payments stream - real-time payments
TRANSCRIPT
SWIFT Nordics Regional
Conference 2015
Payments stream: Next stop: Real-time
payments
Copenhagen , 4 – 5 March 2015
Nordics Regional Conference - Speakers
Henrik Bergman, Senior Manager, WCM Market Infrastructure,
SEB
Stig Korsgaard, Engagement Director Nets
Dag-Inge Flatraaker, General Manager DNB Bank & Co-
Chairman of the Cards and Mobile contactless proximity payments
Working Group , Euro Retail Payments Board (ERPB)
Elie Lasker, Senior Market Manager, SWIFT
Robert Widmark, Senior Account Director, SWIFT (moderator)
SWIFT Nordics regional conference
March 5th 2015
Next stop: real-time payments
What are Real-Time Payments
Key features
24x7x365: payments can be sent and received all times of the day, every day of the year
24 x 7 x 365 Instantaneous Finality Certainty
Instantaneous*: 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 “Instantaneous Payments” is increasingly used to refer to retail real-time payments
Background Retail payment system landscape – client side
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
Background Retail payment system landscape – market side
Multi Currency Payment Scheme Single Currency Payment Scheme
• Clearing • Netting
• Settlement
Clearing and Settlement Mechanisms (CSM)
ACH
Multilateral
Bilateral Bilateral Multilateral
Central Bank RTGS
Inter-ACH Correspondent
Banking
PSPs
Intra Accounts
Banks
Higher
Credit
Risk
Higher
Liquidity
Risk
Correspondent
Banking
Market landscape Live in 17 markets, with 5 more in planning / development
Africa Nigeria
South Africa
Central & Latin
America Brazil Chile
Mexico Colombia
Asia Pacific India Japan
Singapore South Korea
Taiwan Australia
Hong-Kong New-Zealand
Europe Denmark Iceland Poland Sweden
Switzerland Turkey
UK Finland
Key drivers for Real-Time payments
Consumers
Banks
MIs
Regulators RT-RPS
Adoption
Customer expectations for faster payments
• Consumer 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
GSC 2015 - Real-Time Payments
0 1 2 3 4 5
Platform Development
Consumer Protection
Financial Inclusion
Consumer Expectation/ Innovation
Macro Economic Events
Background …but regulatory mandate is the most important
factor … but Regulators Focus on
Impact to Consumers Multiple Factors Drive RT-RPS
Adoption …
Regulatory Initiative
73%
Commercial Drivers
14%
Competition from Third Party
13%
ZA KR
SE PL
GB CH SG TW TR
BR
GB MX CL NG
JP CH SG
BR IN NG MX
Focused on Consumer Impact
Background But take-up rates vary depending on mandate and
pricing 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)
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
Secondary candidate
Real-Time Payments Use Cases
Real-Time Payments characteristics The interbank payment system is only one part of the solution
Payee / Beneficiary Customer
Payee Participant Bank
RT Architecture
Applications
Back Office
Infrastructure
Payer Participant Bank
RT Architecture
Applications
Back Office
Infrastructure Payer / Ordering Customer
RT Interbank Payment System
Clearing
Settlement
Agreements Agreements Agreements Agreements Agreements
Three key components required to allow for end-to-end RT-RPS 1. Banks’ infrastructures (front to back) must work in real-time 2. The interbank payment system must work in real-time 3. End-to-end commercial and operational agreements must be in place
3 3 3 3 3
1 1 2
Real-Time Payments characteristics But, the approach to clearing and settlement differs
Hub Approach RTGS Approach AU NPP Approach
Majority of existing RT-RPS’ - UK, SE, SG, PL
CH,MX,CZ AU
• Interactive clearing, where paying bank requests confirmation of payment details
• 24x7x365 (most) • Settlement either via pre-funding
or through deferred net settlement
• No distinction between high and low value
• No interactive clearing as combined with settlement
• No 24x7, but close
• Interactive Bank-to-Bank clearing • Settlement separated from
clearing and performed by CB as Fast Settlement Service (FSS)
• 24x7
RTGS
Hub Clearing
Settlement
A B
Bank A
Bank B
RTGS A B
Bank A
Bank B
Central Bank
Bank A
Bank B
Clearing
Settlement
A’ B’
A B
FSS
RTGS
Acc
ou
nts
Acc
ou
nts
Acc
ou
nts
A
cco
un
ts
or or
RT-RPS Characteristics Differences, but 24x7 & ISO 20022 are becoming
common
Questions
GSC 2015 - Real-Time Payments
To view drawing guides: 1. Right-click outside slide
and select ’Grid and Guides...’
2. Check ’Display drawing guides on screen’
3. Select ’OK’
Real-time clearing in Denmark Nets RealTime24/7
Nets is specialising in managing digital values through the delivery of strategic consulting and IT solutions
16
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five Nets Theme Color palettes
17
Strategic incentive to move - present system was from the 1970´ties - not sufficient for customer demands, business requirements and new product opportunities.
Competition – not loosing out to new market players – Apple, Google, Facebook, etc.
Support for new products and mobile proposition - initially P2P.
Push combined with DK Central Bank initiative in 2010 on intraday.
Establish with or without intraday a future proof infrastructure platform
Drivers for real-time payments in Denmark
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five Nets Theme Color palettes
Key principles or considerations
18
• Commercial yet Customised
• Solution developed as full platform based on best in class yet serving legacy
• Central system (hub), to keep development as well as operational costs as low as possible
• Hub maximum - also technological - prepared for future requirements and changes (time-to-market), yet actual usage may be quite restricted
• Optimised liquidity management and flexibility on settlement methods
• Flexibility on interfaces/integration points and products/services
• High focus on customer satisfaction
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five Nets Theme Color palettes
19
Real-time – a “Real” real-time system
24/7/365
High availability
Finality of payments within seconds and transaction times in milliseconds
Limitations only by banks
Real-time best practises incorporated
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five Nets Theme Color palettes
20
Modularly designed system, offering the advantage of flexible solutions consisting of standard functional modules.
ISO 20022 and SEPA compliant.
A new platform incorporating best practises for real-time systems.
Flexible to support present and future business models.
Information highway
More than “just” payments and banks
Pain, remittance information, domestic scheme etc.
Sector agreements or bilateral agreements
A wide range of different overlay services – examples e-Invoicing, Anti-Fraud, mandate management, etc.
State of the art RTP clearing solution
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five Nets Theme Color palettes
21
November, 2014 - big bang implementation.
Migration from day one – strong commitment from the banks.
End user from day one as well
Mobile – a product – as a big driver.
The entire Danish banking sector is participating.
The Central Bank as an active player throughout the different phases in the project.
Key success factors for real-time in Denmark
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five Nets Theme Color palettes
Real-time in a broader perspective
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RealTime24/7 supports both domestic and cross border clearing and settlement
RealTime24/7 can route according to rules
Standard SEPA compliant transaction for Europa + AOS
Added support and product offerings for domestic transactions
Prepared and ready for Europa
ISO20022 + other ISO standards
Use of existing full interbank schemes
Easy adaptions of new schemes
SEPA prepared
TARGET2
Channel agnostic – so for instance SWIFT
DK real-time is not a SILO!