Week 9: SAP Integration Package for SWIFT

SAP INTEGRATION PACKAGE FOR SWIFT: Simplified Corporate-to-Bank communication

Overview:

Global companies often have to maintain a myriad of bank communication interfaces based on different technologies. This results in high total cost of ownership (TCO), a lack of cash-flow transparency, and huge working capital inefficiencies. SAP integration Package for SWIFT helps reduce the TCO of bank communication and establish a multibank-enabled communication channel via the secure and reliable infrastructure of the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Large international companies can’t rely on a single financial institution to do banking with. Even midsize corporations have to maintain several bank communication channels and interfaces to stay competitive in the global marketplace. The result is a myriad of different bank connections that are based on a variety of technologies. The average costs for such proprietary interfaces often exceed US$50,000 per year per connection.

In addition, these companies fail to achieve seamless integration with their banks via straight-through processing. They must handle payment orders or bank statements separately for each bank. This results in manual processing, productivity losses, excessive exception handling, and an overall lack of cash-flow transparency. Moreover, treasury and cash managers are interested in harmonizing and standardizing their payment infrastructure because of increased compliance pressures and upcoming regulatory changes, especially in the European payment landscape.

SAP Integration Package for SWIFT can help achieve the strategic goals regarding efficient payment processing by providing the following benefits:

• Tight integration with the SAP NetWeaver platform, the SAP ERP Financials solution, SAP R/3 software (functionality now found in the SAP ERP application), and the SAP Financial Supply Chain Management (SAP FSCM) set of applications
• Direct access to the network of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), called SWIFTNet, which provides global reach to 7,800 financial institutions
• Real-time exchange of payment and settlement messages via a secure, trustworthy, and highly available network, using SWIFT’s secure IP network, which provides full redundancy, advanced recovery mechanisms, and first-class operations and customer support services
• Independence from proprietary country standards and bank specific electronic-banking products
• Simplified implementation and auditing of statutory payment regulations through a uniform solution worldwide

SWIFT is the financial industry–owned cooperative supplying secure, standardized messaging services and interface software to 7,800 financial institutions in more than 200 countries. SWIFT’s worldwide community includes banks, broker/dealers, and investment managers, as well as their market infrastructures in payments, securities, treasury, and trade. In 2001 SWIFT opened up its network for corporate customers by offering them direct settlements between companies and banks via member administered closed user groups (MA-CUGs). Companies can join one or multiple MA-CUGs through their administering banks and can exchange payment, cash management, and treasury information with their financial service providers. Corporations can access SWIFTNet via various messaging services, including the following services:

• FIN, which is suitable for single messages (such as a single credit transfer or end-of-day bank statement based on traditional SWIFT MT standards) and is based on the store-and-forward telecommunications technique
• FileAct, which can transfer bulk messages (such as domestic payment formats or the new XML-based universal financial industry [UNIFI] messages) and supports both real-time and store-and-forward communication.

Besides MA-CUG, SWIFT also offers a many-to-many closed user group for companies traded in regulated stock exchange in Financial Action Task Force member countries. The many-to many closed user group is administered not by banks but by SWIFT. The main benefit of this offering is that corporations need to join only one CUG to exchange messages with all their banks via SWIFTNet. Participation in all these messaging services requires, in addition to SAP Integration Package for SWIFT, other services with costs: a SWIFT membership, SWIFT software, network access, and a virtual private network box that creates an encrypted communication link to SWIFTNet. In addition, the partner bank needs to have the necessary messaging capabilities, and SWIFT charges for ongoing transmission services, depending on the file size.

Technical Architecture:

SAP Integration Package for SWIFT is powered by the SAP NetWeaver platform, which integrates people, information, and business processes across technologies and organizational boundaries. Based on open, standard technology, it works with commonly used technologies such as Java 2 Platform, Enterprise Edition, Microsoft .NET, and IBM WebSphere. SAP NetWeaver is the technical foundation for enterprise service-oriented architecture (enterprise SOA). As such, it increases business process flexibility and supports business-ready solutions, reducing the need for custom integration and decreasing project implementation time.

The SAP NetWeaver platform has advanced business process management functionality, allowing the design, execution, and monitoring of the pay-to-reconcile process across applications and systems. The SAP NetWeaver platform supports the FIN service as part of an enhancement of the file adapter of SAP NetWeaver XI by providing the following file-adapter-specific functionality:

• Creation of SWIFT-specific files that are formatted as protocol data units (PDUs) of the automated file transfer (AFT) format and can be processed by the SWIFT infrastructure (SWIFTAlliance Access)

• Management of the local authentication mechanism between SAP NetWeaver XI and SWIFTAlliance Access. (Each record of the file containing an MT message is signed using the HMAC-SHA256 algorithm.)

• Transfer of files between SAP NetWeaver XI and SWIFTAlliance Access. (The files are made available to SWIFTAlliance Access or SAP NetWeaver XI either by FTP or through a shared folder.)

• Interpretation and conversion of SWIFT-specific files that are formatted as PDUs of the AFT format and can be processed directly by SAP ERP Financials

Support of International Payment Standards

SAP Integration Package for SWIFT provides dedicated, prebuilt, out-of-the-box message and process mappings between the application interfaces and business logic of SAP FSCM and SAP ERP Financials and the SWIFT infrastructure. The process-integration content in the package and the mappings covers the entire business process from payment to reconciliation and initially supports FIN and FileAct. It enables you to send and receive both MT- and MX-based message types. The package includes standard mappings within the SAP NetWeaver Exchange Infrastructure (SAP NetWeaver XI) component for FIN messages.