cross-border payment innovation for the caribbean

IBIS Management Associates © 2016IBIS Management Associates © 2016

IBIS Management Associates Inc.Clark Russel, CEO

Miami 16 April, 2016

THE NEW THINKING IN CROSS BORDER PAYMENTS FOR CARIBBEAN BANKS

IBIS Management Associates © 2016

Topics

• Quick refresh on IBIS Management Associates Inc.

• Alchemy and Operational Excellence

• The Ripple network and unique opportunity for cross border payments

• A Caribbean roadmap to a Ripple connect pilot

• Q & A


A trusted advisor to Central and Commercial Banks, Credit Unions & other FI's and developers of best in class banking technology solutions for Operational Excellence.

• Every month, billions of dollars flow securely through our proprietary systems• Proven solutions. Clients in more than 40 countries• Offices in Curacao, Miami and Singapore• We help financial institutions to become Profitably Efficient• Experts in Operational Excellence, Payment Processing, SWIFT and Regulatory

Compliance• In-house Development team • State-of-the-art Online Banking: Internet Banking & Mobile Banking• Back office efficiency gains improve by 600%• More than double the profitability of your operations in under three months

A QUICK REFRESH ABOUT IBIS MANAGEMENT


Award-winning solutions for: Cross Border Payment Processing

SWIFT ConnectivityMobile & Internet Banking

Regulatory Compliance and Reporting


SERVING CARIBBEAN BANKS


Client Footprint


Customer payment Order

CSR

Online Banking

Mobile Banking

INPUT OUTPUT

RTGS

Alchemy

Enter Verify Authorize

CORE Banking

Realtime Sanction List Screening

ACH

TRADITIONAL SETUP


STP for all ChannelsAutomates all Paymentprocesses

• Improved Efficiency & Compliance• More Control & Audit ability• Reduced operational costs & risk• Increased Profitability• Standardization across channels• Channel and procurement flexibility


CONTINUOUS DRIVERS OF CHANGE

Profitability Costs & Complexities need to be reduced for more profitable banking business (Manual processes, multiple systems)

Payment ServicesAre facing the highest level of disruption

CustomerExpectations are creating a need for speed and innovation

De-riskingCross-border $$ payment in jeopardy as US Correspondent banks are placing increased pressure on Caribbean banks

PROPRIETARY AND CONFIDENTIAL; Contents are proprietary to Ripple Labs and provided on the condition of confidentiality. Provided information may be disclosed, reproduced and used only in accordance with a written agreement with Ripple Labs. No implied licenses are intended and all rights are reserved.

CONFIDENTIAL

Global Leaderin Distributed Financial Technology

PROPRIETARY AND CONFIDENTIAL; Contents are proprietary to Ripple and provided on the condition of confidentiality. Provided information may be disclosed, reproduced and used only in accordance with a written agreement with Ripple. No implied licenses are intended and all rights are reserved.

CONFIDENTIAL

Experience Capital Markets• J.P. Morgan• Citi• Merrill Lynch• BlackRock• Visa• Fiserv• Paypal• Prosper

Technology• Google• Apple• NSA• Yahoo• Bloomberg• NASA

Team 120 Team Members

• 65% Engineering Talent

• San Francisco• New York• Sydney• London

Financial Technology Company

With expertise in global financial settlement

Regulation• Federal Reserve• SEC• DTCC

The Problem With Today's Payments Infrastructure

12

¥

Central counterparty

¥

$ ¥

Lifting fees

Receivingcorrespondent

Sending bank

(USA)

Receiving bank

(Japan)

Central counterparty

$FX cost: $$$

Sending correspondent / Liquidity provider

Lifting fees

Duration: 2–5 days

$

Problems: Access, Certainty, Speed, Cost

Decades Old Infrastructure


Direct global reach is costly

Costs associated with nostro accounts: liquidity, regulations, operations, risk and compliance


CONFIDENTIAL

Corridors without a direct reach are inefficient

Sending Bank

Receiving Bank

Sending Correspondent

Receiving Correspondent

Lower payment volume do not justify a direct nostro relationship

KEY PROBLEMS:! Delays: Relay process induces delays in payment settlement! Risk: Multiple intermediaries increase settlement risk, with little traceability! Unknown Liquidity Route: The receiving correspondent is usually unknown

?Payment failure

Unknown Party

~4%of wires fail

2+days to settle

$1.6 Tin costs

The Real Impact of the Problem

Make money move like information moves on the web

today.

