nybf 2014 - evolution of swift in treasury

Evolution of SWIFT in Treasury

New York Business Forum

4 Mar 2014

Robert J. Blair, Managing Director, SWIFT and Americas Market Management, J.P. Morgan Robert Freiling, CTP - Senior Manager, Fund Financial Services Fund Treasury, Vanguard Stephanie McClintock, CTP - Manager, Fund Financial Services Fund Treasury, Vanguard

Disclaimer

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such client’s affiliates/subsidiaries, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan.

This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. It may not be copied, published or used, in whole or in part, for any purpose other than as expressly authorized by J.P. Morgan.

The statements in this presentation are confidential and proprietary to J.P. Morgan and are not intended to be legally binding. Neither J.P. Morgan nor any of its directors, officers, employees or agents shall incur any responsibility or liability whatsoever to the Company or any other party in respect of the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation.

The products and services featured in this presentation are offered by JPMorgan Chase Bank, N.A., member FDIC, or its affiliates/subsidiaries. All services are subject to applicable laws and regulations and service terms.

J.P. Morgan is a marketing name for the Treasury Services businesses of JPMorgan Chase Bank, N.A. and its affiliates/subsidiaries worldwide.

J.P. Morgan is licensed under U.S. Pat Nos. 5,910,988 and 6,032,137.

© 2013 JPMorgan Chase & Co. All rights reserved

Agenda

Questions

Vanguard Fund Treasury - Case Study

SWIFT for Corporates – Evolving value proposition

Result

The Result If this is the answer, what’s the question?

+31% of the

Fortune 500

+ 72% of the

Fortune 25

+12% of SWIFT

connected parties

+20% growth

+31% FIN / +41% FileAct

SWIFT for Corporates

SWIFT’s Training & Consulting Services

Reference Data

Global Standards and

Implementation Guidelines

Trouble-free payments and SEPA

compliance

Personal PKI Certificates

User Entitlements

End-to-end traceability and

Single Sign-on

Identity and mandate management

Payment Assurance

Pre-shipment Finance

Post-shipment Finance

A/R Reconciliation

Certainty and efficiency in the

supply chain

Payments

Cash Management

Foreign Exchange

Multi-asset class matching

Trade Finance

Supply Chain Finance

Regulatory Requirements

eStatements

eBAM

Secure financial connectivity

The Evolving Portfolio Supporting treasury requirements

The SWIFT portfolio for Corporates

Secure financial connectivity Before…Challenges


Dealing with multiple banking partners

Different protocols, channels & systems

- Lack of visibility on cash

- High operational costs

- Manual processes & errors

- Complicated traceability and

compliance

Secure financial connectivity Adopting multi-bank solutions - Streamline banking communication with industry standards

After…Solution


Corporate

YOURBIC8

YOURBIC8

YOURBIC8 YOURBIC8 BIC

Benefits

- Higher Efficiency & Reduced

Costs across financial

transactions

- Standardize bank

communications

- Improved control and visibility

- Automation

- Accelerate decisions

- Unique legal identification – BIC

Vanguard Fund Treasury SWIFT round table discussion

March 2014

9

> 10 For Internal use only

Agenda Review

• Vanguard’s background – SWIFT metrics

• Case study – Fund Treasury payments

• Payment landscape

• SWIFT implementation

• Global expansion

• Questions


Vanguard overview

Vanguard profile Market leadership Investment management Depth of experience

• No outside owners: we

serve only client interests

• An enduring commitment to

lowering costs because low

costs often provide a distinct

advantage for investors

• 38 years of investment

management experience

• $2.7 trillion in assets

under management (U.S.-

based mutual funds)

• Assets increased $2 trillion

past ten years, $1 trillion

past five years

• Broad lineup over 175

mutual funds, ETFs, and

other products

• Active equity: leading

institutional sub-advisors

• Index equity: internal

management provides

state-of-the-art execution

• Fixed income: offering deep

expertise and risk

management

• More than 14,000 crew

based in Pennsylvania,

Arizona and North Carolina

• Growing international

operations including:

– Australia, Canada

– Continental Europe

– Hong Kong

Vanguard total assets

U.S.-based mutual funds Global

Vanguard’s Mission – To take a stand for all investors, treat them fairly, and give them the

best chance for investment success.

$2.7 trillion

Fund payments using SWIFT

• Quality

• Scalability

• Uncompromised controls $

b

i

l

l

i

o

n

s


Vanguard’s SWIFT usage

SWIFT Breadth Across Vanguard’s divisions

Statistics • 28 unique message types

• 12 business units across global Vanguard enterprise

• Message mix is 23% outbound to 77% inbound

• Fund Financial organization accounts for 95% of volumes, 99% of outgoing traffic

• 53,000 messages per day, up 23% in past year, 13.4 million in 2013

mil

lio

ns

2013 2012 2011 2010 2009

Fund Financial

Institutional Retail International Brokerage

SWIFT message growth


SWIFT messages across Vanguard

Incoming traffic Outgoing traffic

75% of incoming traffic is trade related

Statement related traffic largest increase

over 2013

90% of outgoing traffic is security trade/FX

related

Money movmenet payments holding

consistently at just under 8%


Fund Treasury Services

Money Movement Unit, Payment Case Study

Indispensable

partner Long term planning

Money Movement

Financial

stewards Risk/control

Support Vanguard’s mission by delivering accurate, timely

and compliant Treasury services for Vanguard’s investment

vehicles, driven by best in industry crew, VUE application

and risk and control management.

