Slide 1 Sibos205_Banking_PC_LVACH_v2.ppt Slide 1

SWIFTSolutions for low value payment clearing systems

Sibos205_Banking_PC_LVACH_v2.ppt

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Low-value payments

Usually low to medium value and / or non-urgent payments and related statement reports

– Credit transfers Salaries, pension payments, retail and commercial payments

– Direct debits

– Cheque clearing and truncation Formatted in a variety of file structures Exchanged in electronic files Cleared through correspondent relationships

and/or Automated Clearing Houses (ACHs)

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Complementing our position in wholesale segment by extending to low value payment market

1973

1995

2003

We started in the wholesale cross-border payments market : high-value messaging but limited volume

We entered the retail cross-border payments market: lower-value add messaging but limited volume

Cards & cash

We extended to the wholesale domestic payments (RTGS) : high-value add messaging with large volumes

High-valuemessaging

We are entering the retail We are entering the retail domesticdomestic payments market: payments market: lower value addlower value add messaging but messaging but large volumeslarge volumes

Low valuemessaging

20052005

High-volumemessaging

Low volumemessaging

Single and cross-border payments

Domestic payments (RTGS)

Bulk cross-border payments

ACH

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SWIFT provides a total solution for payments and settlement systems

Automated clearing houses

Bulk payments

Real-time gross settlement systems

Settlement instructions

FIN FIN Copy InterAct FileAct

Central securities depositories

DVP instructions

Real-time query/control

Reporting

Settlement instructions

Real-time query/control Real-time query/control

Reporting

Banking correspondents

Payments

Bulk payments

R-t cash reporting

Settlementinstructions

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LVP Business Models

Bilateral file exchanges

4

“Hub and spoke” around ACHs

ACH acting as accounting centre

3

“Hub and spoke” around ACHswith indirectmembership

2

Accounting data

Payment dataACH

Indirect ACH participant

e.g. NL, UK e.g. ES, FR

e.g. BE, EBA, ZA e.g. AU, DE, IE

1

Direct ACH participant

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Market developments

In Developing Markets:

– Central bank led buy off shelf ACH’s in developing markets In Europe:

– ACH operator becoming more commercial

– SEPA leading to consolidation

– TARGET 2

– Faster Payments (OFT)

– Gradual move to XML, encouraged by Regulators In US:

– Increased interest in XML

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SWIFT’s solution for low-value payment clearing systems

Rationalisation

Standardising the communications layers with SWIFTNet FileAct embedding SWIFTNet PKI

Harmonisation

Standardising the end-to-end transaction chain with Bulk Payments standard for bank-to-bank and bank-to-ACH flows and C2B Payment Initiation standard for customer-to-bank flows

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The solution aims to connect all potential players involved in the end-to-end transactions

Bank-ownedservices

Bank-ownedservices

NationalACH

RegionalACH

Region with an ACHRegion with an ACH

SWIFTNet services

International bank-to-bank exchanges and clubs

EBA

STEP2

Countrywith an ACHCountrywith an ACH

Countrywithout an ACH

Countrywithout an ACH

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SWIFTNet solution for EBA STEP2 -Pan-European ACH

EBA Clearing acting as service provider:

– Administers its own SWIFTNet service for the STEP2 community

– Uses SWIFTNet FileAct in many-to-one for payments input and output flows

– Uses the MT103 and the XML Bulk Credit Transfer messages

– Uses SWIFTNet Browse for on-line monitoring services

– Uses Reverse Billing in order to let SWIFT invoice input traffic to senders; output traffic to receivers

To-date, 70 direct participants access STEP2 over SWIFTNet. More will join in November 2004 and later

See http://www.abe.org for more infoSWIFTNet FileAct,InterAct and Browse

SWIFTNet solutionfor EBA STEP2

EBASTEP2

Direct Participant

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What the first SWIFTNet-basedAutomated Clearing House says

"Combining the strengths of our partners SIA and SWIFT, we have been able to launch our new pan-European retail payment clearing house (STEP2) within a record timescale of 10 months. With STEP2 in place, banks in Europe now have a new platform that enables them to further develop their retail payments business in accordance with customer needs in the Single Euro Payments Area. Using SWIFTNet was an obvious choice to allow for open access by a very large number of banks.”

Gilbert Lichter, Secretary General of EBA

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Caja Madrid’s implementation of XML Bulk Credit Transfer for EBA STEP2

Caja Madrid has implemented the Bank-to-bank Bulk Credit Transfer message STP Plus variant and originates the STEP2 bulk payments files straight from the internal back-office application

SWIFTNet

XML Bulk Credit Transfer STP PlusXML Bulk Credit Transfer STP Plus

ApplicationEBA

STEP2SWIFTAlliance

GatewayFTA

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What our customers say…

“We have given our preference to the XML bulk payment standard for STEP2 since XML is now our standard internal content management technology. Loading the XML schema into our back-office application enables us to avoid the development costs that a proprietary syntax requires.”

Caja Madrid

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New

By using SWIFTNet, Eurogiro Members can eliminate their Eurogiro proprietary link

Eurogiro proprietary

network

Eurogiro Members can use their SWIFTNet connectivity to exchange Eurogiro payments with other members. The Eurogiro Hub interfaces Eurogiro’s proprietary network with SWIFTNet.

EurogiroHub

EurogiroMember

EurogiroMember

SWIFTNet

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What our customers say…

“The co-operation agreement with SWIFT fits perfectly with our strategy to lower entry and transaction costs and to expand the Eurogiro offering.”

Henrik Parl, Managing Director, Eurogiro A/S

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SWIFTStandards XML for end-to-end bulk payments enables end-to-end STP

Ordering Customer’sFinancialInstitution

AutomatedClearingHouse

Standardised content End-to-end STP

BeneficiaryCustomer’sFinancialInstitution

OrderingCustomer

BeneficiaryCustomer

2

4

XML Inter-bank Bulk Payments

XML Cash Management

3 XM

L Cash

Managem

ent

5 XM

L Cash

Managem

ent1

XM

L Paym

ent

Initiation

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SWIFTNet

FI’s &FI’s &RTGSRTGS

FedFedACHACH

EPNEPNACHACH

CHIPS

Dedicated link(s)

Dedicated link(s)

Federal ReserveFederal Reserve TCHTCH

FedWire

Single Single SWIFTNet SWIFTNet connectionconnection

FINFIN

FedWire CHIPS Clients

InterActInterAct

New SWIFT flows (InterAct and FileAct)Existing SWIFT flows (FIN)

SWIFTNet solution for FedACH & EPN ACH and US banks

Single payments / MessagesSingle payments / Messages

USUSBanksBanks

EPNEPNACHACH

ClientsClientsFedFedACHACH

FI’s &FI’s &ACHsACHs

FileActFileAct

Bulk payments / FilesBulk payments / Files

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hardwarehardware

softwaresoftwarelineslines maintenancemaintenance

supportsupport

release qualificationrelease qualification

testingtesting

backupbackup

disaster take-over disaster take-over exercisesexercises

legallegal

softwaresoftwaremaintenancemaintenance

project managementproject management

procurementprocurement

educationeducation

documentationdocumentation

Benefits for Automated Clearing Houses

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