The Swift global payments network is about to introduce an automated system for processing exceptions and investigations of international wire transfers.
The system is scheduled to go live Sept. 8 with 17 global financial companies and two corporate users; five international banking companies have been testing it since March.
Bankers estimated that using the system to automate processes that are now largely manual could boost the banking industry’s balance sheet by $165 million a year, in savings and new revenue.
Edward B. Wolfe, a vice president at JPMorgan Chase & Co. and the senior product manager of U.S. dollar clearing in its treasury services unit, said the system would become more effective as more companies get behind it.
“It’s a community event,” he said.
Edward W. Adams, a regional director for Swift — formally the Society for Worldwide Interbank Financial Telecommunication — said the companies that are planning to use the exception processing system “cover a very large population of the existing volume” of exceptions and investigations on Swift’s network.
Once the system begins full operation, more banks are likely to come on board quickly, Mr. Adams said. “Others that have been waiting on the sideline will have the opportunity to join.”
The SwiftNet Exceptions and Investigations initiative involved Swift not only in its role as a provider of messaging services but also as an arbiter of banking standards. It uses extensible markup language, which tags data fields so software can recognize the information.
Mr. Wolfe said Swift’s transmission of basic payment instructions is already highly automated. JPMorgan Chase has a 97% straight-through processing rate, Mr. Wolfe said, and the banking industry’s rate worldwide is probably in the high 80s or low 90s.
By contrast, the handling of exceptions and investigations — such as changing the payment instructions or reporting on problems — remains a heavily manual process, he said. “Those don’t have a lot of automated field recognition like the payment messages do. It’s all free-form text.”
Five global banking companies — ABN Amro Holding NV, Australia and New Zealand Bank Group Ltd., Bank Austria Creditanstalt, Banque Nationale du Canada, and JPMorgan Chase — began a pilot test in March involving four scenarios. They included two types of exceptions that occur before a wire is executed (a request for cancellation and a request for modification) and two investigations that take place after the fact (the inability to apply and a beneficiary claims nonreceipt).
The companies that are expected to begin using the system next month include Banco Popular North America, Bank of New York Co. Inc., Mellon Financial Corp., Royal Bank of Scotland Group PLC, Wachovia Corp., General Electric Co. and E.I. du Pont de Nemours & Co.
Susan Feinberg, a senior analyst in the wholesale banking group of TowerGroup, a Needham, Mass., market research unit of MasterCard International, said the corporate participation is important. “It’s not just the banks communicating with each other. It goes all the way back to the corporate customer.”
Businesses are often frustrated when expected payments do not arrive and they must wait, sometimes for weeks, while the banks investigate what went wrong, she said. “This could be a big help in improving the turnaround and the visibility.”
Mr. Wolfe said the system could be applied to other kinds of Swift messaging, such as securities or trade-related issues.
“It is meant to address any process flow where something can go wrong,” he said.
