Asian funds sign up to SWIFT automation
Since its launch in October, SWIFTNet Funds has signed up more than 30 new users, half of those in Asia. The internet-based funds messaging platform has been adopted by UOB and OCBC in Singapore, Schroders in Luxemburg and Asia, Franklin Templeton for its cross-border business and Fubon Bank in Taiwan. On a recent trip to the region, programme manager for SWIFTNet Funds securities industry division, Michel De Boe, spoke with FinanceAsia about these early adopters and why others should be considering the shift to the XML-powered system.
When was the launch of SWIFTNet completed?
De Boe: It went live in October, just prior to the Sibos conference in Atlanta. The launch came after the successful completion of a pilot programme involving 16 firms such as Fidelity, JPMorgan Fleming, Dexia and BNPParibas. The current phase of SWIFTNet Funds includes the ability to place orders and received confirmations, to check on the status of trades, and to receive price reports and cash flow reports.
We also have a whole new set of messages ready to launch next year in 2005 and then the final phase will occur in 2006. The system uses new ISO 20022 open market messaging standards in XML syntax. We are also working on a rule book to guide users on best practices.
How much input is the industry having in developing this rule book?
We're working with the European Federation of Funds and Investment Companies (FEFSI) to prepare best practice rules for fund data quality and transactions processing and this will be released in December. In Asia we are working with funds on a domestic level rather than at a regional level.
Are you surprised at the level of interest in SWIFTNet Funds?
Yes, we're surprised by the momentum that we see in the market both in Europe and in Asia. At Sibos we issued a press release announcing the names of 24 institutions that joined the 16 pilots and since then we have signed up eight more players. About half of these come from Asia - Hong Kong, Singapore and Taiwan.
What type of institution is registering for the service?
An equal number of fund managers/their service provider and distributors. We have a good balance between the two sides of the industry.
What is the biggest hurdle to implementation?
The major difficulty in the project of automating funds distribution is the fragmentation of the market. To build a critical mass you need to have quite a number of counterparties onboard which requires a lot of coordination to align the scope of the projects and the timelines for implementation. That is why I am particularly happy with progress in Asia.
There are user groups of early adopters in Hong Kong and Taiwan. They should experience like our pilots participants did that it is much easier to implement the XML-based platform for ISO 20022 messages - this technology allows for the simple injection of information. At Sibos, one of our pilots, Citco, said that it only took them five days to map a simple message with their internal database, and expect it would take about 10 days for complex messages. This is quick.
What are the benefits of using SWIFTNet Funds?
There are three value propositions: a reduction in cost and risk; scalability and enhanced service levels. In Asia the improvement in service levels is high on the list of benefits. The system can give fund managers a longer selling window to end investors. And it can also help to redirect resources to more high-value tasks.
One transfer agent told us that 70% of the calls to its call centre related to errors made during manual processing, such as statements not being received or confirmations missed. By automating the process and eliminating these errors, the staff at the call centre can focus on adding value to the customer experience in other ways.
Do you expect that once a few institutions have signed up that others will quickly follow?
Certainly. Once a few industry leaders start the automation process, the rest of the market is encouraged to do the same otherwise they lose their competitive edge.
What do funds need to do to participate?
Participation is easy. They need to be involved in funds management or funds distribution (such as a transfer agent, a custodian, a fund accounting agent), they need to register with SWIFTNet Funds which is a simple process, and then they need to migrate their systems. This can be done in large part by re-using existing equipment and software.