information security identification: confidential global payments best practices laura mcgortey, ctp...
TRANSCRIPT
Information Security Identification: Confidential
Global Payments Best Practices
Laura McGortey, CTPManaging DirectorMulticurrency ServicesBNY Mellon
June 6, 2012
Information Security Identification: Confidential2
Key Topics
• What in the World is Going On?
• Regulatory Considerations
• Payment Systems and Charging Options
• Options for Managing Global Payments
Information Security Identification: Confidential
What are your international cross-border payment pain points?
• Cost
• Beneficiary never receives full value
• Delivery is often late
• Multiple global payment providers, inconsistent reporting
• Other?
What in the World is Going on?
3
Information Security Identification: Confidential
The theme is transparency; for example:
US – Dodd Frank:
• Payments from consumers’ US-based accounts to any beneficiary outside the US
• Sweeping requirements for full transparency regarding FX rate, settlement date, local taxes, any fees – prior to transaction initiation
• Infrastructure challenges
Europe:
• Payment Services Directive (PSD)
• Provides fee transparency for intra-Euro zone payments, no deductions or lifting fees
Regulatory Considerations
4
Information Security Identification: Confidential
There are many different Payment Systems—each best suited for certain types of transactions
Payment Systems
5
Payment System Typically Used For Examples
ACH, IACH or local low value bulk
High volume, low value
Consumer or commercial payments
US – ACHEurope – PeACH, SEPA Debit or Credit (aka EBA Step2)UK – BACS, Faster PaymentsChina – BEPSIndia - NEFT
Wire (RTGS – real time gross settlement)
Low volume, high value
Consumer, commercial or wholesale
US – FedwireEurope – Target2UK – CHAPSHong Kong – CHATSChina - CNAPS
Wire (RTNS – real time net settlement)
Low volume, high value
Consumer, commercial or wholesale
US – CHIPSEurope – EBA EUR01 or Step1
Information Security Identification: Confidential
Payment types:
• Accounts Payable: Can be ad hoc or recurring, remittance data is very important as is payment in full (limited lifting fees or deductions)
• Payroll, Pension: Repetitive, pre-planned; therefore real time payment systems not required, limited need for remittance data
• Intracompany Payments: Time sensitive, high value
• Consumer Remittances: Often time sensitive, low value
Types of Payments
6
Information Security Identification: Confidential
Wire (Funds Transfer, RTGS, RTNS, etc)
• Beneficiary Deductions are common
• Options for paying in full (Full Pay, OUR) can be expensive
• Most often used for Accounts Payable, Intracompany Payments, Financial Settlements, Consumer Remittances
ACH or IACH
• Not available to all areas
• Local low-value bulk clearing systems are not interoperable and do not ‘talk’ with each other
• Payment services providers may offer solutions for streamlining and accessing these platforms
• Limited remittance data
• Most often used for Payroll, Pension, Accounts Payable (where extended remittance data is supported)
• Often supports “payment in full” schemes with less cost to the remitter than Wire payments
Considerations Regarding Payment Systems
7
Information Security Identification: Confidential
Important Considerations Regarding Charge Types
8
Charge Indicator (SWIFT field 71 or Fedwire 6100)
Utilized for cross border payments outside the US
Charge IndicatorBEN SHA OUR
How Charged? Deduct from the principal of the transaction
Varies per market – sometimes treated as BEN, sometimes limits to only explicit transaction fees for the sender and receiver
The initial sending bank
Who Charges? Any bank in the payment ‘chain’
Initial sending bank charges remitter; beneficiary bank charges receiver
All banks in the ‘chain’
What is Charged? Various amounts can be flat or percent
Amounts can vary however must be disclosed
Various amounts can be flat or percent
Key Considerations Multiple deductions are possible based on how many Financial Institutions ‘touch’ the payment
Typically payments are only treated as SHA in certain regulated markets (e.g., within the EU, within the US, etc).
Multiple charges can be received per transaction. Sending bank must cover costs therefore a costly payment option for the remitter
Information Security Identification: Confidential
How Many Parties Might be Involved in Your Cross Border Wire Payment?
9
Sending Bank Beneficiary Bank
ABC Co.
Sending Bank’s
Correspondent Bank
Central Bank – RTGS clearing – local market XYZ
Ltd.
Beneficiary Bank’s
Correspondent Bank
Number of parties expands opportunity for lifting fees and deductions.
Be certain to know how your bank or payment services provider is handling charge indicators and lifting fees.
Information Security Identification: Confidential
Options for Managing Global PaymentsLocal Accounts
• Process payments from company owned currency accounts
• Accounts may be centralized and managed from one location or localized and managed by local staff
• Payment initiation and data reporting may require access to various electronic banking platforms
• Can be costly to manage, reconcile
Centralized Account
• Account may be localized or centralized
• One account, one currency to fund all payments, to all locations, all currencies
• Streamlines management via one payment portal and consolidated reporting
• Access to multiple payment types
• Often there is more flexibility regarding charging options including easier access to “payment in full” type services
10
Information Security Identification: Confidential
Example of a Centralized Account Payments Portal
11