SL to offer SWIFT messaging to SAARCBy Jagdish HathiramaniView(s):
A Sri Lankan company, which was started in 2008 by 22 local banks to share costs by utilising only one connection to SWIFT (Society for Worldwide Interbank Financial Telecommunications), now plans to take its new shared infrastructure offering, a secure SWIFT messaging interface, to SAARC countries as well as local banks, according to a company official.
Lanka Financial Services Bureau Ltd. (LFSBL), which today counts 34 financial institutions as local customers, has stated revenues of Rs. 46 million and a profit after tax of Rs. 6 million for the year ending March 2011. It also had a Return on Capital Employed (ROCE) of 22% and a Return on Assets (ROA) of 18% for the same period. This is in comparison to Rs. 65 million start-up capital, and a first-year ROCE and ROA of 47% and 36%, respectively.
SWIFT is the globally preferred, secure financial transaction conduit and Sri Lanka has, for every year of the last five years, sent and received between 20,000 and 22,000 SWIFT messages, these being encrypted communications where even the US dollar amounts of the financial transactions are not shown. Further, there is also a local initiative to be launched within the next three months to upgrade local banks to the ISO 20022 global messaging standard which is expected to become the international standard within the next two years.
According to LFSBL Chief Executive, Mihindu Rajaratne, in 2006, following Sri Lanka, being taken off subsidised tariffs for SWIFT, the Central Bank of Sri Lanka took a decision that local financial institutions dealing with US dollar transactions would set up a SWIFT Service Bureau, a company owned by SWIFT clients who shared a single SWIFT connection. This meant that costs would come down significantly because of economies of scale, as well as resulting in a significant savings of US dollars which would otherwise be used to pay individual SWIFT fees, etc.
He added that the next step had been providing a secure SWIFT messaging interface within the local network, which would allow local banks to do away with their infrastructure and costs associated with sending messages and, instead, use remote PCs to use LFSBL’s server to send message. Going live in November 2011, the service was already being used by the Central Depositary System (CDS) for share trading, Union Bank, Indian Bank and Indian Overseas Bank. And it would now be offered to all local banks as well as even offshore, such as with banks in SAARC countries and especially Bangladesh where 100% successful testing had been done with domestic banks.
Mr. Rajaratne also added that advantage of this secure SWIFT messaging interface, if accessed online (for international customers) or through a leased line (for locals), was significant savings as a result of cost sharing. Up to 65% of costs could be saved by light users, while up to 45% could potentially be recouped by heavy users such as banks, all of which was based on US dollar rates.
He further noted that while India also had bureaus providing connectivity, that country did not have messaging services. However, his plan was to first enter India with LFBSL’s disaster recovery solutions at an initial stage before promoting the secure messaging interface.
Mr. Rajaratne also suggested that, for the next three to four years, LFSBL would focus on offering SWIFT connectivity to local stockbrokers, and also the Colombo Stock Exchange, as well as even corporate customers so all financial transactions by local entities, from buying shares to paying suppliers, etc, would become more secure.