Post on 01-May-2018
transcript
The Emerging Payments Landscape
SEMINARIO – CONVEGNOMarjan Delatinne , Business Director, SWIFT
February 2016
Agenda
• The emerging payments landscape • Real time payment trends and market solutions • Correspondent banking competitive landscape• Overview of the global payments innovation initiative (gpii)
Background
Emerginglandscape
High growth of mobile and Internet technology
Ability to do business on‐line,anywhere, anytime
High customer expectations
Set by m‐ and e‐commerce ‐must be simple, immediate, certain with cost transparency
Competition from agile new entrants
New business propositions and improved customer experience, not hindered by existing legacy
Impact of increased regulation
• Consumer protection• Financial inclusion• Transparency• Financial crime compliance• Credit card interchange fee caps• Regional harmonization
Emergence of new technologies
New technologies, such as block‐chain / distributed ledgers, will facilitate the implementation of
new payment systems
Threat from cybercrime
Threat is significant and growing ‐banks are having to strengthen
their security provisions
The new reality of payments has an impact on banks
Real time market trends
RT-RPS CharacteristicsKey features to be supported by an instant payment system
24x7: payments can be sent and received all times of the day, every day of the year
24 x 7 Instantaneous Irrevocability Certainty
Instantaneous*: good funds must be available on the beneficiary’s account in, typically, less than a minute
Irrevocability: once payments are processed, they can’t be recalled
Certainty: payments sent to a beneficiary bank are individually explicitly confirmed (to both payer and payee) or rejected
*The term “Instant Payments” is increasingly used to refer to retail real-time payments
RFP for Eurozone system to be live by 2018
French domestic initiative
Denmark domestic initiative
Spanish domestic initiative
Acquisitionplanned
UK domestic initiative
Canadian payment modernisation
US Faster Payments Task Force and a US Secure Payments Task Force
US domestic initiative
US domestic initiative
Japanese domestic initiative
Singapore domestic initiative
Australian domestic initiative
RT-RPS BackgroundRecent Market developments
Need for at least one solution for the Eurozone according to ERPB
Defining SEPA SCT Inst scheme on request of ERPB
Trend in real time payments is having a profound impact on the payments ecosystem
NETS
Focus in EuropeWhat is their stake in the discussion
ERPBEuro RetailPaymentsBoard
EPCEuropeanPaymentsCouncil
ECBEuropean
Central Bank
VocaLink
SIA
EACHAEuropean
Association ofClearingHouses EBA
Euro BankingAssociation
STET
Equens
ATOSWorldlineIBM
Redsys
IberPay
ICBPI
SWIFT Whitepaper for Real-Time Retail Payments Systems
The Global Adoption of Real-Time Retail Payments Systems
April 2015
Guidelines for the next generation of Real-Time Retail Payments Systems
July 2015
Correspondent banking challenges
The traditional correspondent banking model for cross-borderpayments is under acute pressure
End customers increasingly demanding
Domestic payments going real-time
Network rationalization
Regulatory intensity and increasing costs
Enhanced value proposition
Disintermediation
Customers and regulators push for better payments service
Banks rationalize their correspondent banking networks
Digital innovators offer new disruptive solutions
A
B
C
Correspondent banking disintermediated at origination
Local bank Local bank
PSP PSP
ACH ACH
GTB GTB
End customer (retail, SME, corp)
End customer (retail, SME, corp)
Correspondent Banking
Cor
resp
onde
nt B
anki
ng d
isin
term
edia
tion
Transfer Agent
Transfer Agent
*Icons are representative example of each model
Front Office
BackOffice
New solutions outperform correspondent banking on all dimensions except on security and inclusivity
54321
4
2
2
5
1
1
54321
4
4
4
5
5
5
54321
4
5
5
4
5
4
54321
3
2
3
3
3
4
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3
3
5
1
5
5
Global banks
Remittance banks
Competitive price
Security & compliance
Openness & inclusivity
Convenience & ubiquity
Transparency & predictability
Speed
Dimensions
Better than average across new solutions
Worse than average across new solutions
“1” is lowest, “5” is best score
Disruption is creeping up from C2C to SME and B2B, where mostof the banks’ transaction revenues are
1 Excluding FI to FI flows, 20132 Currently in the B2B/B2C/SME space but actively pushing towards entering into the B2B corporate space (e.g., Western Union Global Pay app)1 Excluding FI to FI flows, 2013
B2B Corporate
B2B/B2CSME
C2CCon-sumer C2C 40
C2B 15
B2C 15
B2B 235
Revenues1
USD billions Banks share Percent
70%
60%
>95%
95%
Disruption in cross-border is creeping up from C2C to SME and B2B … where most of the banks’ transaction revenues are
2
Cross-border payments revenues captured by banks; USD billions“Loss of substantial value in the new world”“Yesterday’s world” “Protect your core and capture new opportunities ”
Growth, %xx%
-150bn+ 40-120bn
ESTIMATE
128 120
30 250
400
272
-38%+20-50%
20-40
Revenue share retention
