Institutional presentation of IBAN Portability Project

1. 1

2. FORFIRM is an ICT company specialized in the FINTECH sector
serving large clients in banking sector.
• The mission of FORFIRM is to experiment new technological
trends in advance in its laboratory and present to the Finance
Market disruptive innovations
• The different research areas are E-payments, Blockchain and
Security
• The company born in 2014 and with a growth of 100% on year
basis passing from 280K€ in 2015 to the estimated 1,2Mil in
2017, is composed by a team of people passed from 2 to 21
person all with PHD or Master Degree and seniority in the IT
and Finance sectors
• The mission of FORFIRM is to be lead in the finance innovation
serving its clients on their specific needs and new business
trends
VARESENEXT is an innovation hub which focus is into FINTECH area.
VARESENEXT principal activity is the startups support in the early
stage with a proprietary methodology
• VARESENEXT vision is inspired by North European states and USA
start up hub
• The mission of VARESENEXT is to increase the number of fintech
start up in Italy (in particular in Varese district)
• The research areas are blockchain, crypto coins, digital and
physical banking merge, digital bank transformation and open
banks
IBANP is a fintech start up, spin off of FORFIRM, with the mission to
realize the Account Number Portability
THE ECO SYSTEM OF IBANP
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3. OUR MISSION
BRINGING ANP (Account Number Portability)
TO THE BANKING MARKET
The objective of the International Bank Account Number Portability Project (IBANP)
is to introduce, in the European banking Market, the portability of IBAN as today
already happens with mobile phone numbers in the telecommunication sector
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4. Both Banks and their Account Holders are facing multiple issues coming from the absence of any form of
ANP in Europe and from the consequences of the financial crisis
Switching barriers for the bank
accounts holders
• Changing IBAN requires informing all
subjects that regularly credit or debit a
Bank account
• This issue is particularly relevant for SME
and for Independent workers and for a
rising proportion of people who are
moving internationally for work
• The consequent loss in the levels of
competition brings to higher prices,
reduced efficiency and innovation
• This is also a barrier to entry for the
newest digital banks
High costs of reorganization for
banks
• As a consequence of Financial Crisis, Banks
need to reorganize and centralize their
finances
• This involves moving bank accounts and,
changing IBANs of thousands and
thousands of customers
• Those operations are very expensive and
can last for a long period of time
• Due to the inconveniences for account
holders, there are very high risks in terms
of losses of clients
Rising Levels of regulatory
compliance activities
• Banks are facing rising costs in terms of
compliance with evolving regulations
(including AML, KYC, PEP)
• Procedures needed to control bank
accounts and updates of IT systems in
response to new regulations can cover
over 70% of the costs related with current
accounts, also because banks manage
them on their own
• When a customer opens a new account,
the procedures have to be repeated from
the beginning: there is not portability of
its dossier in place
IBANP : issues and market needs
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5. ANP: how to solve it?
Two main “revolutions” can be the enablers to address the
resolution of the challenges previously presented
PSD2
• Open bank regulation is forcing Banks to open their
customer account data (if approved by customer) to other
Banks by using simple standard communication
Blockchain
• The introduction of smart contracts and trusted
identity provided by blockchain will allow Bank’s to
securely cooperate between them
• R3 is a concrete example of a consortium with over
100 Banks cooperating to standardize the smart
contract solution among all Banks
Both initiatives allowed us to identify and register two solutions to ANP
with ID # EP17425092.8 and EP17425091.0 under the IBANP project
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6. ANP: How IBANP Works
Old Bank
Internal Database
2
11
2
3
4
5
2Central payment
system
Central Respository
Central Redirection Database
Central Payment Mandates
Central KYC Database
New Bank
Internal Database
The Centralized Banking Options Information Exchange
The customers use the same account
number regardless of which bank
they resides with
The Central payment system accesses a portability routing table from the
central redirection database and forward the payment to the new bank
Plug-in Plug-in
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7. The CLOSED modality will allow the banks to share
the services of IBANP with a specific group of
banks that are part of their specific consortium /
group
The OPEN modality, will allow the banks to share
the service at European Level with all the other
banks that choose the open modality
ANP: An open and a closed IBANP solution
Consortium 1
Consortium 2
1.1
1.2
1.3
2.1
2.2
0.1
0.2
0.3
CLOSED SOLUTION
OPEN SOLUTION
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8. ANP: THE BENEFITIS OF IBANP
The Specific Features of IBANP
1. ANP
2. Shared Platform
3. Plug-in Solution Compatible with every system
4. Closed or Open versions
5. Open License
6. Owned by the Banks and the Consumers
Specific
features
involved
