FTS) is a secure process of moving messages between Misys CMS and clients ERP or TMS. FTS picks up and transfers files from the client to Misys CMS, converting the files to match trade data. After which, a matched message status is sent back to the client’s SAP TMS (Finastra, 2021).
Trading Platforms Trading platforms such as 360T, Bloomberg and FXall offer automated back-office trade processing with SWIFT confirmation messages and trade matching.
The service allows corporate treasurers and banks to exchange deal confirmations directly on the trading platform. Messages are sent via the SWIFT networks directly to and from the banks, with the outgoing (incoming confirmation) and incoming messages (bankside confirmation) being automatically processed on the platform.
SAP Multi-Bank Connectivity SAP Multi-Bank Connectivity (MBC) is SAP’s offering of a SWIFT connection embedded within Business Applications. This cloud-based solution offers a multi-bank digital channel between SAP and partner banks. In addition, SAP MBC is being provided as a SaaS solution by SAP.
A SWIFT Service provider is not needed for SAP customers to send confirmations messages through the SWIFT network, as SWIFT services are given by SAP through an embedded version of Alliance Lite 2. This streamlines trade confirmations for the TRM module, as message statuses are automatically updated directly in SAP. Moreover, the integration platform offers connectivity to partner banks through EBICS and Host-to-Host connection.
Figure 4: SAP MBC (SAP SE, 2018)
SAP Correspondence Monitor This framework in SAP is an excellent tool to manage all correspondence objects. For example, back-office users can view incoming and outgoing messages and resend those messages previously failed to send. In addition, the monitor provides a historical overview of all the deals that have previously been confirmed.
Furthermore, it also allows you to view PDF messages that have been sent out, for example, to your internal counterparties. Through the t-code, technical users can customize messages when their requirements are not covered by standard functionality. For example, previously, SAP TRM did not offer MT305s as a standard message format. The user could then reconfigure standard functionality to fit different message types not provided in the standard TRM Module.
Below is an example of a corporates SAP TMS connected to the SWIFT network through a SWIFT Service Bureau.
Figure 5: SAP Confirmation Connectivity
Conclusion SWIFT Service Bureaus and Alliance Lite2 have been the most popular choice in sending out confirmations to and from the bank, with over 50% of all corporates accessing SWIFT through either connection. However, the offering of SAP Multi-Bank Connectivity is especially attractive to those corporates with a technology roadmap leading towards SAP as a key ERP provider. Nowadays, many corporates are transitioning towards their S/4 HANA transformations journey and are looking at their SWIFT connectivity options. Therefore, SAP Multi-Bank Connectivity is likely to compare favorably to SWIFT Service Bureaus in the coming years.
Over the past year, the interest rates on intercompany financial transactions have come under closer examination by tax authorities. This intensified scrutiny stems from a mix of
At Zanders, we are proud to announce the promotion of Tobias Westermaier as our newest partner. With a rich background in Corporate Finance and Treasury, he brings a wealth of experience and a
Introduction: Faster, smarter, and future-proof
In the fast-paced financial industry , speed and accuracy are paramount. Banks are tasked with the complex calculation of XVAs
In the high-stakes world of Private Equity (PE), where exceptional returns are non-negotiable, value creation strategies have evolved far beyond financial engineering. Today, operational
For many, December is the most magical time of the year. It is a season filled with the warmth of family members, the joy of hanging out with friends, and the coziness of gathering around the
The near-final PRA Rulebook PS9/24 published on 12 September 2024 includes substantial changes in credit risk regulation compared to the Consultation Paper CP16/22. While these amendments
The ECB Banking Supervision has identified deficiencies in effective risk data aggregation and risk reporting (RDARR) as a key vulnerability in its planning of supervisory priorities for the
Recently, Zanders' own Sander de Vries (Director and Head of Zanders’ Financial Risk Management Advisory Practice) and Nick Gage (Senior VP: FX Solutions at Kyriba) hosted a webinar. During
The Right Payment Orchestration Strategy: A Critical Factor for Success
The digitalization and globalization of payment infrastructures have significantly impacted businesses in
In our previous article 'Navigating the Financial Complexity of Carve-Outs: The Treasury Transformation Challenge and Zanders’ Expert Solution' we outlined that in a carve-out, the TOM for
In today's dynamic economic landscape, optimizing portfolio composition to fortify against challenges such as inflation, slower growth, and geopolitical tensions is ever more paramount. These
Effective liquidity management is essential for businesses of all sizes, yet achieving it is often challenging. Many organizations face difficulties due to fragmented data, inconsistent
Exploring S/4HANA Functionalities
The roundtable session started off with the presentation of SAP on some of the new S/4HANA functionalities. New functionalities in the areas of
Accurately attributing changes in counterparty credit exposures is essential for understanding risk profiles and making informed decisions. However, traditional approaches for exposure
However, CCR remains an essential element in banking risk management, particularly as it converges with valuation adjustments. These changes reflect growing regulatory expectations, which were
The timelines for the entire exercise have been extended to accommodate the changes in scope: Launch of exercise (macro scenarios)Second half of January 2025First submission of results to
Within the field of financial risk management, professionals strive to develop models to tackle the complexities in the financial domain. However, due to the ever-changing nature of financial
Addressing biodiversity (loss) is not only relevant from an impact perspective; it is also quickly becoming a necessity for financial institutions to safeguard their portfolios against
SAP highlighted their public vs. private cloud offerings, RISE and GROW products, new AI chatbot applications, and their SAP Analytics Cloud solution. In addition to SAP's insights, several
SAP In-House Cash (IHC) has enabled corporates to centralize cash, streamline payment processes, and recording of intercompany positions via the deployment of an internal bank. S/4 HANA