10-30
2018 if banks don’t act
Revenue share loss
+47%
2018 potential
290-370
New volumes
10-50
New revenues
Margin erosion
Yesterday’s 2018
Yesterday’s growth
2013
Banks should act now, to mitigate the loss of substantial value and to capture new opportunities
Source: McKinsey Global Payments Map
Global Payments innovation initiatives(gpii)
Objective: deliver a better customer payment experience
“Before”Traditional correspondent banking
“After”Global payments innovation initiative
1. Slow, can take multiple days
2. Expensive, multiple deducts
3. Secure and compliant
4. No transparency and predictability on cost and time
5. Convenient and ubiquitous
6. Open and inclusive (global reach)
1. Fast(er) (start with “same day”)
2. Higher efficiency & less intermediaries
3. Secure and compliant
4. Transparent and predictable, with payments tracking
5. Convenient and ubiquitous
6. Open and inclusive (global reach)
Fix key pain points first
Note regarding prices: it will be at sole discretion of each gpii member to decide the pricing strategy vis-à-vis its customers, including other financial institutions
Global payments innovation initiative (gpii)
Global payments innovation initiative (gpii)
Global reachprovided by banks connected
to domestic payments systems
Set of multilateral SLAswith customer at centre
of value proposition
Smart collaboration(e.g. enhanced compliance practices,
optimised intraday liquidity flows)
Embrace innovation(e.g. peer-to-peer messaging,
real time settlement mechanism)
Global payments innovation initiative (gpii)
Bank access channelsDomestic payment systems
SWIFT
Bank access channelsDomestic payment systems
SWIFT
Existing SWIFT messaging
Bank access channelsSWIFT for corporates
Bank access channelsSWIFT for corporates
Accessible by any bank
Differentiate vsnon-gpii banks
Still reach non-gpii banks
Reach any bank
Operational qualityOpen model
Business rule Customer experience
Payments with same day use of funds
• Cross-border payments will appear in the seller’s account the same day the transaction is processed
Transparency and predictability of fees
• There will be full transparency of the cost structure, with no hidden fees. The amount transferred to the seller’s account will be known and be reconciled smoothly
End-to-end tracking of payments
• Banks will send back a confirmation to the buyer that the seller’s account has been credited, leading to less friction between buyers and sellers
Transfer of rich payment information
• Extended remittance information will be transferred unaltered to the receiver, facilitating reconciliation of payments and invoices (initially 140 characters)
Gpii SLA dramatically improves business-to-business cross-border payments experience
The new service will help corporates grow their international business, improve supplier relationships, and achieve greater treasury efficiencies
1
3
4
2
Financial, e-commerce, fintech community
Domestic payments systems
Proactively embrace innovation, along a strategic roadmap
▪ Pragmatic approach, keep customer at center
▪ Time to market is critical: use existing platform + overlay with new business practice
▪ Proactively explore and adopt new innovative technologies (payments status tracking, real time settlement using block chain) along roadmap
▪ 3 areas of innovation: adopt inside gpii+ foster around gpii + leverage innovation in domestic systems
▪ Dedicated engagement, using multiple vehicles: Innotribe, bank labs, industry challenges, FinTech community…
Payment service providers
E-commerce platforms, social networks
3rd party banks
Domestic payments system
Real time payment system
gpiiProactively explore and adopt new innovative
technologies along a roadmap
Examples
Real time payments status tracking
Peer-to-peer messaging
Real time settlement using blockchain
…
API
Adopt innovation inside gpii
Foster innovation around gpii
Leverage innovation in domestic
systems
1. ABN AMRO Bank2. Australia and New Zealand Banking Group3. Banco Bilbao Vizcaya Argentaria4. Bank of America Merrill Lynch5. Bank of China6. Bank of New York Mellon7. Bank of Tokyo-Mitsubishi UFJ8. Natixis9. Banco Santander10. Barclays11. BNP Paribas12. Citibank13. Commerzbank14. Credit Suisse15. Danske Bank
16. DBS Bank17. Deutsche Bank18. Ecobank19. FirstRand Bank20. HSBC21. Industrial and Commercial Bank of China22. ING Bank23. Intesa Sanpaolo24. JPMorgan Chase25. KBC Bank26. KEB Hana Bank27. Lloyds Banking Group28. Maybank29. Mizuho Bank30. National Australia Bank
31. Nordea Bank32. Oversea-Chinese Banking Corporation33. Raiffeisen Bank International34. RBC Royal Bank35. Royal Bank of Scotland36. Sberbank37. Skandinaviska Enskilda Banken38. Société Générale39. Standard Bank40. Standard Chartered41. Sumitomo Mitsui Banking Corporation42. TD Bank43. UniCredit44. UBS45. United Overseas Bank 46. Wells Fargo
46 leading banks have signed up to SWIFT’s global payments innovation initiative
Banks can join the initiative at any time in 2016
SWIFT Compliance RoadmapStatus update
SEMINARIO – CONVEGNO, BolognaBen Zaug, Head of Compliance Solutions, SWIFT