Banks Digital Banks
Final
Consumers
Control
Authorities
A.1. Facilitates Reorganization of Banks reducing drastically
costs, timing and risk to lose clients
1-3 X x
A.2. Facilitates Internal Mobility of Accounts’ Holders and
eliminates related administrative burden
1-4 x x X
A.3. Reduces drastically Compliance and security Costs 2 X X x X
B.1. Facilitates Open Mobility of Accounts’ Holders 1-4 X X x
B.2. promotes a gradual Liberalization of the Market 1-4 X X
B.3. Rises Transparency in the Sector 2 X
C.1. Clients and Consumers associations have Ownership on
the product
4-5-6 X X X
C.2. No Costs of Development for the clients (the banks) 3 X X x
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9. Main Reluctances to ANP(*)
and our response
(*) SOURCES ARE:
For EBF: European Banking Federation’s Response to the European Commission Green Paper on Retail Financial Services (2016)
For EC: Answer given by Lord Hill on behalf of the Commission to the EP : http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=P-2016-000793&language=EN
EBF: “with ANP the current IBAN would have to be
replaced”
• IBANP allows the portability of IBANs in a simple and cost effective way
• BUT we have already the option, in the long term, to mask the actual national IBANs with a European IBAN
EBF: “This system would be extremely difficult to
implement”
• The only thing that will need to be done in order to switch bank will be to communicate to the new bank
the codes of portability of a specific IBAN.
EBF: “ANP implies complete conversion of customer
databases at banks”
• Our solution doesn’t require any change within the software or databases of the banks.
• Our solution will link banks databases with a common platform’s repository.
EC: “Such changes are technically feasible but would
be very costly “
• IBANP doesn’t require cost of development for the banks: the integration in the system is done through a
plug-in solution to a shared platform
• In the long term, once all the infrastructure for the portability of IBAN will be developed thanks to our
Closed/Open solution we can give the option to mask the actual national IBANs with a European IBAN
EC:” the corresponding costs of the introduction of a
full ANP system outweighs its potential benefits”
• Our solution reduces drastically the costs involved
• The CBA above ANP, supporting the preparation of PAD, didn’t take into consideration the effects that the
switching barrier has on the Business Banking sector (which are much higher than in the retail one)
• The CBA didn’t take into consideration neither the indirect effects coming from the rising up of competition
EC: “If pan-European ANP were introduced, the SEPA
Regulation adopted in 2012 would have to be
reviewed to modify IBAN identifiers”.
• Yes - SEPA Regulation (par 4.3 SEPA credit Transfer Processing Flow - and ISO 13616-1: 2007) needs to be
reviewed. Any future model of ANP would. The next review is planned for the end of 2018, with many
changes as the introduction of the fast payments in the SEPA circuit
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10. Views of European Commission on ANP
“The results of the study published today explain why consumers change their banks so rarely. If consumers are not able to
easily switch bank accounts, they cannot take advantage of better and cheaper banking services on offer elsewhere. The
single market is thus deprived of the competitive drive that leads to innovation, cost savings and better quality banking
services. This, in the long-run, can prove to be an obstacle to growth.” (2012)
“The Commission agrees that pan-European portable account numbers have advantages for consumers. During the
preparation of the legislative proposal for the PAD, the Commission examined the costs and benefits of the introduction of
full Account Number Portability (ANP) in the EU but concluded that the corresponding costs appeared to outweigh potential
benefits at that time”. (2016)
• Several important steps have been taken in Europe in order to foster competition on the banking market with initiatives
such as the "Payment Service Directive" (PSD2) and the "Payment Account Directive" (PAD)
• PAD demands for easier ways to switch between banks and asks to member States, as a minimum instrument to support
consumers, to implement a manual switching service
• A deeper CBA of ANP is planned for 2019 in order to support the preparation of PAD 2
(*) SOURCES ARE:
The European Commission press release “Consumers: Switching bank accounts – 8 out of 10 mystery shoppers faced difficulties”, 24 Feb 2012 on the results of the Commission
monitoring report three years after the entry into force of the Common Principles for Bank Account Switching agreed y the European Banking Industry Committee (EBIC) in 2008
Answer given by Lord Hill on behalf of the Commission to the EP in 2016: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=P-2016-000793&language=EN
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11. Manual VS Automatic
• A manual switching service is expected to have higher error rates than an automatic service
• Even an automatic Switching Service has limits in time and do not reassure the customers on mistakes as described below
Informing third parties/fear of
missed payments
• Users of the manual/automatic switching service must check themselves whether:
• direct debits and credit transfers are forwarded correctly
• and whether client or suppliers have entered the new account number in their records.
