Workers’ Remittances Barbara Sacchi Senior Account Director - SWIFT Roma, 26 Novembre 2009 New perspectives, new opportunities

Workers’ Remittances

Barbara Sacchi

Senior Account Director - SWIFT

Roma, 26 Novembre 2009

New perspectives, new opportunities

2

Market overview

Market:• International migrants 200 million

• Financial flows USD 400 billion

• Industry revenue USD 15 billion

• Annual transactions 1 to 1.5 billion

• Average transaction value +/- USD 300

A remittance is a cross-border, person-to-person payment of relatively low value.

February 2006 3

Immigration in Italy

Albania >310.000Rumenia >240.000China >100.000Ukraine >90.000Philippines>80.000Poland >65.000India >45.000

Albania >310.000Rumenia >240.000China >100.000Ukraine >90.000Philippines>80.000Poland >65.000India >45.000

Morocco >290.000Tunisia >60.000Senegal >50.000Egypt >40.000

Morocco >290.000Tunisia >60.000Senegal >50.000Egypt >40.000

23%

15%

10%

10%

A reality of more than 2,5

million people

Peru >40.000Ecuador >40.000

Peru >40.000Ecuador >40.000

4

Issues and options for Bank service delivery

2. Build a proprietary network

4. Build a bilateral service with a correspondent

3. Use open correspondent banking arrangements

Cost

scalability

Poor service

Options:

Issues:

1. Open correspondent arrangements do not deliver price and time transparency for consumers

2. Processing is inefficient and costly for banks

1. MTO franchise Commercial autonomy

Regulators benchmark the quality of service

World Bank remittances price database – LAUNCHED SEPTEMBER 2008!– Remittanceprices.worldbank.org

Main findings :• Transparency insufficient in some corridors • Transaction timelines vary from same day to 10 days and unpredictable• In general, banks are more costly and slower than MTOs• Corridors from Saudi Arabia, Singapore, Spain and USA are less expensive

than average• Corridors from South Africa, Germany, Japan and the Netherlands among the

most expensive • Biggest reductions in Saudi Arabia and Italy• Reforms to National Payments Systems crucial

Workers' Remittances Seminar - Dubai, 28 October 2009 5

G20 objective

6

ObservationIn many remittances corridors the cost of sending remittances is still high relative to the often low incomes of migrant workers and their families

ObjectiveReduce average cost of sending remittances globally over 5 years

Action planStep 5 out of 8

Heal the (cross-border) world: Recent developments around international networks and messaging services (e.g. dedicated SWIFT message for workers’ remittances) have the strong potential to significantly reducing the cost of clearing and settlement internationally and should be encouraged

Based on presentation at Sibos 2009 by Massimo Cirasino – Head of Payments Systems, World Bank

Workers' Remittances Seminar - Dubai, 28 October 2009

Workers’ remittances – options from SWIFT

7

• Purpose built for cross-border person-to-person

• For new correspondents, new payment instruments

Options

Solution for workers

remittances

MTOs and Exchange Houses

traditionalbanking


• Connect in MA-CUGs

• Category Group1 and 2

New since September

New since April

• FIN MT 101 and 103

• ACHs and national payment systems SEPA

Exists today


8

• Provides time & price transparency + easy of use to end-customers

• Reduces time and cost to set up agreements

• Supports any type of retail payment product

• Is commercially and brand neutral

Options


remittances


Traditional banking




• FIN 101 / 103

• XML transactions in SEPA

• ACHs

MT/FIN service framework for P2P payments

9

sender BeneficiaryMT103

MT202 MT950

SWIFT FIN

characteristics :• used for 20+ years by SWIFT community for correspodent banking• broadly used for Corporate ang high value payments in correspondent banking• P2P payments not identified and not processed differently from other payments

Sending bank Receiving bank

SWIFT value proposition for P2P payments

10

maturity Counterparts Service level

Efficiency Scalability

MT/FIN 20+ yearsWidely used in correspondent banking

Existingcorrespondants

Account

Low speed Bilateral Bilateral

WRMXFileAct

5/6 years(SEPA)

MT/MX migration

New correspondants

NewInstruments

High speed

Rulebook

Certification

Certification

Agreement template


11





Options


remittances


Traditional banking




• FIN 101 / 103


• ACHs

New membership categories

12

• Group 1 - Supervised Financial Institution– Engages in payment, securities, banking, financial, insurance, or investment

services or activities, and that, for such purposes– Is licensed by, authorized by or registered with Financial Market Regulator

• Group 2 - Non-Supervised Entity Active in Financial Industry– Main activity, engages in payment, securities, banking, financial, insurance, or

investment services or activities to Supervised Financial Institutions and/or to third parties unrelated to the Non-Supervised Entity

