01 September 2005 Product Reviews

 

Transformer man

In his 18th year at Swift, Lázaro Campos is widely tipped as the insider most likely to take the top slot in two years time. He tells David Bannister about his view of the future

JPMorgan’s Heidi Miller’s presentation at the opening plenary session at Swift’s Sibos conference in Atlanta last year seems to have passed into popular history as a rallying cry for change and has led directly to the theme of transformation at this month’s event.

As ever, there are some nuances and while Miller’s speech certainly put the cat among the pigeons, she was voicing a view that had been growing in popularity in many corners of the international banking business.

“Last year at Sibos there was a fairly openly stated appetite, not only from Heidi Miller but from other speakers, that there is a need for real transformation in the way the banks and financial institutions do business,” says Lázaro Campos, head of Swift’s banking industry division.

Campos’s views are interesting for a number of reasons other than just his position. His experience in Swift covers a number of the larger infrastructure projects it has been involved with, including the original Target, Echo, CHAPS Euro, EBA Clearing and CLS. If there is to be the transformation that the industry seems to want, then that sort of experience will be handy.

So too will the fact that much of his career has been in being the commercial face of Swift and with the introduction of SwiftNet and associated value-added services, the future of Swift is looking increasingly commercial. That he has been taking an increasingly international view adds to the broad overview.

No wonder, then, that many are speaking of him as the likely internal candidate to replace Swift chief executive Leonard Schrank, who will step down at the end of 2007.

For now, though, the task is to look at the immediate future and try to get some sense of the direction the industry is going in — and try to match the needs of individual players with that of the industry as a whole.

“This year’s Sibos is going to be about defining what appetite there is. Not only the institutions, but also national groups and vendors have been looking at what it means for their own businesses — what areas are in more need of transformation? Where are there bigger returns on investment?” he says.

In Campos’s view, there are a number of factors combining to create an environment where change can be worked to institutions’ advantage. “We are going to see a combination of areas in which there is change already imposed because of regulatory pressure or because of changes in approach,” he says. “For example in Europe, with the advent of SEPA and Target 2, there are areas of infrastructure and changing relationships that are going to have to be reviewed. Taking advantage of these changes that have to happen, banks are taking a broader look — since they have to do that, what else could they be doing in that area that makes the investment more than just a response? That also looks at the way in which they are positioning themselves and modifying their value proposition to customers. I think they will take the opportunity of these changes to look more broadly. There is a combination of the need to change and the opportunity to modify your portfolio and offer new and better services to customers.”

These changes aren’t just affecting banks, but the whole landscape, and Swift now has to learn to accommodate the voices of other players such as corporates and fund managers. “Those dialogues are happening much more, and not only privately but in open forum,” says Campos. “If you put all that together, then clearly the payments area — particularly the low value cash area — is going to be transformed as the corporates and the banks interact in an ACH environment — or outside through bilateral arrangements.”

This changing landscape means that Swift itself will have to undergo its own transformation, and its plans for doing so are beginning to take shape under its rolling five-year plan, Swift 2010.

“We are starting to formulate 2010. We’ve had a couple of good discussions with our board at a broad setting of aspirations level. But there is more to be done,” he says. A first draft of the document is expected by the end of this year, and then a final version will appear between the middle and fourth quarter of next year. Campos says that the extended timescale is in the nature of the beast. “It is a gestation process, because Swift being the co-operative that it is, that consultation process with the national groups and the individual customers is one that we treasure and we will not short cut that.”

Already, however, there are some glimpses of the role the organisation sees itself playing in the transformed future, and it is at a much more fundamental level than as a messaging network. “At a high level, I think that it is fair to say that the idea of the unit of Swift being a message is obsolete,” says Campos. “We really need to be concentrating on supporting transactions — as an end-to-end flow not only of data but of processing, of transaction services and of databases and external data provision.

“There are a number of elements that compose a transaction, so that broad look is the right approach. I’m not saying that Swift will do everything, but taking that high-level end-to-end perspective is going to result in us offering a much different set of products and services.”

