MT 799 - preliminary analysis

- understanding the why, what and how of category 7 free format messages

Version 3
20081113

Table of contents

SITUATION ANALYSIS.................................................................................. 3

MT 799 ANALYSIS DETAILED FINDINGS................................................. 3

KEY MESSAGES FROM THE ANALYSIS .................................................... 8

CONCLUSIONS .............................................................................................. 9

Copyright S.W.I.F.T. SCRL (SWIFT) 2008.

Although SWIFT uses its best endeavours to ensure accuracy of the contents, SWIFT assumes no
responsibility for any inadvertent error or omission that may appear in this document.
.

MT 799 Analysis

SITUATION ANALYSIS
A Context
At the October 2007 meeting of the Trade Services Advisory Group (advisory group to the SWIFT
Board) SWIFT presented the results of a community consultation on SWIFT traditional trade
instruments. The conclusions of the survey were:
(1) MT trade standards are out of line with the business resulting in high usage of MT 799s,
(2) Corporates and banks want C2B/B2C trade standards to reduce costs via automation,
(3) The industry believes that XML is a given and expects to move to XML in time,
(4) A trade vision, including SWIFTs position on future standards developments is needed.
The TSAG requested SWIFT to undertake further analysis to support the development of solutions
to address points (1) and (2) above. This document details the findings of an analysis seeking to
understand the why, what and how of category 7 free format messages (MT 799).
B MT 799 global usage
In 2007, on a global level, MT 799s sent represented just under 37% (36.5%) of the total volume of
category 7 messages. At year to date October 2008 that percentage has risen by over one percent,
now 38% (37.84%). The MT 799 is the most used message in the category.
C MT 799 analysis
SWIFT has analysed the results received from 18 banks, This relatively small sample means that
the results must be taken as indicative only. Based in the Americas, Asia-Pacific and Europe,
Middle East and Africa, the banks surveyed range from global trade banks through regional trade
players to smaller country-based trade banks. 2007 statistics show their sending percentages from
18% to 84%, their receiving rates from 24% to 74%. Two-thirds of the banks have higher sending
rates than receiving rates.
D Next Steps
* undertaking an in-depth review of the content of several banks MT 799 messages this will be
arranged on an individual basis with the banks concerned and will run concurrently with the trade
market review.
* Trade market review - modelling business flows to identify gaps in the SWIFT offering and
assessing the need for new/enhanced standards. The results from this MT 799 analysis will feed
into the study.

MT 799 ANALYSIS DETAILED FINDINGS

SWIFT asked for the banks own assessment of their MT 799 usage - by region, size of
correspondent, business area, by message grouping (business, logistical, administrative) and by
message replacement. The analysis then asked for the respondents view of the advantages of
using a structured message as opposed to a free format message, and how the use of structured
messages could be encouraged. Finally, the banks were requested to estimate change in usage of
the MT 799 post Standards Release 2008 when the length of the message increases from 2,000
characters to 10,000 characters.

