Larc2013 - What's Happening in Payments


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Larc2013 - What's Happening in Payments

  1. 1. 1 Payments Work Session What’s happening in the payments marketplace? George M Doolittle, Head of Global Payment Services, Global Transaction Banking, Wells Fargo Liba Saiovici, Managing Director, Latin America Product Management, Global Treasury Solutions, Bank of America Merrill Lynch @swiftcommunity #LARC2013
  2. 2. George M Doolittle Executive Vice President Global Transaction Banking Wells Fargo International Group Cartagena, Colombia, Julio 2013 Some Thoughts On Emerging Payments Issues
  3. 3. Agenda • Trends and Issues • The Emerging Science of Payment Risk Management • The Work of the Payment Market Practice Group 3
  4. 4. 4 But, Payments Sit at the Heart of the System …
  5. 5. What is on the Industry’s Mind? Transparency Global Regulatory Activism Platform Efficiencies Sanctions Management as a Critical and Competitive Advantage The Battle for Liquidity Flight to FX Payments 5 CyberCrime Application Promotion Management The Value of Data Discretionary v. Non- Discretionary Development
  6. 6. 6 Some of the Detail… Industry Initiatives: •eInvoicing •Payment Reference Data •Data Repositories •LEI-Legal Entity Identifier •Off-shore Clearing Sites •CNY-CNH •Character Sets •ISO 20022 Migration •Settlement? PvP, CLS, RTGS, Netting, CCP AML/T &TE: •FATF.. Beneficial Ownership •Sanctions Management •FinCEN…Reporting •Trade Products •Extensions …Human Slavery, Tax Evasion, Corruption, Gambling Competition: •Market Infrastructures •Money Remitters •Non-Banks: e.g. Telecoms, Web Players, Retailers •Central Banks Regulation: •Dodd Frank Act •Reg E/1073 •Reg Q •FATCA •Basel III •BIS-CPSS •FDIC-Living Wills •FSA-CP 09/16 •PSD II •Internationalisation of RMB •Account Portability •Faster Payments Payment
  7. 7. 7 What should we be focusing on? • Payment Transparency • Intelligent Payment Routing • Payment Risk Management • Public Works & Community Projects • Regulatory Harmonisation
  8. 8. The Emerging Science of Payment Risk Management Errors Mount at High-Speed Exchanges in New Year By NATHANIEL POPPER January 14, 2013, 8:00am Security Firm Discovers Global Spy Campaign Bank Hacking Was the Work of Iranians, Officials Say By NICOLE PERLROTH and QUENTIN HARDY
  9. 9. Payment Risk Management (an Emerging Science) 9 Disruptive Technology  Identity Theft  Fraud-Electronification  Card Scams  DDoS Evolving Environment Globalisation •24x7 Real Time Operations •Offshore Centres •Terrorism •Liberation e.g. Arab Spring  Globalisation  Regulatory Activism  Disruptive Technology  Natural Disasters Natural Disasters:  Payment Centre Locations  Telecommmunications and Infrastructure  Team Member Safety Regulatory Activism •Consumer Protection •RingFencing: Safety and Soundness •Anti-Money Laundering and Anti-Terrorism •Corruption and Tax Evasion •Liquidity Customer Segments Consumer Corporate Institutional
  10. 10. So, Hot Topics In Payment Risk Management … • Anti-Money Laundering, Anti-Terrorism, Tax Evasion, Corruption and Sanctions Management • Transparency … – Pricing, and Processing – Banking Privacy and Beneficial Ownership – Counter-Party Risk (LEI) • Safety & Soundness: – Liquidity and Capital – Solving for Too Big to Fail (Living Wills, Basle III, Liquidity) – Euro-Contingency Planning • Interconnectedness: Financial Market Infrastructure Risk – Systemic Risk Analysis • Our Wired World: – Identity Theft and Card Fraud – Software Promotion Mis-Haps – DDoS • Disaster Recovery – Natural Disasters – IT Implementations
  11. 11. Introduction: PMPG and its Work
  12. 12. Introducing the PMPG • International industry group of payment subject matter experts focusing on setting market practices, beneficial to the payments community • Not a regulatory body, no enforcement • Focus – Setting of consensus driven global market practice – Educating the market place by provision of white papers – Protecting the market place by responding to industry consultations from a global market practice point of view • SWIFT Advisory Group • 12
  13. 13. Mission • Provide a truly global forum to drive better market practices which, together with correct use of standards, will help in achieving full STP and improved customer service: • The PMPG mission is to: – take stock of payments market practices across regions – discuss, explain and document market practice issues, including economic viability – recommend market practices, covering end-to-end transactions – recommend payments market practices in response to changing compliance requirements – ensure publication of recommended practices 13