Trusted

voice Suppliers & clients

Talent

Destination Crew growth

Our purpose

Our approach

Our mission

• receives payment instructions from 35 suppliers

• instructs custody and transfer agent banks payments

• provides oversight and management to intraday payments

Our teams

Reduce

expenses

Increase

performance

Manage

liquidity

Safeguard

assets

Manage

operational

risk

Cash Management Bank Fee Management


Money Movement pre-SWIFT environment

Transfer agent

70+ accounts

Custody

250+ accounts

Proprietary

Fax

Bank software

Sources of instructions

People dependent Multi-source No bank STP

• $25 billion in daily movements

• Manual process - proprietary system, fax and bank software

• Over 800 bank accounts, low efficiency, high inherent risk

• Files sent to banks for manual payment entry, no straight through processing

• Reconciliation, manual and inefficient

• No intraday payment oversight

Brokers/Advisors

500+ accounts

Retail

Institutional

Internal

NSCC

$25 billion daily

Payment Case Study


Pre-SWIFT risks and mitigation needs

Financial

Impact or

Significance

Probability of Occurrence

Low

High

Low High

Payment methods

Manual Fax,

bank software

Manual money

movement Payment

timeliness

No bank STP,

inability to move

accurately/timely

Manual

money movement

Payment accuracy

Proprietary

message types

dependability

Accurate/timely

Reconciliations of

many entry sources

Security access

o Dependable, scalable payment instruction source – Treasury workstation

o Aggregated, netted payments

o Ability to support global expansion

o Straight through processing with banks

o Security effectiveness, eliminate fax and bank software

o Payment oversight/reporting and communication with banks

Risk mitigation needs Pre-swift payment risks

Payment Case Study


Treasury Workstation and messaging

2007 to present

2010

Netting technology

2008

Payment

automation

Expenses

2012

Payment

automation

Phase II

2013

Sustained

contingency

Global FFS 2020

Initiative

1998-2007

Pre-SWIFT

Proprietary

Treasury Workstation

SWIFT

implementation

Successes

• SWIFT immediacy - bank STP

• Mitigated payment risks as planned

Challenges

• Migration timing - web of payments

• Manual entry - payment source required

• Day in the life – release timing based on

banks, dollar size and time expectations

• Reporting – internal management and bank

funding, missed opportunity

Lessons Learned

• Phased approach – pilot probabilities

• Change management – more is better

Payment Case Study


Treasury Workstation and messaging

2007 to present

2010

Netting technology

2008

Payment

automation

Expenses

2012

Payment

automation

Phase II

2013

Sustained

contingency

Global FFS 2020

Initiative

1998-2007

Pre-SWIFT

Proprietary

Treasury Workstation

SWIFT

implementation

Payment Case Study


Current state SWIFT environment

Payment sources

Treasury

Workstation

• $12 billion in daily movements – reduced by 60%

• Executes 900 SWIFT payment instructions daily – reduced by 30%

• Bank STP 98%

• Reconciliation via MT940/950s to TWS book

• Eliminated fax and bank software by 99 percent

Supports messages

• MT202

• MT940

• MT950

Retail

Institutional

Internal

Transfer agent Custody

US Domestic

Brokerage

NSCC

Payment Case Study


Where we are headed

2014

Prep for global payments

2015 & beyond

Intraday Business process

monitor

SWIFT MT900/910s

MT103s

2014

TWS Elevation

- Multi-currency

- Dashboard

prepare for global Cash Movement

Center of Excellence

2014

International derivatives

SWIFT MT210s

Treasury

Workstation

SWIFT

Preparing for Global Center of Excellence

Payment Case Study


Target State Operating Model

Global Cash Movement Team

Shift from distinct local teams to a Global CoE that leverages time zone advantages:

• Centralized oversight with local ownership

• Governance, clear ownership, policies & procedures

• Single global platform/system

• Risk/control centralized oversight

• 2 locations enable cash movement coverage around the clock covering each region

Current State

Europe US Australia

Target State

Outsourced

Cash Movement

Capstock Trades Payments

Opportunity to cover

all regions in 2 locations

CoE – Localized Focus CoE – Leverage Time Zones Local CoE – One Location

Trades Capstock Payments

Supports messages

• MT202

• MT210

• MT940

• MT950

Supports messages

• MT202

• MT940

• MT950

• MT900/910

• MT210

• MT103

Payment Case Study


Future state Global Center of Excellence

payment sources

Domestic brokers/advisors

International brokers/advisors

Retail

Institutional

Internal

NSCC

International

Brokerage

Treasury

Workstation

Transfer agent Custody

Transfer agent

Custody

Vanguard Australia

Vanguard US/Malvern

• MT103

• MT202

• MT210

• MT900

• MT910

• MT940

• MT950

Payment Case Study

Roundtable discussion topics

• Your SWIFT evolution, from initial implementation to your

plans of the future

• Global expansion, success stories, lessons learned

• Message types usage, additions since your early years.

Thank you ! The SWIFT portfolio for Corporates

Website: www.swift.com/corporates

Email: [email protected]

Twitter: @swiftcorporates

LinkedIn: http://www.linkedin.com/groups?gid=4351117

nybf 2014 - evolution of swift in treasury

Economy & Finance