In the not too distant past, communications in retail banking and the corporate world were complex, with a myriad of proprietary connections, dedicated lines, servers, operating systems and applications, managed by hordes of telecommunications experts.
At a time when 9.6k Binary Synchronous (BSC) connections ruled, with no trusted, standard globally accessible alternative, business demands for communications were eagerly and willingly satisfied with executive spend.
Contrast this with today. The power of the communications room is more commonly on the desktop and increasingly decentralised. In terms of raw computer power, end users have a serious armoury rivalling the collective capability of hundreds of users only a few years ago. Even home PC users have cheaper and higher ADSL communications bandwidth and processing power than employed in large financial institutions by mission-critical applications.
In retail markets, telecoms suppliers are now providing consumers with previously unimaginable bandwidth. Lower speed connectivity continues to be phased out as telecoms companies strive to standardise their services for business users with more cost-effective pipes, capable of easy upgrade and the ability to carry voice, data and other services.
For financial business today, rationalisation is the key, by selecting providers with multiple services through the same delivery mechanisms with proven diversity and separacy, resilience and economy.
Guaranteeing speed
It is increasingly important not only to have high speed lines, but to ensure an optimised transfer rate of data within those lines. Guarantees of highest possible throughput have to be negotiated and contracted, especially where business regulation will increasingly dictate timings for completion of transactions.
However, like motorways in rush-hour, the world’s communications channels can get clogged for limited periods. It is vital to understand when you need to use those routes, who else may be using them, what load they are putting on the road and in what form (individual messages, high volume small files, one-off bulk data files), and what alternative routes and testing have been planned in case of emergency.
All too often in business, there are costs and processes which one cannot avoid. This is no different in the area of global communications, where more advanced players strive to recoup some of the forward thinking but hugely expensive technology investments they made to suit initially low level usage.
To ensure economies of scale with fewer connections for smaller uses, with growing bandwidth and higher discounts for increased messaging usage, an important factor is to participate through industry proven communications links in a standard way with clusters, clubs, associations and partnerships that bring an individual into a larger community.
Larger players in the investment management community are fortunate in being given choice, feted by providers of applications and additionally endowed by financial institutions with proprietary communications links. Conversely, smaller less agile companies suffer a lack of communications options, and ultimately rely on manual operations, communicating by phone and fax, with heavy reliance on manual tracking and settlement operations.
Greater selectivity is taking place, fighting with lowering margins and tighter cost control, the emphasis is on finding and providing more cost-effective services, more scope and impact in markets, and larger more process-efficient correspondents. Companies must be assured that all dealings with all parties are correctly handled, and working with hundreds of companies increases the administrative load and risk.
The development of the eurozone also created the opportunity to rationalise correspondents. Rather than the previous situation of having one company maintaining multiple correspondent relationships in each country for each currency, individual banks can provide broader cross-border services, without the traditional burden of extra staffing and expense.
From a business perspective, additional responsibility is being placed on creating relationships with companies with multiple services able to satisfy a complete range of institutions needs.
Pricing and simplicity
From a technology and communications perspective Swift are already world leaders with standard single-window dedicated channels enabling financial messaging. To access other services, such as interactive, file exchange or data visualisation through browsing customers invest in a communications gateway. The scaled pricing, and simplicity of enhancement to Swift configurations means that companies can explore new services, become active in markets which use new delivery mechanisms for messaging, and gain value from lower spend on training, addition of connections or programming of proprietary links.
So, to achieve economies of scale in communications, there is always a process of rationalisation. Questions need to be asked, namely, to whom can I connect, and to whom do I need to connect?.
With a growing trend to share communications and business processing infrastructures, providing low-cost connectivity for smaller players has grown in popularity and interest from budget-conscious institutions.
To remain a player in the global financial markets, the way forward may be summarised as commonality through rationalisation and consolidation of physical communications mediums, standardising connectivity through tight service level agreements and being an active member of the community, and re-using or sharing operations and communications infrastructures.
Graham Bright is head of international sales at Financial Tradeware plc.