Ripple Vision...


Make Institutions Interoperable


Efficient global reach without nostro relationships in every corridor

Consolidation of nostro relationships


What is Ripple?

Distributed transaction and ledger technology that allows banks to directly transact with other banks to settle transactions in real time.


Ripple Consists of 3 Main Components

Ripple Connect: Connects banks to the Ripple network to exchange KYC risk information, fees, payment details and expected time of funds delivery.



Ripple Stream: Is an interface for liquidity providers (I.e. the bank’s FX desk) to submit bid/ask offers to the Ripple network.



.

The Ripple Network: Contains the Ripple Consensus Ledger (RCL), the secure distributed ledger that uses the consensus process to settle transactions.


CONFIDENTIAL

Capability 1: Real-time, Atomic Settlement

Sending bank

Receiving bankSending Correspondent


Single-step atomic transaction

Step 1: Payment Information Exchange and Processing

Step 2: Cryptographic Escrow of Funds

Step 3: Atomic Settlement

Step 4: Payment Confirmation


CONFIDENTIAL

Real-time, atomic multi-hop transactions

25

Ability to chain transactions together without impacting service levels

KEY BENEFITS:

! Reduced Delays: Payment processing across all intermediaries happens in parallel! No Settlement Risk: Either the entire payment goes through or it fails (atomic payment)! Higher Balance Sheet Efficiency: Ability to consolidate nostro relationships while

maintaining service levels

Sending Bank

Receiving Bank

Sending Correspondent



CONFIDENTIAL

RippleConnect

RippleConnect

Ripple Network (Interledger Protocol - ILP)

Bank Bank

Payment Instructions (with structured data)Customer Information (AML/KYC)

Fee ExchangeAutomated Payment Confirmation

Settlement Settlement

Capability 2: Bidirectional Messaging


CONFIDENTIAL 27

Sending Bank

Receiving Bank

Bidirectional messaging increases operational efficiency and lower costs

KEY BENEFITS:

! Higher STP: Data validation prior to transaction! Transparency: Capability to pre-disclose end-to-end delivery fees (Basel III and Dodd-Frank)! Intraday liquidity monitoring and automated reconciliation: Real-time payment confirmation

More efficient bank-to-bank settlement


CONFIDENTIAL

Capability 3: Liquidity Management

Model 1 (Same as today):

SVB(USD)

Correspondent(USD)

Correspondent(EUR)

DB(EUR)

SVB Nostro

DB Nostro

SVB(USD)

DB(EUR)

Liquidity Provider 1



USD EUR

EUR

EUR

EUR

USD

USD

USD

Model 2 (Competitive liquidity marketplace):


CONFIDENTIAL

Flexible Liquidity Provisioning

29

Multiple models for liquidity provisioning for banks

KEY BENEFITS:

! Balance Sheet Efficiency: Ability to leverage third party liquidity for non-core corridors! Agility: Expansion into new corridors without incurring capital risk or cost

Sending Bank

Receiving Bank


KYC & Compliance

Using Ripple does not impact an institution’s Compliance, AML, Sanctions list screening, and transaction monitoring requirements and responsibilities. Ripple is designed to complement existing compliance programs


&

Partnership Solution


Online Banking Wire Transfer

Alchemy

Entry Verify Auth.

CORE Banking

STP

Sanction List Screening

Ripple Connect example through Alchemy...

RippleConnect


Access: Provides direct access to a growing, global network of financial institutions and liquidity providers instead of relying on scarce correspondent banking relationships for cross-currency settlement. Certainty: Ripple’s technology tightly integrates payments messaging with funds settlement, allowing for unprecedented visibility into a transaction’s lifecycle. Speed: Ripple’s distributed technology enables banks to settle cross-border payments in real time allowing them to serve their customers in new ways with differentiated services. Cost: Through Ripple, banks can lower their cost of cross-currency settlement by minimizing settlement risk and operational costs.

Key Benefits of using Alchemy - Ripple


Next to ALL existing Alchemy benefits:

Key Benefits of using Alchemy - Ripple

• Improved Efficiency & Compliance• More Control & Audit ability• Reduced operational costs & risk• Increased Profitability• Standardization across channels• Channel and procurement flexibility

&

IBIS Management Associates © 2016IBIS Management Associates © 2016

Thank You!For more information please contact:

[email protected]@ibis-management.com