SWIFT payment innovation initiatives by Qinwen Xiao, Rahul Bhargava and Susan Bray

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SWIFT Payments Innovation InitiativesRahul BhargavaDirector, Payments Markets Initiatives, Asia Pacific, SWIFT

Qinwen XiaoDirector, Payments Markets, Asia Pacific, SWIFT

Susan BrayExecutive General Counsel, Australian Payments Clearing Association

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Domestic Cross-Border

RTGS

ACH

Country A

RTRPS

• High Value Payments Modernization

• Re-Inventing Low Value Payments

PSS

Country A

PSS

Country B

Interoperability

• Cross Border Payments Integration: • Local PSS to Foreign PSS Connectivity• Local PSS to Foreign Bank • Local Bank to Foreign Bank Connectivity

Innovation

Disruption

Perspectives: Payments & Settlement Systems in Asia Pacific

Payments Innovation Initiatives – 1st March 2016

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Payments Markets Are Central To 2020 SWIFT strategy

2020 Strategy 5 R themes Disruption, change and challenges

Regulation & Compliance

Regionalisation

Renewal

Resiliency & Reliability

Real-time payments

Competition

FinTech

New Entrants

Financial Inclusion


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1981First ATM launched

1999RENTAS Implemented

2013RENTAS, eSPICKdesignated as SIPS

2008eSPICKImplemented

2015RENTASRMB RTGSOn SWIFT

2017....Real-Time ePaymentsPlatform (RPP)

2006RENTAS PvP for MYR-USD

Highlights: Malaysia Payments Systems Evolution & SWIFT

2016 Q3RENTAS..MYR RTGSon SWIFT

2013SWIFT office opens in KL

2009eSPICK rolls out nation-wide

2000sBefore 2000 2010s

2006HOUSelaunched

2000MEPS IBG launched


201110 Year Financial Sector Blueprint 2011-2020promoting migration to Electronic Payments

2014SWIFT selected as connectivity channel for RENTAS RTGS

RetailPayments

Large Value Payments

Malaysian Payments Landscape by Clearing Streams

5Note: the above is representative only and does not depict the entire payments eco-system in Malaysia

• Multi-currency interbank RTGS• Multi-currency debt securities

settlement• Depository services

RENTAS(Real Time Electronic Transfer of

Funds and Securities)

Interbank GIRO (IBG) Same Business Day Clearing

Financial Process Exchange (FPX) Internet Banking Payments

MYMobile Collaboration with Telcos

MEPS ISO 8583, Cross border integration

HOUSe Established by MY local banks

• Automated Clearing House (ACH)

• Mobile Payments

• Shared ATM Networks (SAN) / Cards

Clearing Streams

Direct Debit & eDebit Bulk collections & merchant debits• Direct Debits

Mal

aysi

a Fi

nanc

ial S

ecto

r Blu

eprin

t 20

11-2

020

(and

oth

er R

efor

ms)

eSpick Electronic Check Information Clearing• Cheque Clearing

Real-Time ePayments Platform Procurement process

initiated• Real Time Retail Payments System

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Agenda

Introduction

SWIFT Innovation: Global Payments Innovation Initiative (gpii)Presented by Qinwen Xiao, SWIFT Asia Pacific

SWIFT Innovation: Real Time Retail Payments Systems (RT-RPS)Presented by Rahul Bhargava, SWIFT Asia Pacific

RT-RPS Innovation in Australia – New Payments Platform (NPP)A conversation with Susan Bray, APCA

Open Q&A Session

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Correspondent banking model is under pressure

Customers and regulators push for better payments service

Banks rationalize their correspondent banking networks

Digital innovators offer new disruptive solutions

End customers increasingly demanding

Domestic payments going real-time

Regulatory intensity and increasing costs

Network rationalization

Enhanced value proposition

Disintermediation


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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

Front Office

BackOffice

*Icons are representative example of each model Payments Innovation Initiatives – 1st March 2016

Need to Innovate

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“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 intermediaries1