  14. 14. Scope • End-to-end payment transactions, including: – payment initiations from any business to a financial institution – payment instructions between financial institutions – any kind of exception handling related to the above (rejections, returns, status reports, request for cancellations, reversals) – transportation and processing by financial institutions of business to business information – financial reporting, confirmations and statements, related to the above – the convergence of the trade and payments space – the impact of compliance requirements as they relate to global payments market practices – market practices for securities transaction related payments 14
  15. 15. Publications • Market Practice Guidelines – Use of the MT 202 COV – Compliance with FATF SR VII – International payment charging claiming process – US expanded wire formats – Use of ISO 20022 for high value payments • White Papers – Use of IBAN in international payments – Maritime attachments – Handling of multiple character sets – Auto Foreign Exchange Conversion – Foreign Account Tax Compliance Act (FATCA) – Dodd Frank Section 107315
  16. 16.
  17. 17. What’s happening in the payments marketplace? Liba Saiovici, Managing Director, Latin America Product Management July 11, 2013
  18. 18. 18 The global payments landscape Multiple countries… Multiple innovations… Multiple currencies… Change in global payments is inevitable… and will require a different strategy.
  19. 19. 19 Forces at Work in the Global Payments Industry InnovationRegulationStandardizationGlobalization There are a number of forces at work which are shaping the direction of the global payments industry
  20. 20. 20 Globalization With the increasing volumes of electronic payments, there is a focus on improving infrastructure to transform how payments circle the globe While the forces at work are similar across the globe, focus areas vary by region:  North America - focus on mobile and near-field communication (NFC) payments, and a number of regulations  EMEA – SEPA implementation and the impact of an integrated market  Asia Pacific - increase in electronic payments and payment options  Latin America - growth of person-to-person (P2P) payments and electronic payments as a result of an increase in non-cash usage.  Global volumes of non-cash payments increased by 7.1% , reaching $283 billion during 20101.  Mature economies contributed nearly 80% of the volume, however, the 4.9% growth rate of mature economies was far outpaced by the 16.9% growth rate in developing economies.  Use of non-cash payment instruments continues to grow exponentially.  Heightened importance of emerging markets in driving global economic growth has highlighted the growth of intra-regional trade and has increased the need for enhanced cross-border settlement and cross-currency payment solutions. Payments is one of the fastest growing industries worldwide and future growth potential remains enormous 1 Source: World Payments Report 2012
  21. 21. 21 Standardization But… a lot of companies in Latin America are still unfamiliar with ISO 20022 ISO 20022: the lingua franca in payments and securities  ISO 20022 has been widely viewed as the ‘holy grail’ of message standardization for the future.  The standard offers great potential for reengineering the payments industry and for process improvement.  Use of the standard has been greater in more developed markets with emerging markets, such as LatAm, being slower to adopt, however, usage continues to grow.  Global embracement of the standard will be critical if industry participants are to reap the full benefits of global standardization.  Widespread adoption will most likely drive further changes in consolidation, competition and technology.  Standardization initiatives aimed at improving efficiency, streamlining processes and reducing costs continue to gain widespread industry attention and participation.  Organizations such as SWIFT have become a critical voice on the standards front and have emerged as catalysts towards global standardization of processes.  In a recent Anthemis Group report, SWIFT was highlighted as still being “the preferred infrastructure when we talk about international payments” through its core “strategic positioning”.  Standards are particularly key in the emerging mobile space with the need for mobile payments standards definition and management. Historically the lack of a common global standard and variations between systems have reduced the ability to seamlessly pass data between counterparties
