Standardisation and automation in external asset manager relations thanks to EBICS

External asset managers (EAMs) offer their wealthy private customers or institutional customers such as pension funds and insurance companies a multitude of services (for example, tax and real estate consulting as well as trading and investment transactions). The customer accounts are usually held at one or more custodian banks. Interactions with the financial institutions are often neither standardised nor automated. Communication by mail, telephone, e-mail and sometimes even fax dominates everyday business.

Few big asset managers have a SWIFT connection and are using it for treasury and foreign currency transactions (message category 3), securities transactions (message category 5), precious metal transactions (message category 6) or cash management transactions (message category 9). Some have implemented proprietary system-to-system connections, for example via FTP, to exchange financial messages. In Switzerland we are currently observing a trend towards EBICS as an alternative connection type for these use cases.

During the PPI Petit Déjeuner in April 2019 in Lausanne, a representative of Credit Suisse presented the offer "Private swift Network (PsN)". It deals with the extension of the EBICS service scope in the sense that about 20 new EBICS order types (reports for download) based on the EAM use cases mentioned above are available. Thanks to their cooperation with leading software manufacturers of portfolio management systems (such as Allocare or Expersoft), Credit Suisse achieves a significantly higher level of standardisation and automation when interacting with their partners. In concrete terms, the SWIFT messages of the above message categories can now also be transferred via EBICS.

As the EBICS protocol is flexible with regard to the content transferred, Credit Suisse additionally offers other formats like CSV or XML for reporting on the transactions and assets, including the master data of the respective customer depositories. All players stand to profit from the new offer: asset managers can connect more financial institutions via EBICS at low cost and automate their processes, software manufacturers can effectively extend their functional scope, and financial institutions can boost their appeal for EAMs. Viewed across all parties and processes, the error rate decreases and the implementation speed increases through elimination of manual operations.

Swiss financial institutions that are currently implementing projects in this area are already planning the next steps of the EBICS offer extension. In addition to the reporting functions (EBICS download), the order functions (EBICS upload) shall also be offered in the future. Especially orders in the trading business (SWIFT message category 5) are well-suited for uploads via EBICS. Particularly stock exchange orders (like SWIFT MT502) shall be transmitted from the asset manager to the financial institution. In the same way as the known payment order interfaces, the stock exchange interfaces are connected on bank side. The use of an EDS is also conceivable in this context.

In conclusion:

The first financial institutions in Switzerland are extending their EBICS offer beyond the use cases of payments. The Credit Suisse offer for medium and larger asset managers paves the way for EBICS in the EAM customer market and will likely prompt others to follow suit. Software manufacturers of portfolio management systems are slowly but surely learning to understand the EBICS protocol and extending their connectivity options with this connection type. When it comes to formats and standards that may be transferred via EBICS in the future, there are no limits to the possibilities. It is safe to say that for a certain customer segment, EBICS presents a viable alternative to the communication via SWIFT even in domains outside of payments.

Carsten Miehling