3. Secure and compliant

4. Transparent and predictable

5. Convenient and ubiquitous

6. Open and inclusive (global reach)

Fix key pain points

1 Note: pricing strategy is at sole discretion of each gpii member

Cross Border Innovation Use Case: SWIFT gpiiGlobal Payments Innovation Initiative (gpii) delivers a better cross-border payments


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Global payments innovation initiative (gpii)

– Proactively respond to evolving customer needs for more speed, transparency and predictability of time and cost in cross-border payments

– Building on the foundation that banks provide in security, resiliency and compliance• New service level agreement (SLA) rulebook, initially focused on business-to-business

payments, will enable corporates to receive an enhanced payments service directly from their banks, with the following key features: same day use of funds, transparency and predictability of fees, end-to-end payments tracking, transfer of rich payment information.

• Deliver real-world innovation: building on existing platform, embrace new technologies, such as DLT/blockchain, along a strategic roadmap

– Global reach, collaborative industry-wide initiative, organised by SWIFT– Open model, participation based on operational quality

Fast Transparent Predictable

Secure Resilient Compliant

Real-world innovation Global reach Open model

45 banksswift.com/gpi


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gpii aims to provide faster, transparent, predictable B2B cross border payments through a set of mutual business rules

Payments with same day use of

funds

Transparency and predictability of

fees

End-to-end tracking of payments

Transfer of rich payment

informationgpii


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Benefits to banks and their corporate customers

Grow international business

Enhance supplier relationships

Increase treasury efficiencies

Benefits for a corporate

Grow volumes & customers

Reduce cost & increase STP

Lead innovation

Benefits for a bank


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gpii timeline

▪ Identify drivers▪ Define

principles▪ Announce

initiative

Pilot

Promote

Define strategic roadmap

2015 2016

▪ Show early results at Sibos

▪ Prepare for go live


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Agenda

Introduction




Open Q&A Session

Real Time Retail Payment Systems (RT-RPS)Live in 18 markets, many more being planned..

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18 countries ‘live’12 countries ‘exploring’ / ‘planning’ / ‘building’17 additional Eurozone countries ‘exploring’

Planning

Eurozone

Live

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, central addressing service in review

RT-RPS Background

Need for at least one solution for the Eurozone

according to ERPB Defining SEPA SCT Inst scheme on request

of ERPB

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Australia New Payments Platform to

be live by 2017

Thailand Mobile Instant payments in

review

Indian domestic initiative

Features

• Near immediate funds availability to recipient• Service availability outside normal banking

hours• Richer, more complete remittance information • Allow addressing of retail payments to recipient• Supports Retail and Corporate end customers


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Industry standards

Cater for ubiquity

Manage settlement

risk

Cost efficient

End-userconvenience

Richer data Easy integration

Real-time 24/7/365 services

RT-RPSDesign

Guidelines

SWIFT RT-RPS Design GuidelinesResulting from deep expertise in payments, MI’s and standards

Key drivers to success:

Payment volume enablers:• Proxy resolution (phone nr to account nr) is a key

feature to facilitate volumes in the P2P space.• Easy integration with overlay services: e-commerce and

trade platforms, e-invoicing platforms, payment factories of businesses,…

Bank‘s business case optimization:• Bank’s value proposition to indirect participants,

corporates and overlays.• Vision of payment rationalization on the long run, rather

than one more channel to support.

Platform robustness:• Clear liability framework supported by authentication,

non repudiation of origin, controls on business rules and roles,…

• Paramount security and above (fraud detection)• High resiliency - ability to process essential payments

in the advent of catastrophic events.Payments Innovation Initiatives – 1st March 2016

Payer Bank

Channel

Account Source• Debit• Credit• Prepaid

Branch

Mobile

Phone

Online/Internet

New services

Ordering Customer

Payments Platform – Basic Principles

Channels

CorporatesDe-bulk

Type of payments that could be supported:

• Attended real time payments (including a time-out mechanism)

• Unattended payments batched or un-batched

• High and low value


Payer Bank

Channel

Payee Bank

Beneficiary Customer


Branch

Mobile

Phone

Online/Internet

New services

Ordering Customer


Acquisition channels

CorporatesDe-bulk

Clearing

Clearing:• Clearing aims to verify

beneficiary details• Posting can happen

after clearing, based on risk profile.


