The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

End is in Sight for Swift’s Lean Programme, But is it Fighting Fit?

Ahead of this year’s Sibos in Amsterdam and following the approval of the 2015 strategy, I have been asking people what they think of Swift and its new five year plan. The most obvious concern for most of the market seems to boil down to one thing: cost.

Whatever you think of its new, more commercial approach to the market, Swift has one main challenge ahead of it if it hopes to attract more users onto its network (be that from the securities market or elsewhere) and that is to bring down its own costs and those passed on to its customers.

That was the rationale behind the launch of its Lean programme back in 2009 at a time when Swift was facing its first ever messaging volume decline on the previous year’s figures. The industry network operator duly hired consultancy firm McKinsey to advise on which heads to chop and which overheads to eliminate in order to bring down its overall costs by around 30% by the end of 2010. The plan was therefore to eliminate €120 million out of its overall running costs of €600 million per annum.

After all, Swift has to live up to its promise to its customers to bring down its pricing by 50% by next year; a tough ask when times are so tight.

The rather controversial selection of McKinsey for a considerable sum aside, as expected, the cost cutting largely centred on cutting headcounts: as noted by Campos in the Swift press conference in Hong Kong, 60% of Swift’s overheads are accounted for by its staffing costs. This has resulted in a number of high profile exits over the last year, including corporate actions stalwart Linda Bookheim.

According to Arun Aggarwal, Swift’s managing director for the UK, Ireland and the Nordics, the project is on course to be completed by the end of this year, with the last wave scheduled for the fourth quarter (at which point I imagine many staff members will breathe a blessed sigh of relief). The end goal is therefore an efficiency gain of 30%, with 10% of this being reinvested in new growth areas, leading to an overall cost reduction of 20%.

However, Aggarwal was quick to reassure that Lean is not a retrenchment exercise, it is about doing what Swift does “more efficiently and laying the foundations for controlled growth”. So that effectively means keeping costs down permanently and not returning to the heady days of old (a fact which will no doubt be reflected by the Sibos “closing networking event”, rather than a party).

Swift has had the advantage of volume increases year on year to enable it to bring down prices for its customers, with the average price per message going down and rebates being handed out fairly frequently since its inception. The last 18 months have, however, been a serious challenge and the eagerness of the industry network operator to get as much of a hold on other markets as it can reflects its desire to push volumes across the network up again.

This uncertainty, however, could also make it challenging for Swift to continue to push down prices if volumes fail to reach the levels of previous years. The question that many in the industry are asking is whether Swift has changed its DNA to make it into a more cost conscious organisation.

As noted recently by Paul Bodart, BNY Mellon Asset Servicing’s executive vice president and head of EMEA global operations, the fixed price agreement is also coming to an end and the market is keen to see the next steps that Swift is planning with regards to reducing costs and increasing volumes. The ball is in Swift’s court and it has to prove it has cut out the fat to make it a leaner machine overall that can keep to its promises in spite of potentially tough times ahead.

Related content

WEBINAR

Recorded Webinar: Entity identification and client lifecycle management – How financial institutions can drive $4 billion in cost savings

A new model in Legal Entity Identifier (LEI) issuance has created significant opportunities for financial institutions to capitalise on their KYC and AML due diligence. By becoming Validation Agents and obtaining LEIs on behalf of their clients, financial institutions can enhance their client onboarding experience, streamline their internal operations, and open the door to new,...

BLOG

FactSet Addition of Data-Mapping to Snowflake Links Third-Party, Factset and Proprietary Data in Seconds

FactSet is meeting increasing market demand for rapid content integration, access and control by integrating its data-mapping solution, FactSet Concordance Service, into Snowflake’s cloud data platform. The integration allows investment professionals to quickly link third-party, FactSet, and proprietary content together in the Snowflake platform. The data-mapping solution is scalable and can be used by joint...

EVENT

Virtual Briefing: ESG Data Management – A Strategic Imperative

This briefing will explore challenges around assembling and evaluating ESG data for reporting and the impact of regulatory measures and industry collaboration on transparency and standardisation efforts. Expert speakers will address how the evolving market infrastructure is developing and the role of new technologies and alternative data in improving insight and filling data gaps.

GUIDE

ESG Handbook 2021

A-Team Group’s ESG Handbook 2021 is a ‘must read’ for all capital markets participants, data vendors and solutions providers involved in Environmental, Social and Governance (ESG) investing and product development. It includes extensive coverage of all elements of ESG, from an initial definition and why ESG is important, to existing and emerging regulations, data challenges...