Leonard Schrank is the CEO of SWIFT, the financial industry-owned co-operative supplying secure and standardized messaging services 7,800 financial institutions in more than 200 countries. SWIFT's worldwide community includes banks, broker/dealers and investment managers, as well as their market infrastructures in payments, securities, treasury and trade.

This coming September, SWIFT will host its annual conference called Sibos in Copenhagen. We talk to Schrank about the upcoming gathering, the ongoing changes at Swift and his own legacy as he prepares to step down after 13 years at the helm.

Transformation is the theme of this year's Sibos conference and this year has also been a year of transformation at SWIFT. How has your community changed over the past year?

Last year's Sibos was a very important event. We have really got to the point now where numerous figures from our community are saying that we should use this SWIFT community to solve some deeper problems that are plaguing us in banking and securities, to really carve hundreds of millions if not billions of dollars of excess costs and waste due to the inefficiencies in the way we operate. Heidi Miller [the CEO of JPMorgan Transactional Banking] put a number on it, saying why can't we carve out 5% of the global IT operations costs in the next five years. The SWIFT bill is a small total of the total bill but SWIFT can impact so much more than just the Eur600 million we bill every year.

We are talking evolution not revolution here. A lot has been happening at both the industry level and at the SWIFT level. We have been successful for three reasons. Firstly it is because of our community. Every financial institution in the world in over two hundred countries is a member and that is absolutely priceless. We are also the most powerful standard setting body for back office, payments, trade, treasury and securities processing in the world. We also have the most secure and reliable messaging infrastructure to do all this. The community is saying lets harness all this to do more. And that is where transformation comes in. Transformation is aspiration. You don't just transform an industry from the bottom up. It has to be championed at the highest levels.

You've announced another series of price cuts this year, which should please the community.

Costs are important. The single most important thing I've done since being CEO is putting in place a price plan that recognizes the sensitivities of our membership. We used to have a "tariff" that went up every year. I realized that we had to take it the other way. Since I've been here, we have now dropped prices by up to 80%. The lower the prices the more messages are sent - we are up to ten million a day now. The more messages are sent the lower our unit costs due to our economies of scale. The lower our unit costs, the lower are our prices, and so on. It's a virtuous circle.

At last year's Sibos, Heidi Miller called for a wholesale change in the way the industry works, not just price cuts from SWIFT.

She's right. The focus should not be "just" on SWIFT's own prices but on the potential impact we can make on the entire cost structure of our community. There's real potential here.

Is there more acceptance of this need for change among the community?

It is easier said than done. That's why aspiration is key. Unless it is championed from the top and people keep the pressure on nothing is going to change. There is a lot of inertia in the existing banking organizations. Change is difficult, even if it is necessary.

Are you expecting this year's Sibos to be as seminal an event as last year's?

You can never predict. But it is entitled 'Transformation' and we have some very important speakers. SWIFT is more than a bank owned network, it is a network of banks and institutions. This is where they come together. Senior bankers used to go to the IMF and World Bank meetings to schmooze. Now they come to Sibos, because that is where the business is. Euroclear has even switched their Fall board meetings from the IMF meetings in Washington to the Sibos meeting.

I expect to keep the process going. There are a lot of things that have happened since last year's Sibos. Last year we were in the middle of the SWIFTNet migration onto and now that is 100% done: everyone has migrated. That in itself is a transformational thing. We have completely rebuilt our infrastructure and everyone is on itnow. Now we want to give everyone the benefits of the new infrastructure and the whole way we approach standards and solutions.

There are some very important themes with our new strategy that will take us from 2006 to 2010 that deal directly with this transformation. We will deliver the document in 2006 and in Sibos we will be dealing directly with this transformation.

What will that strategy be?

They key thing is this: we have a one-sentence vision for SWIFT. And today this is to be 'the global financial community's foremost messaging infrastructure, with the lowest risk and highest resilience' and that is fine and simple. As Einstein said, 'solutions should be as simple as possible, but not simpler'. Look how far we have come with our basic SWIFT message - financial institutions now send 10 million each day.

But now, we are thinking of changing the word 'messaging' with the words 'transaction management'. That's a very deep change, even though it is only two words. If we can add to the messaging and standards another service or two, to really deal with tracking transactions, think what happens.

These days you can track your package that is shipped from Hong Kong to New York by FedEx. If you think of a transaction, there is an initiation, a conclusion, a lot of support and reporting, and a lot of exceptions and investigations. If you think in those dimensions, all of a sudden, the payments, or trade, or securities are full of standards and rules all along that chain. But what additional services do we want to offer?

We already have a service called 'Copy' in FIN, where a bank can send a message from A to B and copy it to C. We thought it would be used internally for risk management, but instead it is used for standardized real time gross settlement systems. So imagine if we had a service called 'Track', where we can track the status of a transaction. We have to consult our membership. We have to design it simply and properly. But the impact could be quite significant.

Is your scalability due to the presence of these standards?

I would turn it around. Everything SWIFT does, scales. The way we are designing solutions for banking and securities, and everything that will run on SWIFTNet, all will scale. The more people that use us, the lower we can make our costs. This is due to the standards we use today.

If we add a few more services onto that, such as tracking or data translation or data enrichment, then we have a whole new world, where we can reach right into the heart of our member organizations and help them replace their old systems with SWIFTNet. This is where the real transformations and cost savings start.

What are your other strategies for growth?

We have four reach strategies. Firstly it is geographic reach into Brazil, Russia, and China. In China, we have a new Beijing senior manager and are making significant investments. David Wong is running it and we have hired five graduates who we are training in our offices in Europe and the USA. We expect several more waves of new Beijing hires. . Secondly we have institutional reach, which means getting smaller users on our system through member concentrators. Corporate reach is where we have set up the corporate access group where a dozen of our top global banks that deal with the corporate to bank treasury space try to do transformation there. Finally we have CIO reach where we try to go deep into the operation and try to talk to the operations people, not just the payments and secutitiespeople. To be successful we will have to work with the technology partners to transform banks' back office systems to be compatible with SWIFTNet. So it is quite a strategy for growth over the next five years. It's a big vision, but we are hitching our wagon to a star.

Finally there are some new faces at SWIFT and word has it that you are stepping down soon. Can you tell me about that?

We just announced Jim Donovan as our new securities Executive who succeeds Francis Remacle, who is retiring at the end of this year. Jim comes to us after a distinguished securities career at Citibank and other institutions. We are also bringing on board other new commercial and marketing managers. SWIFT has real momentum now. As for myself, I joined SWIFT in 1992, and I originally signed up for five years. The board takes succession and governance very seriously and so we have mutually agreed on one final contract extension. We signed this in December 2004 and its term is three years. So I will step down at the end of 2007 at which time I would have been CEO 15 years and SWIFT's longest serving CEO. We will announce a successor sometime that year and I'm looking forward to passing the torch at that time. It's been quite a run, I must say. Since I've been at SWIFT, we've cut prices by 80%, traffic is five times the volume it was, we have opened up the securities side of the business which is now one third of our business, market infrastructures have gone from 2 to 100 and now account for 30% of our business, we have completely rebuilt our infrastructure and resilience is continuously improving. We're just "warming up"...