NACHA Payments 2013 - Payments Systems Worldwide: Non-Bank Providers Perspective

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Non-Bank Providers are often able to introduce less expensive products and services more quickly than the typical financial institution. In part this is due to the regulatory pressures in the financial industry, but these offerings could also be attributed towards the willingness to embrace emerging trends. In this session speakers offer insights on how the non-bank is poised to succeed in today’s market and how they are able to extend their offerings beyond consumers and begin working with the financial institution to extend the reach of both the bank and the non-bank networks.

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NACHA Payments 2013 - Payments Systems Worldwide: Non-Bank Providers Perspective

  1. 1. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.© 2013 [Insert RPA Name]. All rights reserved. Through its Direct Membership in NACHA[insert RPA Name] is a specially recognized and licensed provider of ACH education,publications, and support. Regional Payments Associations are directly engaged in theNACHA rulemaking process and Accredited ACH Professional (AAP) program. NACHA ownsthe copyright for the NACH A Operating Rules & Guidelines. The Accredited ACHProfessional (AAP) is a service mark of NACHA.Payments Systems Worldwide:Non-Bank Providers PerspectiveNick Senechal, VocaLinkNeil Burton, Earthport© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.
  2. 2. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.2© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Agenda• Banks and non-banks – Disruptors or collaborators?• Examples• Creating a platform for collaborative innovation
  3. 3. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.3© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.There is a broad spectrum of non-bank providersNon-banksACH; e.g.VocalinkService providere.g. Earthport,FedGlobal*Serviceprovidere.g. PayPal*Alternativecurrencye.g. BitCoin* Many non-banks are registered with and regulated byauthorities, and required to execute compliance processesincluding KYC, AML and Sanctions
  4. 4. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.4© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.There is also a broad spectrum of banksBanksRetailbanksAgencyBanksSavings andLoansCreditUnionsWholesalebanks
  5. 5. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.5© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Collaborate or Compete?Relationship NPVFXtransaction feeOperational servicesComplianceSystems and ITNetworksIncome Cost
  6. 6. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.6© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Balancing customer services and ROINon-banksNon-bank shareRelationship NPVFX spreadtransaction feeRelationship NPVFX spreadtransaction feeBanksBank share• Transactional revenue v cost• Investment cost• Time to market• Stake in emerging space
  7. 7. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.7© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Example 1 - M-Pesa - Disruptor or Enabler?• Kenyan realtime domestic clearing and settlementscheme• Frequently described as a mobile payments scheme• Unique national requirements – itinerant domestic workforce• Started as a non-bank innovator as banks not interested• Commercial motive was brand loyalty rather than profit• Now processes perhaps 30% of Kenyan GDP• Now it has reached scale, banks are increasingly involved
  8. 8. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.8© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Segregated AccountsNetwork LiquidityFI:EUR UK:GBPSG:SGDUS:USDPH:PHPAU:AUDJP:JPYZA:ZARUS:USDUS:SGDNO:NOKInstructionEarthportclientPL:PLNExample 2 – Global ACH
  9. 9. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.9© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Example 3 – ACHACHs are a bank outsource:• ACHs were an innovation that has allowed banks to :• Create collaborative networks• Outsource services and share costs in “non-compete” areas• Access new value for banks’ customersBankBankCustomers accountsCustomers accountsBankBankCustomers accountsCustomers accountsACH
  10. 10. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.10© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Card schemes have adopted a different space...ACHCardschemeMerchantCardholderMerchantCardholderBankBankBankBankCard schemes have enabled banks to monitise commercetransactions......although underpinned by the ACH and the bank account
  11. 11. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.11© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Digital technologies have created newopportunities for the consumerACHCardschemeMerchantCardholderMerchantCardholderBankBankBankBank“Digital native” entrants have been quick to exploit digital technologyOriginally riding card rails they are now moving to the ACH to access funds• Will they ever pay a fair price?• Can banks exploit their own rails better themselves?
  12. 12. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.12© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Collaborative disruption by banks?ACH models have been a stableunderpinning of economies for decadesbut are generally basic:• not tuned to operate at the pace ofdigital channels• Not connected directly to a widerange of services and providersObservable consequences• Aggregation of financial flows by newproviders (e.g. wallets providers,remittance providers)• Disintermediation of banks frombasic financial transactionsA new ACH model can help banks onceagain to reclaim space3%20%47%30%nonesmallmediumlargeHow much pressure is thereOn ACHs to innovate?Source: Survey of 76 payments experts in 25 countries, 2012
  13. 13. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.13© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Infrastructures must engage morewith the marketSource: Survey of 76 payments experts in 25 countries, 2012A key task for ACHs will be tobuild partnerships that enableBanks to offer new servicesto their customers
  14. 14. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.14© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Realising the connected visionCreate new value through ACHNetworksConnect new, revenue earningcustomers to banksACH connectivityStandardised real-timeprocessingThe right commercial modelCo-creation of valueConnect new, revenue -creating service providers tobanksRe-intermediation
  15. 15. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.15© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.New propositionsVision – driving bank-centric value fromexisting capabilityACHOpenAccessNetworkBankBankCustomersCustomersBankBankCustomersCustomersCorporatesInternationalconnectivityMerchantsSmallerbusinessesDistributionNetworkRevenues, customer familiarity, re-intermediationServiceproviders
  16. 16. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.16© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Requiring more from utilities may be a better modelRegulations,moreregulationsLeast commondenominatorInnovator
  17. 17. © 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.17© 2013 [Insert RPA Name]. All rights reserved. No part of this material may be usedwithout the prior written permission of [Insert RPA Name]. Content from other sources isused with permission and requires the separate consent of those sources for use byothers. This material is not intended to provide any warranties or legal advice, and isintended for educational purposes only.Collaboration delivers moreNon-banksNon-bank shareRelationship NPVFX spreadtransaction feeRelationship NPVFX spreadtransaction feeBanksBank share• New products• New markets & sources of income• Speed to market• Mitigate development costs and risks

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