• ANP eliminates this switching barrier
Retail and Business
• The actual manual switching service is not compulsory for Businesses
• Banks don’t have incentives in liberalizing this market
• Nevertheless businesses would be the major beneficiaries of an ANP system
Third Parties Admin. Systems
• If ANP was introduced, businesses would no longer need to adjust the account numbers of customers that switch banks in their
administrative systems.
Level of Awareness and
Switching Rates
• Despite the application of manual/automatic switching services, switching rates in Europe are still low
• A study by two employees of the Dutch Central Bank (**) has shown that increasing the awareness of the switching service has no
significant effect on consumers’ switching intention.
• The introduction of ANP, by contrast, would have a significant effect on the intention to switch
Several competition and markets authorities around Europe are hiring research specialists in order to move the current
discussions above ANP forward(*). The results are similar: ANP would be a much more effective way to lower switching
barriers and therefore to raise the competition in the banking market than a Bank Switching Service
ANP VS Banks Switching Services
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(*) In this presentation we refer to the Study of the benefits of account number portability, Decisio (The Netherlands, 2016) commissioned by the Netherland’s Authority for
Consumers and Markets and to the study Account Number Portability – Report Commissioned by the Financial Conduct Authority, Moorhouse (UK, 2015)
(**) DNB working paper no. 490. Banking products: You can take them with you, so why don't you? De Nederlandsche Bank. (2015, december)

12. One of the main reasons for consumers’ painful switching experiences and their unwillingness to switch is the
fear of losing some incoming and outgoing payments to the ‘new’ account. This issue obviously goes beyond
the consumer-bank relationship and involves creditors (e.g. utility companies, lenders) and debtors (e.g.
employers, fiscal authorities) who often fail to update new account credentials in their databases in a timely
manner. Ultimately, recurring payments continue to come out of the old account which may be insufficiently
provisioned or the old account may have been closed.
Account number portability (ANP) would avoid significant inconvenience to consumers and would reassure
them that no payment will be lost while switching accounts.
CUNSUMER ORGANISATION OPINION(1):
THE EUROPEAN CONSUMER
ORGANISATION
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13. CUNSUMER ORGANISATION OPINION(2):
The UK Financial Conduct Authority
In September 2014, the UK Financial Conduct Authority (FCA) commenced a study of the costs and benefits of account number
portability (ANP) as a way of increasing competition in banking by making it easier for customers to switch provider. This report
provides 4 theoretical solutions to ANP and their advantages. IBANP is built combining the best options from this study
CUNSUMER ORGANISATION OPINION(3):
Netherlands Authority for Consumers and Markets
June 2016
Direct benefits only for the Netherlands (for the period 2017-2026) Base Scenario 1 Base scenario 2
Lower switching costs for customers EUR 174 million EUR 134 million
Lower switching costs for business EUR 159 million EUR 121 million
Fewer administrative operations for business and institutions when customer is given a new
account number
EUR 133 million EUR 133 million
Estimate of total direct benefits EUR 466 million EUR 388 million
Estimate of Indirect Benefits coming from more Competition EUR 550 million EUR 500 million
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Recommendation of ACM to the European Commission: Stimulate other Member States to estimate (parallel to the implementation
of the PAD switching service) the social benefits of EU-wide ANP, using the framework offered by ACM as the starting point

14. The Benefits of IBANP
• IBANP Facilitates Reorganization of Banks reducing drastically
involved costs, timing and risk to loose clients
• Costs of the Migration of Data (1): M&A operations require
expensive IT assistance for the migration of data depending on the
complexity and number of IT systems involved. IBANP simplifies
those operations and doesn’t involve any cost of internal
development for the clients as based on a Plugin solution
compatible with the systems of the banks
• Timing Required (1.3): Those operations can last 9 to 12 months
while the introduction of IBANP would reduce this time to a few
weeks.
