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Best Practices

Uncovering the real – and ongoing – costs of bank connectivity: SWIFT/H2H Connectivity

FinLync | June 7, 2022


As market and supply chain challenges continue, companies are looking for not only better ways of doing business to improve company cash flow, forecasting capabilities and overall liquidity, but doing all of this with streamlined teams, higher turnaround demands and reduced — or no — capital investment.

Everything is on the table and every corporate system is in the crosshairs of economic review, even long-term solutions that have been a staple of many corporate treasuries.

Bank connectivity, because of its daily use, ongoing costs, and direct impact on cash flow, is one critical area being highly scrutinized these days –perhaps because there has never been a time when new, less costly options have been so plentiful and easily available.

So what is the true cost, including ongoing maintenance, for your bank connectivity?  And are there options to improve that cost?  While every organization may be different in how they assess bank connectivity costs, there are key items to consider that will help you determine if your current bank connectivity costs are worth the expense– or ripe for change to add value and reduce costs.

The reality behind the cost of bank connectivity solutions

There are a myriad of soft and hard cost factors that come into play when determining the cost of any system. For our purposes here, we’re focusing on the fees associated with bank connectivity solutions. Though some may argue that this is not inclusive enough to give a 100% accurate picture, the reality is it gives a clear enough view to help you decide whether or not your current bank connectivity channel is really your best – and most cost effective- solution.

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As the de facto standard-bearer of financial messaging, it’s no wonder that everyone in corporate finance is familiar with SWIFT. With connections to more than 11,000 financial institutions in over 200 countries worldwide, SWIFT averaged 42 million messages per day in the last year. And those messages, as part of its file-based system, carried the financial instructions for moving funds across borders.

So SWIFT, which does not manage accounts for people or banks, and doesn’t hold any third-party funds, is simply your financial messaging channel with your bank.

Once you’ve joined SWIFT, there are three types of fees that come into play to get a clear picture of what your ongoing costs will be:

  1. The costs paid to SWIFT to set-up and maintain connectivity
  2. The costs related to the messages and files exchanged over the SWIFT network
  3. Internal costs to maintain infrastructure and data mapping for new bank connections and formats along with changes to existing banks

The costs paid to SWIFT to set-up and maintain connectivity

Each SWIFT connectivity option comes with its own set of cost considerations:

  • Alliance Lite 2:
    • Onboarding cost and installation costs for hardware, software, integration
    • Requires a local installation of SWIFT software
    • Annual recurring fee based on volume

  • Alliance Lite 2 for Business Applications (L2BA):
    • Onboarding cost
    • Installation cost for hardware, software, integration
    • Annual recurring fee based on volume
    • This connectivity method is provided by a business application provider, who will likely charge a fee to maintain/support the infrastructure
  • On Premise Alliance Access:
    • Onboarding cost and installation costs for hardware, software, integration
    • Requires investment in internal infrastructure, resulting in a higher set-up and maintenance costs
    • Annual costs: typically 20-30% – based on software maintenance, support, volume, type of integrations
    • Internal support:  typically 0.25 to 1 full time employee will be required to support, operate, and monitor the infrastructure

  • SWIFT Service Bureau
    • Onboarding cost
    • Annual costs for maintenance, support
    • Annual recurring fee based on volume

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Messaging costs

SWIFT has ongoing per message and per file charges that can build up if you’re not careful. There are two main messaging channels in the SWIFT network:

FIN – FIN messaging is based on the SWIFT MT Standards that are used globally for various business segments ranging from cash management to trade finance flows. It enables corporates and financial institutions to exchange individual structured message formats and is most often used to send urgent or high value (MT101) payments to banks.

FileAct – FileAct allows for the exchange of MT messages and other kinds of messaging formats like ISO20022-based formats and is typically used for the exchange of bulk files or larger files containing several payment instructions are transmitted via the network.

Corporates are charged for payments sent via the SWIFT network, inbound reporting messages (such as bank statements) delivered over the SWIFT network will not incur a SWIFT charge. But be aware that banks may charge a processing fee and if you use a SWIFT service bureau, they may charge a delivery fee.

Internal IT Fees

IT departments face different costs depending upon what is needed to set up and maintain any new technology. For the initial setup, host-to-host connectivity channels have a very labor-intensive setup. The interfaces of host-to-host channels often come with an extra charge to get up and running, or with mandates requiring use of their proprietary system.