February 2016
The SWIFT Financial Crime Compliance Roadmap
Standards
Data repositories
Traffic analysis
Quality assurance
Processing services
Sanctions KYC AML
Sanctions list management service
KYC Registry
Compliance Analytics
Sanctions Testing(testing / tuning of transaction & client systems) AML testing & tuning
Payment Data Quality (FATF recommendation)
Client/Name screening
Sanctions Screening Traffic Restriction (RMA)
LiveMid 20162016/2017Exploring
Sanctions Screening: SWIFT’s hosted screening service
Challenges of small institutionsChallenges of small institutions
Regulatory scrutiny and enforcementof sanctions policies is increasing
Increasing pressure from correspondents to be compliant
Available screening solutions complex and costly to maintain
Increasing challenges for low-volume financial institutions
SWIFT providesSWIFT provides
• Screening engine & user interface• Sanctions List update service with
enhancements• No additional footprint• Centrally hosted and operated by SWIFT• Real time• Simple to configure and use
• Screening engine & user interface• Sanctions List update service with
enhancements• No additional footprint• Centrally hosted and operated by SWIFT• Real time• Simple to configure and use
A fully managed service to screen all transactionsA fully managed service to screen all transactions
Your institution
• Screening engine & user interface• Centrally hosted and operated by SWIFT• No local software installation & integration• Real-time• Sanctions List update service
• Screening engine & user interface• Centrally hosted and operated by SWIFT• No local software installation & integration• Real-time• Sanctions List update service
Sanctions screening over SWIFT
Your correspondents
Sanctions Testing: Overview
29
Automate • Repeat • Compare • Monitor
Definetest objective
Downloadtest files
Processtest files
Uploadhit results
Viewtest results
Formats
Settings
Lists
Exact match testing - evaluates the filters capabilities to match sanctioned names as they appear on the tested sanctions lists.
Risk information match testing - evaluates the filters capabilities to match additional risk information such as BICs and country names.
Fuzzy match testing - evaluates the filters capability to match variants of sanctioned names.
Sanctions Testing: Fuzzy Matching by Derivation
Chart shows filter effectiveness across different fuzzy derivations
• Enterprise risk assessment
• Correspondent risk assessment
• Alignment with risk policies
Risk Assessment
• Compare anticipatory behaviour against country standards
• Periodic reviews to ensure activity is in line with anticipated risk
• Event driven reviews • Retrospective reviews
Customer Due Diligence
• FIU investigations• Country visits • Correspondent
reviews
Investigations and visits
Transaction monitoring
• Pre-calculatedmetrics
• Key Performance / Risk Indicators
Metrics and dashboarding
• Volume reconciliation • Scenario optimisation• System tuning
Compliance Analytics will bring value to…
Compliance Analytics: Overview
Compare relative distribution of transactions by value range
Track value range evolution over time
Spot anomalies in correspondent behaviour
Monitor hidden payment flows & nested activityIdentify countries of origin and destination, and which institutions are involved
Track RMA status evolution over time
• Geographic distribution of RMAs
Monitor correspondent relationships
• RMA relationships in high-risk countries
InvestigationQuality breach identification
Payment Data Quality – Responding to regulatory demands
• Provide assurance that expected payments’ data is present
• Apply one set of commonly accepted rules
• Institution can tune rules based on risk appetite and jurisdiction
• Provide neutral post fact third party reporting
• Possibility to opt into a peer comparison scheme
• Measure improvements via trend analysis
• Alert on unusual trends or behaviour (e.g. good quality gone bad, or systematic bad behaviour)
TestingMeeting regulatory
demands
Monitoring Continuous controls
with
• Identify offenders – By branch – By correspondent – By rule – By risk classification (country,
correspondent)– By currency
• Identify most broken rules– By branch– By correspondent
with
Payment Data Quality – SWIFT offering
• MT103, MT202COV, MT205COV
• Inbound and outbound flows • All entities belonging to the
financial group
Common set of rules managed centrally by SWIFT with input from the community • Shared dummy list of commonly used
not acceptable entries• Shared white list of commonly accepted
entries - synonyms• Rules applied in the flow - No
extraction/storage of fields 50/59 • All rules applied to 50/59 – Filter results
via the reporting tool
• Management information, trends, data mining, data visualisation, basic alerting
• Weekly or monthly reports• Consolidated group level, drill down to
BIC11 • Consolidated rule types, drill down to sub
rule type• Field 20 to trace back transactions• FATF country risk classification to filter
results
Scope Rules Reporting
www.swift.com
SWIFT UGM Athens - 15th December 2015 35