• Inconveniences for Account Holders (3): Banks loose a significant
share of clients in those operations with consequent losses in terms
of investment downgrade. IBANP would reduce drastically this risk
thanks to the ANP that reduces inconveniences for account holders
• Communication and Retention (2): As a consequence of the risk to
loose clients, banks have to put in place customers’ retain activities
that involve costs of several Millions € for an operation of average
level. IBANP would reduce those activities to formal communication
• Assistance to Clients for Switching (4): As imposed by PAD banks
have to take certain actions in order to inform businesses that
collect debits payments from the consumer’s previous account.
IBANP would eliminate this cost
A simulation (*)
(*) Scenario of Acquisition of 3 banks by a big banking group, involving the migration of 1,5
Million Bank accounts, an expected loss of clients of 8%, an average daily balance of users of
3.000 euros, and returns of investments of 10% with a leverage effect of 10.
THE VALUE PROPOSITION for BANKS (1):
INTERNAL MIGRATION OF BANK ACCOUNTS
NO IBANP IBANP
0. Plug-in to IBANP - 800.000
1. Migration of Data 4.000.000 146.000
1.2. Risks of Interruption of operation High No
1.3. Time of Migration of Data 9 Months 2 weeks
2. Communication and Retention 2.777.273 1.200.000
3. Loss of Clients and Investment
Downgrade
313.200.000 19.575.000
4. Assistance to clients for switching 47.045.455 0
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15. The Benefits of IBANP
THE VALUE PROPOSITION for BANKS (2):
CLOSED ANP FOR ACCOUNT HOLDERS
• Rising Mobility of Work and Consequent rising Demand for ANP
• IBANP facilitates Mobility of Accounts’ Holders and eliminates
related administrative burden
• Switching Administrative Costs for Retail Consumers (1): Costs
related with opening a bank account and closing the old one are
evaluated at 100 € per switching operation + loss of time. IBANP
would eliminate them. Banks could ask for a part of the savings
provided to cover the services of ANP.
• Cost of the Services of ANP (2): in order to offer the services of
portability banks have o pay an amount which is proportional to
the number of switching operations and to the number of requests
of a BIC to the redirection database od IBANP (in relation with the
number of bank transfers)
• Loss of Clients (3): Banks loose an important share of their clients
going o live abroad, with consequent losses in terms of investment
downgrade. IBANP would reduce drastically this loss
• Marketing Campaign and Investment Upgrade (4): We assume that
the first banks that will provide a service of ANP to mobile workers
can gain a significant share of this category of clients.
A simulation (*)
(*) Scenario of a Medium Group with 40 banks, 10.000.000 account holders, a switching rate of
0,5% with an average daily balance of users of 3.000 euros, and returns of investments of 10%
with a leverage effect of 8. In this scenario we assume that the bank is between the first offering
the ANP service and would capture a 10% of the market of Mobile people.
NO IBANP IBANP
0. Plug-in to IBANP 3.000.000
1.Swiching costs of the client (as an
indicator of their willingness to pay)
5.500.000 (+) 2.750.000
2. Cost of the Services of ANP 5.949.440
3. Loss of Clients and Investment
Downgrade
104.400.000 10.440.000
4.Maketing Campaign and Investment
Upgrade
(+) 206.300.000
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16. The Benefits of IBANP
THE VALUE PROPOSITION for BANKS (3):
MANAGEMENT OF CURRENT ACCOUNTS WITH
REDUCTION OF COMPLIANCE COSTS
A simulation (*)
• Management and update or regulatory compliance represents
today the most relevant IT cost for current accounts (up to 70% in
2017).
• IBANP would drastically Reduce Compliance Costs of clients
thanks to:
• The Portability of Personal Accounts Dossiers: IBANP would
reduce them drastically thanks to the fact that client folders will
be passed from a bank to another bank and to the centralization
in a unique office of all the normative activities of the
consortium.
