day1 - payments landscape
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The payments landscape: the trends that
are reshaping domestic and cross-border
payments
SWIFT Benelux forum 22 April 2015
Elie Lasker, Senior Market Manager
Lior Cohen, Product Manager Banking Markets
Where do we come from, where do we go to? Source: Correspondent banking 3.0 white paper, available from swift.com
New entrants Benelux businss forum – 22 April 2015 – Confidentiality: PUBLIC 2
1970s
Automation
SWIFT
1990s
Efficiency
GTB
2010s
Simplicity
Consumer
1.0
Correspondent
banking
2.0
Transaction
banking
3.0
Experience
banking
4.0
?
2020s
5 mega trends impacting correspondent banking
New entrants Benelux businss forum – 22 April 2015 – Confidentiality: PUBLIC 3
Real time
Open access
Compliance
Off the wire
Growth
Correspondent banking disintermediated at origination
New entrants Benelux businss forum – 22 April 2015 – Confidentiality: PUBLIC 4
Local bank Local bank
PSP PSP
ACH ACH
GTB GTB
End customer
(retail, SME, corp)
End customer
(retail, SME, corp)
Correspondent Banking
Co
rre
sp
on
de
nt
Ba
nkin
g d
isin
term
ed
iati
on
Transfer
Agent
Transfer
Agent
*Icons are representative example
of each model
Bank-grade payments system requirements
New entrants Benelux businss forum – 22 April 2015 – Confidentiality: PUBLIC 5
Addressing
real
challenges
compliant Impact on
bank’s economics
Scalable
Real-Time Retail Payment Systems
Benelux Business forum La Hulpe , 22 April 2015
Agenda
• Market trends and landscape
• Australia New Payments Platform
• Approach going forward
7
Market trends and landscape Key features of real-time (instant/immediate) payments
24x7x365: payments can be sent and received all times of the day, every day of the year
24 x 7 x 365 Instant Finality Certainty
Instant*: good funds must be available on the beneficiary’s account in, typically, less than a minute
Finality: 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
8
Market trends and landscape Retail payment system landscape – client side
9
Multi Currency Payment Scheme Single Currency Payment Scheme
• Credit D / D+11
• Debit Later2
• Credit D / D+11
• Debit D / D+11
• Credit Instant • Debit Instant
• Credit Instant • Debit Before3
Credit Accounts
Deposit Accounts
Money Transfer Operators
(no account)
Store-Value Accounts (wallets)
• Credit D / D+11
• Debit Before3 Note 1: “D / D+1” means same day / next day / next few days Note 2: “Later” means ~30 days after transaction Note 3: “Before” means account / service needs to be prefunded
Market trends and landscape Key drivers and challenges
10
Customers
Banks
MIs
Regulators RT-RPS
Adoption
Customer expectations for faster payments (consumers, business / merchants)
• Customer protection • Financial inclusion &
cashless • Next generation platform/
Foster innovation • Macro-economic events
• Large investments/costs
• Limited revenue potential
• Disruption on operating model
• Impact on compliance and fraud detection processes
• Threat from new entrants
Threat from new entrants
Market trends and landscape Take-up rates vary depending on mandate and pricing
11
Rapid Adoption Path
Rapid adoption driven by Central
Bank / Regulatory mandate and low
pricing
Slow Adoption Path
• Low participation of banks is a blocking factor in
Poland, South Africa, India and Brazil
• In India, overly complex use experience was a barrier
Typical Adoption Path
Ad
op
tio
n (
% o
f C
T/D
D v
olu
me
vs t
ota
l)
Time in Existence (Years)
RT-RPS market landscape Live in 18 markets, with 13 more in planning / development
12
Europe Denmark
Czech Republic Iceland Poland Sweden
Switzerland UK
Bahrain Finland
Netherlands Turkey
Eurozone
Asia Pacific China India Japan
Singapore South Korea
Taiwan Australia
Hong Kong Indonesia
New Zealand Thailand
North America Mexico Canada
United States
Central & Latin America
Brazil Chile
Colombia
Africa Nigeria
South Africa
18 countries ‘live’
12 countries ‘exploring’ / ‘planning’ / ‘building’
17 additional Eurozone countries ‘exploring’
Planning
Eurozone
Live
P2P
B2B
P2M
B2P
4%
51%
18%
7%
20%
Segment Type Share* Payment
confirmation Funds
availability***
RTP needs
e-payment
Point of Sale (Physical)
Bill Payment**
Large value payment
e/m-commerce
Bulk Payment
Invoice Payment
Large value payment
Primary candidate
Secondary candidate
RT Candidate
*share of total non-cash payments worldwide
**including direct debits
*** Immediate vs. (Near) Real-Time
Growth trend
13
Secondary candidate
Market trends and landscape Real-Time Payments Use Cases
GSC 2015 - Real-Time Payments
Market trends and landscape
There are different approaches to clearing and settlement
14
Hub Approach
Central Bank
Hub
Clearing
A B
Bank A
Acc
ou
nts
RTGS - Settlement
A’ B’
Shad
ow
A
cco
un
ts
Bank B
RTGS Approach
Bank A
or
Central Bank
A B
Acc
ou
nts
RTGS Settlement
Bank B
Distributed Clearing Approach
Bank A
Clearing
or
Bank B
A B
Acc
ou
nts
RT App - Settlement
A B
Acc
ou
nts
RTGS – Liquidity Mgt
Central Bank
Real-Time 24/7/365
EOD/Intra Day during Business Hours
Agenda
• Market trends and landscape
• Australia New Payments Platform
• Approach going forward
15
Australia New Payments Platform
Status
• Project was kicked-off in December 2014
• Currently mid-way through design phase, deep-deep
dive industry workshops are being conducted
• Scheduled go-live is August 2017
• Project is currently on track
16
Domestic real-time payment system (clearing & settlement ) • Low-latency in-country messaging service • High throughput and capacity • Real time settlement payment-by-payment • 24x7 ‘real-time’ operations (no down-time window) • Financial industry standards (ISO 20022) • Leverage SWIFT infrastructure components
Enable easy integration with overlay services, eg • Mobile P2P Apps • Government tax platforms
Distributed architecture model (RFP was based on a central hub)
17
Australia New Payments Platform
Key characteristics
Australia New Payments Platform How does it work?
Central Bank
Orderer’s Participant Bank
Branch
Mobile
Phone
Internet
Services
Applications
SWIFT Payment Gateway
Beneficiary’s Participant Bank
Branch
Mobile
Phone
Internet
Services
Applications
SWIFT Payment Gateway Clearing / Confirmation
Settlement
Payment Details
Payment Details Confirmation
Domestic Messaging Channel
Settlement
Settlement Confirmation
Settlement Confirmation
1
2
3
4 4
SWIFT Payment Gateway
Overlay services
Fast Settlement Service
RTGS
Bank
archive
Bank
archive
Payee / Beneficiary Customer
Payer / Ordering Customer
18
Addressing
Database
19
Approach going forward
Identify markets
selectively on a
case by case
basis
Position SWIFT in
RTP
Thought
Leadership
Explore the
winning models,
build and adapt
the solution
Solution Market
engagement
Questions
20
New entrants Benelux businss forum – 22 April 2015 – Confidentiality: PUBLIC 21
Thank you
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