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2.1 MT 799 USAGE

A - by region, size of correspondent, business area
The first part of the survey looked into the business conducted using MT 799s. Four out of the 18
all global trade banks have analysed which correspondents send them MT 799s, 14 have not.
Despite this low figure, over half the banks have a good idea of where they were sending MT 799s
to and where they receive them from. By region, Asia comes at the top of the list, both for sending
and receiving, one or two banks mention the Middle East, North America, Africa, and Europe. Only
three banks had looked at banks sending/receiving MT 799s by size two mention major
correspondents, one bank all correspondents. By business area MT 799s are sent instead of
SWIFT structured messages (e.g. for Documentary Credits), and related queries and tracers, but in
one case they are sent to carry Conditional Payment Orders, a regulatory issue in the country
concerned. On the receiving side one bank uses MT 799s for messages relating to global bank
trade deals.
When asked if the exchange of MT 799s would be discussed by the correspondent banking
department only one bank said it would be. One (different) bank exchanges MT 799s with its
corporate customers.
B - by message grouping
The first Trade Survey (November 2007) ascertained that overall the usage of MT 799s messages
falls into 3 groups:
administrative tracers, corrections, clarifications, disputes and discrepancies, or where there is
lack of clarity on which message to use,
logistical where the current message is too short, where the allowed number of extensions has
been exhausted, where mapping is difficult, or where mandatory field content is not available and
the message is urgent, or
business where the structured message no longer fits the business, or is too difficult to use.
This analysis asked the banks to try and split their MT 799s into these categories.
Administrative
14 of the banks surveyed state that 50% or more of their MT 799s are sent for administrative
reasons, 8 banks send 80% or over. Current high volumes of this MT 799 usage (up to 30,000 per
month) create demands for SWIFT to add structured administrative messages to the cat 7 set. Low
global usage of the common group messages in category 7 (MT 79x) queries, answers etc seems to indicate that they are not known, or not available in an institutions system, or are
inadequate. This situation is well known in other message categories it has been estimated that
the SWIFT Exceptions and Investigations solution (where an expanded set of administrative
messages specific to payments has been developed) could automate up to 60% of payments
enquiries.
Overall the picture of received messages looks very similar to that of the sent. However, of the
banks reporting actual sent/received figures, only two showed similar volumes for each. Some
banks sent 3 times the number they received, others, half. Average volumes per bank for these
messages again rose to 30,000 per month, but for a different bank from the sending side. There
was no correlation between the percentages of MT 799s for administrative purposes and the size
of bank either for sending or receiving.
Logistical
This group shows the smallest volumes of MT 799s, with maximum 3,300 messages per month on
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average being sent. This is quite surprising as a key reason stated for using the MT 799 is often
that the structured message is too short. The percentages are even lower overall on the receiving
side, but top volumes are higher, going up to 7,200 messages on a monthly basis. A substantial
number of banks say they do not send or receive logistical MT 799s at all.
With Standards Release 2008 several category 7 messages (including the MT 799) will increase in
length from 2,000 to 10,000 characters: the MT 707 (Amendment to a Documentary Credit), MT 734
(Advice of Refusal) and MT 750 (Advice of Discrepancy). Given that several banks stated that the
MT 799 is used frequently where the MT 707 is too short, one would expect fewer MT 799s to be
used for this purpose post SR 2008.
Business i.e. as an alternative to an existing structured message
For a majority of banks MT 799s relating to business represent up to 20% of their total MT 799
usage. Half the banks surveyed state that MT 799s are sent in the areas of Guarantees, one uses
the message for LOIs (Letters of Indemnity). Other areas (apart from L/Cs and Standby L/Cs) with
substantial volumes were Collections (over 30,000 per month in one case), Reimbursements, and
Conditional Payment Orders. The use of the MT 799 appears to be bilateral - Guarantee
messages being received by the same banks that send them. One bank receives MT 799s for
LOIs. Collections are not mentioned on the receiving side.
C - by message type replacement
The banks were asked about specific message types where it was known that MT 799s were used
in lieu. Answers come in three areas:
1 Message types - MTs 700, 701, 707, 730, 756, 76x, 768
2 Message purpose - tracers, clarifications, discrepancies, charges claims, assignment notices,
chaser messages, and refinancing interest details
3 Message format issues -overall where the SWIFT free text field only allows for 4*35 (a maximum
of four lines of each maximum 35 SWIFT allowed characters), and continuations to message types
which are currently too short (eg the MT 707).
To summarise, however banks analyse their MT 799s, the results are similar. Overall MT 799s are
sent where either a current structured SWIFT business message is not adequate, for whatever
reason, or where administration around the business is necessary.

2.2 USING STRUCTURED MESSAGES WHAT DIFFERENCE DOES IT MAKE?

SWIFT asked for feedback on problems experienced by banks when sending/receiving MT 799s.
How could using structured messages instead of free format have a positive impact on a daily
basis; how could the banks and SWIFT encourage the use of structured messages.
A - problems caused by the use of MT 799s
With such a high level of MT 799 usage overall it is essential for SWIFT to know whether using MT
799s actually causes processing problems at the bank. Overall it seems not. On the sending side
10 banks simply said no - using MT 799s does not cause problems. Problems cited by other
banks in the survey are: processing delays, messages being sent without sufficient authorisation
since there are no fields for currency and amounts, and staff having to decide how to split
information between MT 799s.

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Half the banks surveyed do not consider MT 799s to cause problems on the receiving side. Those
institutions experiencing problems cited increased levels of manual registration, and information not
mapping into relevant fields in the system, resulting in staff needing to type it in manually. In
addition banks experienced less effective prioritising by message type, and the need for additional
workarounds.
Very few institutions are taking any steps to resolve problems they have one mentioned that it
was reinforcing internal regulations regarding sending MT 799s, another that regular correspondent
senders of MT 799s (where there exists a structured message) are contacted as appropriate. The
impression the banks give is that use of the MT 799 is not sufficiently problematic to justify
investment in changing current practice.
B - how using structured messages can make a difference on a daily basis
As seen below, easier routing is the major difference the use of structured messages instead of MT
799s would make in the trade department. An incoming MT 799 may be destined for anywhere in
the trade area: L/Cs, Standbys, or Guarantees. This lack of routing data is inconvenient, and slows
down processing firstly because (part of) the message has to be read in order for it to be routed to
the right team, and secondly if the message has to be rerouted from one area to another. These
aspects, together with fewer errors, faster response time and improved STP are all interlinked.
Fig 1 - How structured messages make a difference on a daily basis

Improved STP
Faster response time

Fewer errors
Faster processing

Easier routing

In addition one bank commented that with higher levels of automation costs would be reduced. Other
comments indicated the importance of the interaction between the IT and business areas SWIFT
message capability and the institutions own IT functionality. One bank said it saw no need for more
structured messages.
Banks consider that faster processing would have the most positive impact on their operations.
Clearly speed is key to the business. With UCP 600, the timeframe for determining if the documents
are compliant has been reduced from 7 to 5 days, and this may put extra pressure on the trade
teams. One bank commented that the most positive impact would come from improved mapping
functionality.