• Economies of Scale and Reduced Individual Price: IBANP would
sell this reduced (per single bank) amount of compliance services
at a lower individual price.
• The upgrade of the IT system would be done once for all the
members of the platform. (*) Scenario of a Medium Group with 40 banks, 10.000.000 account holders, in a year of
high regulatory updates
NO IBANP IBANP
0. Plug-in to IBANP - 3.000.000
1. Annual Regulatory Compliance Costs 26.410.000 10.428.000
1.1. Annual Upgrade of IT systems in
response to regulatory Changes
8.000.000 200.000
1.2. Costs of Compliance (PEP, KYC, AML) of
opening of New Accounts (Per year)
1.050.000 228.000
1.3. Closure Current Accounts 360.000 0
1.4 Annual Compliance Monitoring (PEP,
KYC, AML) and update data for all the clients
17.000.000 10.000.000
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17. Advocacy Key Elements and Barriers for IBANP
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BARRIERS AND ADVOCACY ELEMENTS OUR RESPONSE AND COMMENTS
The concentration of the activities of such a
strategic area in a private company is dangerous and
would not be allowed
• Creation of a Consortium of banks and Associations of Consumers: Banks and consumers will manage and own the
platform
• The software of the platform is open AND based on GNU licensing model allowing third parties to build new commercial
products;
Traditional Banks are reluctant towards a solution
that may foster competition in their sector
• Correct communication with banks explaining LT opportunities
• Proposition of other competitive Advantages
• The needs of reorganisation of the market are pushing in this direction
Europe may prefer another Model of ANP. There are
several theoretical options under analysis
• We registered two different solutions to ANP.
• We believe the market is ready only for the solution presented under this presentation.
• The second model would use the same technical infrastructure in order to propose a European unique IBAN coding
system
Our solution requires Openness of personal financial
data of customers
• Solved by PSD2 (which will be applied as of 2018) that will require banks to open data on their clients
Requires improvement in the SEPA regulation on the
composition of IBAN
• Next revision to SEPA is planned for 2018.
• Other expected changes are going in this direction
In order to trigger this solution at European level
ANP has to become compulsory
• Not a market barrier as our solution has a potential market that is independent
• EC is planning a new CBA on ANP for PAD2 in 2019
• We will actively collaborate with consumer associations to promote this change

18. OUR VISION OVER THE GOVERNANCE OF IBANP
Governance structure: the platform should be owned by a consortium of banks and associations of consumers and FORFIRM as
Technical Partner. The CDA of IBANP should be composed by Representatives of Banks and Consumers
Redistribution of Revenues: Revenues of its activities would be redistributed following a model that will be decided by its members
over the following voices:
• The further development and management of the platform (including the services that will be provided by FORFIRM )
• Returns to the members
• Investment into Innovative Fintech Startups with a fund promoting innovative solutions promoting the liberalization of the
sector
Banks
Tecnical
partner
Associations of consumers
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19. In 2016, FORFIRM has been involved directly as IT consultant for an important German Bank in an operative tentative to
centralize in its Frankfurt branch foreign bank accounts. At the end, the operation was limited at the retail segment as the
risk of losing clients was too high in the corporate segment. This experience brought us to the conclusion that an innovation in
the field was required
• March 2016 - design of the solution’s architecture: adopting the TOGAF (Open Group Architecture Framework)
• October 2016 – development of prototype APLHA in COBOL with a focus on performance and cyber security.
• December 2016 - Interconnection of prototype ALPHA with SEPA circuit communication standards: In this phase we have integrated the IBANP
software with a payments bank emulator and tested the E2E flow.
• August 2017 - Registration of two patents regarding our tactical ST solution (described above) and our strategic LT solution (that building on the
shared platform will propose to mask the actual National IBANs with EU IBANs)
• December 2017 - April 2018: Development of BETA Prototype
• April-October 2018: TEST with Pilot Bank
• December 2018: Finalisation of Candidate Version of IBANP
Current Stage of Development of IBANP
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20. Enzo Russo
CEO – Varese
e.russo@ibanportabilityproject.org
0039 - 3358031283
Federica Cunego
Marketing Manager
f.cunego@ibanportabilityproject.org
0039 - 3938102274
Greta Forloni
PR Manager
g.forloni@ibanportabilityproject.org
0039 -3929401905