This closer involvement is rooted in what Campos sees as Swift’s legacy. “We have to ensure that we move as an industry, not as individual players,” he says. “My fear is that tactical moves, to move all of the messages into files just because it’s a few cents cheaper, are going to create the situation where the value that Swift was created for 35 years ago will vanish. Those are fairly short-term cost-reduction advantages and we have a role to orchestrate that to ensure that we use the right protocols for the right things. Using files for payment instructions would be a transformational backward step.”

The downside of this is that several times in the consortium’s history it has run up against the industry and been castigated for its ambitions and its high-handedness in attempting to impose them on its own members. Campos’s solution to this is to balance the commercial aspects of its operations and its leadership role with a customer relationship offensive that will enmesh its plans closer to the customers.

“If you ask some of our customers and many industry opinion makers, they will tell you that Swift was perceived as arrogant, as having its own agenda and wanting to drive,” he says. “It’s not that Swift wants to move from passive to active, it’s that we want to listen to and engage our customers much more than ever before. That customer intimacy is important to us. All of the changes that I have done in the banking division in the past 12 months are geared towards that — we now have multifunctional teams out there in the regions engaging with the customers at every level of the organisation from the business managers to the technologists to the CIOs so that we can really have a deep, meaningful and rich engagement with our customers.”

Many of the changes he refers to have been taking place in the international operations of Swift, where it has much more ground to make up. Campos himself is recently returned from Asia, where he has been concentrating on beefing up local support.

“There is a significant recognition within Swift that although a lot of our business comes from Europe and North America, the world is a big place, and the same solution doesn’t apply everywhere,” he says. “In the same vein as getting closer to our customers, we need to move from being the foreign company trying to sell solutions for international transactions to becoming more part of the domestic fabric. For example, we’ve been 27 years in Hong Kong but we’re still seen as a foreign provider. Why is that? Because we all speak English, with all the documentation in English and we deal with international financial institutions. Clearly those things don’t position you very well in a domestic market, so we are investing in getting more local professionals involved, we want to be part of the different projects that are going on the region, and we are starting to see some of that happening.”

“We really need to move from being Swift in the different regions to being an Asian Swift and a European Swift and an American Swift: we have to be able to adapt our global portfolio to the local conditions in a much more obvious way. The customers need to be able to feel that we are reactive, not from HQ, but with the appropriate regional flavour.”

Campos points to an increased range of activities to support this thrust, Swift has organised more events in Asia in the past year than in the previous three combined. These include 12 business forums in various cities in Asia, with another six before the end of the year. Those are events organised “to engage the local community and talk about their issues and give them an outlook on what is happening elsewhere”, he says. “These are not just our plans for the future; this is what we are actually doing. And there is more to come — we are beefing up China, we are looking for a new head for our Tokyo office, and increasing the number of local executives. The same is also happening in America, where we have recently done five new important hires from the industry.”

All of which is intended to increase Swift’s contact with customers, he says. “We are really getting more resources closer to the customer, so that we can get a better image in terms of supporting their business but also so that we can be in listening mode to learn where to take the company, where to take the portfolio.”

At the end of the day, of course, Swift is also looking to be increasingly commercial with that portfolio: “With SwiftNet we have opened a lot of the limitations that were in the product set. We have a complete suite of protocols now that allows us to move into other areas. This transformation drive comes at a good time for us, because we are ready with the portfolio to engage.”

According to Campos, the trick is going to be keeping a balance between the commercial aspirations of Swift and its role as an industry consortium, and comes down to customer contact.

“We are a sales organisation,” he says, “but … I see a future where we would be rating the success of account managers not only by the revenue of the account but by the quality of the relationship — that we have the right customer intimacy that they feel that they know us, that they feel like they are driving us and feel that they have an influence on Swift, to erase the arrogance that we might have been accused of in the past. I like to think that we will get to the point where our customers think of Swift’s relationship management as the best in the business. I’d like to achieve that.”