  22. 22. 22 What is ISO 20022? For payments  Implemented by banks, corporations, payment systems and financial applications providers to conduct payment operations  The future (and present) standard in use with a number of the world’s clearing and payment systems  Frequently appearing in corporate cash management RFPs where multi-bank, multi-country reach is required For financial services  A harmonized set of standards across financial services domains: – Cash, Securities, Trade, Card, FX, Remittances and other  Freely available to all members of the financial services community  Based on a partnership of multiple standards organizations including SWIFT, IFX, OAGi, x9, TWIST, and others  A single set of globally relevant financial services messaging standards  The focus of SWIFT’s future standards development (SWIFT MX) Many view ISO 20022 as the ‘holy grail’ of message standardization for the future
  23. 23. 23 Who (and what) is driving adoption? Drivers - Harmonization (driven by regulation or innovation) - Renewal of legacy systems - Further automation required - Creation of new services - Interoperability with other systems/players  New initiatives - Market infrastructures - Global harmonization & regulation (e.g., SEPA in Europe) - Automation in specific markets (e.g., the ‘funds’ market)  New players - Corporates, fund managers  New technology - XML, SOA, web services Bank of America Merrill Lynch is a leader, very actively supporting ISO 20022 adoption globally
  24. 24. 24 ISO 20022 Payment Market Infrastructure Adoption CA IN JP CN CO PE BR TH EU-EPA EU- Target 2 DK SADC AU CH IPFA GB
  25. 25. 25 Regulation It is important to note that while the myriad regulatory changes taking place across the globe represent unique challenges, they also bring with them opportunities for firms who are able to seize them The evolving regulatory landscape: the list that keeps on growing  Dodd-Frank  SEPA  FATCA  Basel III  Regulatory changes around the globe are impacting the operational, technological and competitive models of payments.  Pace of regulatory change brings with its own challenges for firms to keep current on existing, and emerging regulations at a global, regional and local level. A wide range of global and regional regulatory and industry initiatives are reshaping aspects of the payments market
  26. 26. 26 Innovation Familiarity with the latest advances in technology innovation will prove invaluable for firms looking to stay ahead of the global payments curve Mobile technology: Revolutionizing financial services throughout the world  Mobile is widely viewed as a game changer, globally, in the evolving payments landscape.  Increasing penetration of smart phones and mobile tablets.  The user experience with a mobile device has evolved to be much richer and is contributing to channel convergence.  The emergence of mobile as a ubiquitous delivery channel is also seen as fueling the drive to real-time payments.  Mobile has become increasingly important in the emerging markets where the use of mobile devices continues to climb and be seen as an important delivery channel for services.  Financial institutions have the chance to leverage their reputation as trusted payment providers and effective risk managers to strengthen their role in the mobile payments ecosystem.  Enhanced automation through technologies, such as mobile , and the evolution of artificial intelligence and straight-through processing abilities, are quickly reinventing industry payment methods and vehicles.  With advances in technology and adoption of industry standards, there is a tremendous opportunity for firms to deliver more “value added services” to differentiate themselves in an increasingly level playing field. Advances in, and adoption of, technology continues to fuel and foster the introduction of new innovations
  27. 27. 27 Forces at Work in the Global Payments Industry Adapting to an increasingly connected global industry  It is clear that the future payments landscape will be very different in the coming years compared with what it is today.  In order to fully embrace and capitalize on this change, collaboration at all levels of the industry is required.  The pace of regulatory change will continue to increase as regulatory and industry participants adapt to a more globally connected industry.  Newer technologies , such as the ubiquity of mobile, are going to be game changers.  SWIFT will continue to play a pivotal role as the drive towards global standardization continues.
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  29. 29. Q&A ? SWIFT Latin American Regional Conference - 2013 11-12 July 2013 29
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  31. 31. SWIFT Latin American Regional Conference - 2013 11-12 July 2013 31 What’s next on the agenda