For those that decide to outsource host-to-host connectivity to a third party, additional time and money for purchasing and implementing the solution should be expected. Should you need changes made to your host-to-host connections, treasury teams are reliant on IT’s limited time and resourcing.

On a day-to-day basis, host-to-host connectivity requires a great deal of file management. Missing bank statements, payment confirmations and status updates are a headache that nobody wants to deal with, and fileservers need ongoing maintenance. 

Bank Fees

Some may say that you shouldn’t include bank fees when assessing the costs of host-to-host or SWIFT bank connectivity, but we beg to differ. Though all bank connectivity options will include bank fees, the number of banks involved in the process can significantly impact the total bank fee cost, particularly in cross-border payments. And the speed with which you can see bank fee charges, including how many banks a payment goes through to reach its final destination, gives you negotiating power with your banks.

When banks offer SWIFT connectivity services to corporates, they incur fees charged by SWIFT for the use of the SWIFT network. Most often, these fees are transferred by banks to their clients and incorporated into banks’ connectivity service fees charged to corporates. Since host-to-connectivity connectivity is a bilateral connectivity solution between banks and corporates, banks have more leeway to set their connectivity service fees without intermediary network charges to incorporate into their pricing policies.

Banks may also charge a one-time on-boarding fee via their SWIFT channel, so in addition to this, you’ll also have a recurring on-going service fee typically dependent upon the number of bank accounts and volume of messages.

Is there a different option to SWIFT and Host-to-Host bank connectivity?

Simply put, yes. Bank APIs are changing the landscape in what corporates can do to improve their bank connectivity -with a lighter “technology lift”, direct bank connections, richer data, stronger security and faster delivery of data for immediate decision making – and at a lower cost.

Bank APIs are today’s most secure form of technical communication between two parties. They leverage the latest and greatest in technology and enterprise security standards. The security is built into the channel and the data – since they’re one in the same – and includes multiple types of security like certificate exchange, user credentials and data encryption.  With bank API connections, there are no files — which means it’s secure, has a lightweight set-up and comes with little to no ongoing maintenance. And that means there are no fileservers that are vulnerable to security breaches and no way to intercept or compromise the data.

With that in mind, Bank APIs are altering the role of treasury in organizations to a more strategic function, by:

  • Changing the “push-pull” of staggered data synching typical with host-to-host and other third-party connections by creating a continuous information loop that translates data into action.
  • Increasing liquidity optimization benefits with real-time data, even when centralized mechanisms may already be in place like cash pools, in-house banks, or sweeps.
  • Significantly improving your treasury crisis-preparedness playbook to meet the challenges of a highly volatile market – as we have seen with the COVID 19 pandemic.
  • Providing your company with a competitive advantage to meet not only elevated user expectations but also by allowing you to hire and retain the talent needed for the treasury of tomorrow by using modern technologies like bank APIs.
  • Maximizing machine learning-enabled apps with enriched data flow from real-time data and bank APIs.
  • Making treasury more agile in adjusting to changes in the company’s business model and financial ecosystem with APIs.
  • Creating a robust data platform, based on ERP-embedded apps and bank APIs, that increases the speed and efficiency of treasury and other related activities, to focus on more value-creating work, such as business partnering and analytics.
  • Providing the office of the CFO with never-before available data like the status of a payment, detailed payment tracking, and bank fees – all in real-time. No more stale data or best guesses. No more waiting for an acknowledgement for a critical M&A payment.

Once your organization connects to bank APIs, you can leverage them for a number of things including:

  • Minimize risk of fraud, increase security through end-to-end encryption
  • Real-time available balances
  • Instant, end-to-end payment tracking just like tracking a package
  • Greater transparency of bank fees
  • Faster issue resolution: same day, automatic reconciliation, automated alerts for exceptions, machine learning-assisted cash application
  • Reduces your need for IT resources: no more broken connections to repair, no waiting on IT to correct message structures based on cryptic responses
  • Deeper integration by providing direct connectivity, eliminating the limitations of legacy technology by embedding incoming multi-bank data directly into your system of record.
  • Removes the barriers between the ERP and banks -Opens new doors for analysis, and data harmonization and reduces manual tasks allowing treasury to focus on its core work.



Host-to-host (H2H) and SWIFT have been the default channels for bank connectivity for decades. But technology has improved significantly and the use of multi-bank API connections is now a reality. Though bank APIs and API aggregators will not supplant legacy connectivity methods overnight, the future is clear: bank APIs are quickly becoming a core component of the finance organization’s modern technology architecture.