For the banks, however, the conversion will not be cheap. A 2006 Boston Consulting Group study estimates that the cost to make the national banking system interoperable by 2008 could run to $650 million. The next step — eliminating or converting all domestic schemes by 2010 — will take another $6.5 billion. In addition, Wagner predicts a “10 to 30 percent erosion in fees” once SEPA is under way. The result could be more consolidation or the outsourcing of initiatives by smaller banks. There could still be roadblocks, particularly political ones. But if all goes according to plan, by 2011 the global payments landscape could be a much more level place.
Shoot and Score
One innovation may ease the transition to SEPA. In January, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) released a program that would streamline communication between corporations and banks. Its new SCORE (Standardized Corporate Environment) model enables corporate members to access multiple banks through one open-access channel. At present, companies connect to only one bank at a time.
“The biggest advantage of SCORE is that it adds efficiency by allowing corporations to communicate with all banks in a very easy and straightforward manner,” says Luc Meurant, head of SWIFT’s corporate access program. SCORE also promises to be faster, safer, and cost-effective. Research shows that a corporation spends $20,000 to $26,000 to maintain each bank-specific communication relationship. SCORE eliminates the need for individual connections.
“It is also a highly reliable network and allows for better control in a stable environment,” says Roy DeCicco, senior vice president with the Treasury Services business at JPMorgan Chase.
General Electric was one of the companies participating in SCORE Phase 1, the pilot program. Paul Bernstein, managing director of GE’s Corporate Treasury, says the program will benefit companies new to SWIFT because it decreases paperwork and other administrative burdens and makes it easier to join the organization. “For GE,” says Bernstein, “the real benefits come with Phase 2, which is the standardization of the ISO 20022 payment messages for corporate-to-bank communications.”
Currently, SCORE focuses on cash management and treasury services, but Meurant expects to add trade and investment services as well as exceptions and investigations services in the future.