Payer Bank

Channel

Payee Bank



Branch

Mobile

Phone

Online/Internet

New services

Ordering Customer



Settlement platform

CorporatesDe-bulk

Clearing

Settlement


Settlement:• Each transaction settled individually • Reduced payment processing

complexity• Support for settlement platform

unavailability

SponsorBank

Payee Bank


Payments Platform – Agency models

Settlement platform

Clearing

Settlement

Indirect model:• Indirect Settlement (E.g. no central bank account)• Indirect / Direct connection (Relay model)

Payment processor

SmallBank

SmallBank


Channel



Branch

Mobile

Phone

Online/Internet

New services

Ordering Customer

Payments Platform – Customer Convenience


CorporatesDe-bulk

Address resolution

Addressing service:• Convert an e-mail address,

phone number into a bank account number

• Enable mobile payments • Same principles for Fraud

detection platforms

Payer Bank

Payee Bank

Settlement platform

Clearing

Settlement


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Payer / Ordering Customer

SWIFTPaymentGateway

BankChannels

SWIFT Payment Gateway

Fast Settlement Service

Addressing Database

$24h

Overlay Services

Payee / Beneficiary Customer

SWIFTPaymentGateway

BankChannels

Ordering CustomerBank

Beneficiary Customer Bank

RTGSCentral Bank

Settlement

Clearing

Settlement1

2

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Case Study: New Payments Platform (NPP) Australia


Innovation Use Case: Overlay Services for e-Commerce

Clearing

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BankApplications

Payer Bank BankApplications

Payee Bank

SupplierOrdering Customer

e-Commerce platform

Initiation

Order request Order paid

Delivery

• Account posting confirmation

• Connectivity and interoperability

• Extended remittance information

A’ B’

Acco

unts

Integration with overlays helps the business case, but is also a key source of volumes.

Settlement

1

2

3

4

5

6


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Agenda

Introduction




Open Q&A Session


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RT-RPS Innovation in Australia:The New Payments Platform (NPP)

A conversation with:

Susan BrayExecutive General Counsel Australia Payments Clearing Association (APCA)


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RT-RPS : Big questions for the industry to consider..

What are the Business Case drivers?

How does the end customer benefit?

How will new standards like ISO 20022 help?

Promoting wider adoption & innovation?


Considerations for the longer term roadmap?

• Flexibility• New Service Development

• Convenience• Security

• Overlays & Open Access• Simpler Addressing

• Regulation• Wider Adoption & Innovation

• Convergence of payment systems infrastructure?

• Regional integration

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Agenda

Introduction




Open Q&A Session


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Important lessons in development of payment systems..


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Thank You

Case Study: New Payments Platform (NPP) AustraliaRT-RPS initiatives like NPP fosters financial inclusion & promotes longer term innovation in the payments ecosystem

• Speed up cash to digital payment migration & “Cashless Society” drive

• Public good: improving lives of individuals and businesses (particularly small business sector)

• Participation of Non FIs through overlay services

• Increasing utility of mobile wallets through connectedness to interbank payment systems

• Promote Central bank oversight – formalisation of informal/unregulated payments

• An additional channel for regional cross border payments integration

• ISO 20022 compliance

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INNOVATION USE CASE – ADDRESSING SERVICE

• Convert e-mail address, phone number etc. to a registered bank account number

• Enable digital channels like mobile, internet banking etc.• Utilization by RT-RPS participants & non-participants


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The SWIFT solution is distributed, low latency, real-time, and 24/7/365

• Domestic Messaging Channel (DMC), manages the high volume peer-to-peer communication over the SWIFT low latency network, on a 24/7/365 basis

• Payment Gateway (PAG), orchestrates the clearing and settlement authorisation flow

• Easy integration with value-added services (VAS), e.g. addressing database, AML or fraud detection services, and overlay services such as merchant platforms

• ISO 20022 Standards, which have become de-facto in this space and enable long-term interoperability between market infrastructures

Presentations & Public Speaking

SWIFT payment innovation initiatives by Qinwen Xiao, Rahul Bhargava and Susan Bray