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ASEAN Payment Market Trends
SWIFT Business Forum, Singapore
Qinwen Xiao
Payments Market, Asia Pacific, SWIFT
July 9th, 2014
Singapore Business Forum 2014
Rapid transformation in payment system development
• Fighting Financial Crime & SWIFT Compliance Services roadmap• CPSS-IOSCO, Sanctions, FinInform, Intraday liquidity
• The trend to real-time payments
• RMB internationalisation
• ASEAN Economic Community (AEC) 2015• ISO 20022 and market practice
• Reliability of systemically important payment systems
Regulatory Developments
Resiliency
Renminbi
Regionalisation
Real-time innovation
Singapore Business Forum 2014
The Macro Context - ASEAN growth is high and tightly coupled to China
2006 2007 2008 2009 2010 2011 2012 20130%
20%
40%
60%
80%
100%
120%
140%
ASEAN
CN
Rest of APAC
SWIFT Total
CARG
ASEAN 9.5%China 10.2%Rest of APAC 7.3%SWIFT Total 6.65
Customer Payments: MT 103 sent in volumes (2006 – 2013)
Regionalization
-2%
4%
Volume Value
Within ASEAN Countries Payments Sent YOY ChangeCustomer initiated (MT103) and institutional payments (MT202 excluding cov), excl. central banks
1%
5%
Volume Value
Series1-1%
-6%
Volume Value
10%
3%
Volume Value
Series1
7%
-3%Volume Value
Series1
3%
-12%
Volume Value
Series1
-2%
-1%
Volume Value
Series1
-16%
29%
Volume Value
37%
27%
Volume Value
132%
12%
Volume Value
Source: Watch growth in 2013 compared to 2012 in volume and in valueSingapore Business Forum 2014
Regionalization
Singapore Business Forum 2014
Regionalisation - Developments in the Financial Infrastructure will facilitate economic activity
Common Standards
Interoperability
Common Platform
Single system and process
Central system and currency
Regionalization
Singapore Business Forum 2014
Towards AEC 2015: the role of standards and a common community
6
AU
Zengin, JP
CNAPS2, CNIN
Low-value
High-value
CIPS, CN
BOJNet, JP
Live
NZ
TH
PG
BN
SG
MA
Live
ISO 20022 movers Payment systems
ASEAN:• Thailand• Singapore• Philippines• Brunei (2014)• Malaysia (2015)
These systems use SWIFT today:
Asia Pacific:• Australia• New Zealand• Taiwan• Macao• Hong Kong• Fiji• Sri Lanka• Papua New Guinea• India (end 2014)
Live
Regionalization
Singapore Business Forum 2014
Real Time - ASEAN Countries have opportunities to “Leap Frog” their payment infrastructures and work across borders
Deferred Net Settlement (DNS)
Real time Gross Settlement
(RTGS)
ACH(Automated
Clearing House)
Real time Low Value
Batches Single Payments
HighValue
LowValue
Time Criticality
Sizeof
paymentHybrids
Mu
ltip
le b
atch
es
Real-Time
Singapore Business Forum 2014
Renminbi
Significant evolvement in RMB offshore clearing
Hong Kongthe leader ~74% share(BOC)
ThailandAnnounced interest to establish clearing bank
London 4th Clearing bank(CCB).
China (CIPS)New international RMB clearing system by 2015
Singapore3rd Clearing bank(ICBC)
Luxembourg RMB clearing MOU signed
With Clearing Bank approved by PBOC
Potential, or in progress
Shanghai FTZ Piloting liberalisation of RMB financial services
RMB “centres”
9
• Political drive to reduce dependency on USD
• RMB sitting in top 10 payment currencies
• Mushrooming offshore clearing centre environment
Taiwan2nd Clearing bank(BOC)
MacaoRMB clearing (BOC)
Frankfurt 5th Clearing bank(BOC)
With Clearing Bank approved by local central bank
LaosRMB clearing (ICBC)
MalaysiaRMB clearing (BOC)
CambodiaRMB clearing (BOC)
PhilippinesRMB clearing (BOC)
MoscowRMB clearing (BOC)
ParisRMB clearing MOU signed
SeoulRMB clearing service to be set up
RMB
Competition among RMB “centres” is intensifying
Source: SWIFT Watch Customer initiated and institutional payment, inbound & outbound, based on value
RMB
26% offshore (outside China and Hong Kong)
SWIFT support for financial institutions in RMB?
• STP & automation (e.g. market practice guide)
• CIPS (China International Payment System)
• RA for 20022
• Industry dialogue – onshore/offshore RMB groups
• RMB Tracker
• RMB Market Insights
• Customised insight services
• Watch Value Analyser
• White Papers
BusinessIntelligence
Standardisation& Automation
• Clearing centres – RMB RTGS on SWIFT (HK, TW, SG)
• Bank reach
• ~10,000 globally
• ~3,000 in Asia-Pac
Connectivity
Singapore Business Forum 2014
RMB
Singapore Business Forum 2014
Resiliency
Singapore Business Forum 2014
What do we mean by resiliency?
Resiliency
2011 - RTGS outage of 4 hours
Software bug
2013 - RTGS 9 hours unavailable
Wrong parameterization
In 2011 both main sites of an PMI were nearly
flooded
Natural events
Risk of being
unavailable for
days, weeks, months
Data Corruption
From which “golden position” can I restart?
Staff unavailability
Diversity with peers and/or 3rd party staff?
Loss of essential services
Service diversification & geography
9/11could be on an FMI?
Terrorist attack Cyber attack
Who accessed my confidential data base?
Threats are everywhere
Singapore Business Forum 2014
Resiliency
2011 - RTGS outage of 4 hours
2013 - RTGS 9 hours unavailable
In 2011 both main sites of an PMI were nearly
flooded
9/11could be on an FMI?
Data Corruption
Cyber attack
Staff unavailabilitySoftware bug Wrong parameterization
Terrorist attackNatural events Loss of essential services
From which “golden position” can I restart?
Which staff will be really available?
Service diversification & geography
Who accessed my confidential data base?
Geographicdiversity
Staffdiversity
Technical and geographic
diversity
Technical diversity
Technical diversity
Technical diversity
Technical diversity
Geographicdiversity
Risk of being
unavailable for
days, weeks, months
Need for a different approach
Singapore Business Forum 2014
Resiliency
Paymenttransactions
Paymenttransactions
Payment settlement system
So , how do we do this?Payment system resiliency only as strong as weakest link
MIRS:Market
Infrastructure Resiliency
Service
Alliance Lifeline
Alliance LifeLine
Singapore Business Forum 2014
Resiliency
Singapore Business Forum 2014
Regulation
Financial Crime Compliance Roadmap
FATF 16 Information quality
Compliance Analytics
Sanctions list Mngt service
Sanctions KYC AML
Processingservices
Traffic analysis
Standards
Data repositories
KYC registry
AML testing & tuning
Sanctions Screening
Sanctions Testing & tuning(transaction & client systems)
Traffic restriction (RMA)
Live
Development
Qualification
Exploration
QualityAssurance
Client/Name screening
Singapore Business Forum 2014
Regulation
Singapore Business Forum 2014
The Future and Opportunities for the ASEAN / APAC Financial Infrastructures will Revolve Around These Themes
Regulatory Developments
ResiliencyRenminbi
RegionalisationReal-time innovation
Singapore Business Forum 2014
Commonchallengesuniquesolutions
20
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