– Is not subject, for such purposes, to supervision by Financial Market Regulator


Easy for exchange houses to join SWIFT


13





Options


remittances


Traditional banking




• FIN 101 / 103


• ACHs

14

Workers’ remittances objectives

• Deliver a robust end-customer value proposition

– time transparency

– price transparency

– ease of use

• Bring scalability to bilateral bank services

• Support any type of retail payment product

• Remain commercially and brand neutral

A business and technical framework for bilateral clearing and settlement

15

Business framework Technical framework

Business Contract

Market Practices

Reference DataMessaging Standards

Messaging Services

=> Commercial flexibility

=> Interoperability, efficiency, scalability

Service framework fit in the person-to-person payments ecosystem

16

Debtor CreditorAgentAgent ParticipantParticipant

Settlement Agent

Bilateral ContractBilateral Service Level Template

Market PracticesService Levels, Product Groups, Charges & FX Practices

Reference DataParticipant and Agent Capabilities and Points of Service

Messaging StandardsInstruction, Reject, Return & Status

Messaging ServicesFileAct Store & Forward 6.1

17

Market Practice Rulebook

- Participants- Participants’ Agents

- Service levels (instant, urgent, non-urgent)- Two product groups (account & cash disbursement)- Transaction ID specification (sender defined)

- OUR (DEBT) charging default- FX guidelines- Reject/returns charging practices

- Definition of sorting, transmission etc.- Transmission timing relative to service level

- Gross bilateral settlement- Serial method recommended, but guidelines for Cover incl.- No restrictions on provider or currency choice

Participation

Products

Charging practice

Clearing

Settlement

18

Ref. data

FileAct S&FISO UNIFI 20022

Architecture

Rules + Guidelines

Settlement

Sender BeneficiaryAgents

Distribution network

sending country

Distribution network

Receiving country

participants

MT cover payment

participants Agents

End-to-end service conditions

Solution for workers’ remittances

Example: La Caixa

About La Caixa• Third F.I. in Spain, first in retail banking• 11 million customers• 5.200 branches in Spain, 8.000 ATM

Workers’ remittances business• 6 years of experience• 10% of customers are immigrant• 3 main corridors: Latin-American,

Morocco and Eastern Europe.• 1,5 million remittances in 2008

Current situation• 14 countries, 25 partner banks• 3 channels: Internet, MT103 and FileAct.• 12 different solutions (different formats, files,

status info, returns…)

• Each agreement: minimum 6 months

Benefits SWIFT workers’ remittances• Standardised definitions• Technical framework similar to SEPA (ISO

20022 XML pacs)• Centralised information database: all we

need to know about our counterparties.• Complemented with Integrator

Expectation

• Each new agreement: implementation cost 80% lower

• Time to market new counterpart: reduced to 2 months

19Workers' Remittances Seminar - Dubai, 28 October 2009

32 participants to Workers’ Remittances

20

Americas (14) EMEA (14) Asia Pacific (4)

Banco do Banco do BrazilBrazil

Banco

Guayaquil

14 implementation partners


Vendor Region Front-office

solution

Middleware

solution

back-office solution

Service

bureau

Acotel EMEA & Americas No Yes Yes No

AEG MEA No Yes Yes Yes

Alliance Enterprise Latin America No Yes Yes Yes

BCG Latin America No Yes Yes No

BIS EMEA Yes Yes No No

Clear2pay Americas Yes Yes Yes No

Decillion Asia pacific Yes Yes Yes No

Earthport EMEA No No Yes No

Eastnets EMEA Asia No Yes Yes Yes

Integratech Asia pacific No Yes Yes No

Misys EMEA Yes Yes Yes No

Netsolving EMEA Yes Yes Yes No

Profix EMEA Yes Yes Yes No

Synergy EMEA No Yes Yes Yes

With customer reference

Workers’ remittances certification


Reference data provisioningto SWIFT Directory

Payment instructionsfrom/to counterpart

Payment status/rejectfrom/to counterpart

Payment return after settlementfrom/to counterpart

FileAct service optionDelivery notification

Test1

Test2

Test3

Test4

Test5

• Interoperability

•Time to market

• Service readiness

• Enablement speed With new counterpart

• Service scalability

Thank you

Barbara SacchiSenior Account DirectorSouth Europe, Middle East & Africa

SWIFTCorso G.Matteotti, 1020121 MilanoItaly

+39 02 7742 5000+39 02 7742 5015+39 02 7742 5090+39 335 144 74 [email protected]

T

D

F

M

W

E

Documents

Workers’ Remittances Barbara Sacchi Senior Account Director - SWIFT Roma, 26 Novembre 2009 New perspectives, new opportunities