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D - encouraging the use of structured messages

As can be seen in the chart below, staff training, greater awareness and clearer/stricter procedures for
using the messages on the one hand, and availability of structured messages in the system and better
back office integration on the other, point to the strong interaction between the business and IT areas.
One bank specifically mentioned that it needed IT enhancements in order to upload information into
formatted messages.
Fig 2 What could you do to encourage the use of structured messages?

Other
Better b/o integration
Greater awareness
Procedures for structured msgs
Availability of structured messages
Staff training

When asked what SWIFT should do to encourage the usage of structured messages, almost every
bank surveyed had a suggestion. The principal demands were for SWIFT to:
- Clarify the usage of the current structured messages; ensure they meet the needs of users
- Check that all users are aware of, and currently use the available messages
- Add structured messages where needed, develop them according to the nature of the business
- Make the message standards easily identifiable and available on swift.com
- Make structured messages flexible and easy to use, and
- Increase training for bank staff.
The overall feeling was that SWIFT can certainly make a difference.

2.3 GOING FORWARD - USAGE OF THE MT 799 AFTER NOVEMBER 15 (SR 2008)
Category 7 message capacity has often been an issue in the past - where trade is concerned banks
traditionally have needed to exchange information that is often lengthy. With Standards Release 2008
several category 7 messages increase in length. How will the move to 10,000 characters affect MT
799 usage? The general view is that the extra length will increase the use of the message. As seen in
the charts below half the banks surveyed thought that MT 799 usage would definitely increase within
their institutions, all banks bar one think that usage globally will increase. However, SWIFT did not ask
whether the usage of the other messages which will increase in length (MT 707, MT 734, MT 750) will
increase. If it does it will affect MT 799 usage, albeit in a small way.

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With Standards Release 2008 the MT 799 will move from 2,000 to 10,000 characters. In your opinion
will this increase its use?
Fig 3 within your institution

Fig 4 ...globally

Don't know
28%

Don't know
17%

Don't know
28%

Yes
50%

No
6%

Yes
66%

No
33%

KEY MESSAGES FROM THE ANALYSIS

The results of the analysis convey several messages:
(1) Banks on the whole see many advantages in using the MT 799 and predict that its usage will grow
with increased message length. They are in general unconcerned about high (SWIFTs view) usage
levels and do not discuss this topic with correspondents.
(2) The MT 799 is frequently used even where there is a structured message available. The structured
messages themselves are currently inadequate, and need to be improved. Several comments on the
need for back office integration indicate that once new messages have been developed they must be
good enough for banks to invest fully in their potential investing internally in changes to their back
office systems, in staff training and procedures, and externally in correspondent relationships. When
asked which business area, where MT 799s are currently used, should be the focus for SWIFT
standardised messaging, answers were, in priority order:
A Letters of Credit and Guarantees

B Standby Letters of Credit

C Payment Orders (Conditional/Documentary)

D Reimbursements

(3) Banks recognise that structured messages which meet business needs have a key role to play in
improving trade operations overall, in speeding up processing and creating greater efficiencies.
(4) The MT 799 is used heavily for administrative messages that are needed for business to run
smoothly (queries, tracers, etc). The current 79x messages are underused. There seems to be a case
for a common group set of messages that is specific to the trade business, perhaps along the lines of
the Exceptions and Investigations messages.
(5) In some countries regulation forces specific communication for the trade business which can
currently only be taken care of using a free format message. SWIFT needs to evaluate whether this is
an area where it can add value.

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CONCLUSIONS
The analysis showed that is no substantial difference between the views of larger and smaller trade
banks, between those working on a global scale and those working on a more regional level. Thus even
if the sample of 18 banks is small, the results can be taken as indicative.
Despite very positive comments about the difference usage of a structured message would make to
everyday operations, it is clear that banks see great advantages in using the MT 799. You can create
the message you want, and it can be used (theoretically) for almost anything sum up the benefits very
well. Free text, long text, ease of use due to lack of structure, free from message length restriction
(in fact field length rather than message length) were other representative comments. The fact that it is
an authenticated message is clearly important, ie an MT 799, not an MT 999. On the receiving side, an
extra benefit cited was the message needs to be read, and there is less risk of information being
missed. To summarise, flexibility and ease of use are the areas where the MT 799 scores high.
Given the lack of stated problems when using the MT 799, together with the prediction for increased
usage post November 15, it seems that the free format message is here to stay. The challenge for
SWIFT is to meet customer needs by developing better structured messages which respond to the
needs of today and tomorrows trade business. There are areas of business such as LOIs and
Conditional Payment Orders which are not catered for at all in the current category 7 set. SWIFT must
help customers improve their speed of operations, create competitive edge (by allowing rapid response
and reduced costs through better automation) and above all help them serve their trade customers
better with a progressive service offering. Free format messages will always be needed, but once better
structured messages are in place SWIFT and the banks will need to communicate these to everyone
using them, so that free format usage becomes the exception rather than the rule.

*****

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