The document presents recommendations for reengineering the U.S. payments systems in light of international trends, emphasizing the need for integration of new technologies and customer needs. It critiques the current state of U.S. payment systems and highlights successful models from Europe, particularly regarding SWIFT and the U.K.'s innovative approach. The author advocates for a comprehensive redesign to enhance competitiveness and efficiency, including addressing compliance and infrastructure challenges.

1. USA PAYMENTS SYSTEMS
RECOMMENDATION
An Outsider’s View
Intended Main Audience:
Fedwire, CHIPs and ACH representatives
By:
Jose Payano
Josepayano@gmail.com
jpayano@bhd.com.do
(809) 243-5468 Office
(809) 330-5784 Mobile

2. Prelude
Following these preliminary notes immediate
you will find
recommendations regarding the USA Payments Systems as a
very surface-scratch conclusion stemming from recent trends presented at
IFSA Global Payments Conference in New York in march 2008…
The views of this person, located outside of the “system” are intended, with
all due respect and consideration, to be creative in the wake of all the
information and trends presented at the IFSA Conference.

3. Item I – Who’s Talking
g
I am from small country but I like to think of me as a creative
person who is smart enough to capture trends whenever I have the
opportunity to be presented with enough information, as has recently
happened while attending the aforementioned IFSA Conference (March
2008).

4. Item II – Market Assessment
In the wake of the trends presented to us by IFSA,
pertinently to my comments, let s consider the following
comments let’s
facts:
1. The fact that SEPA and TARGET2 are coming so fast into place, becoming a unique
and very advanced payments platforms for Europe.
2.
2 The ineludible fact that SWIFT is NOT ONLY driving SEPA but is at the heart of
SEPA,
TARGET2 and considering it is also the de facto platform for international
communications among more than 8,000 banks worldwide.
i. SWIFT is also driving the UNIFI and ISO 20022 initiatives, becoming the unique “registrar”
for these standards and assuring a preeminent position on the FUTURE payments Market
Place.
Place
ii. Last but not less important SWIFT is the underpinning technology driving TARGET 2 which is
already operative from November taking the RTGS for Europe to new levels of performance.
iii. TARGET 2 will be based in an advanced and flexible MX (XML) standard also provided by
SWIFT and a very advanced and streamlined model to include Indirect Participants on the
systems thru a Bank Gateway
Bank-Gateway.
3. Due to the United States Economy being an “Enclave”, self-sustained and self-
contained, it has neglected even their most proximate neighbors, leaving a virgin
market untapped for SWIFT to conquer (Latin America).

5. Item II – Market Assessment
4. I was wandering for sometime now where was the U.K. heading,
keeping th i economy somewhat “d t h d” f
k i their h t “detached” from th rest of E
the t f Europe,
by not surrendering to the “Euro initiative”…Well, they are breaking
the news with a “big entrance”: This U.K. Faster Payments Model, if
official, is really striking from many points of view. Formerly, they show
tremendous determination to overhaul the “establishment” which,
establishment hi h
usually pervades and avoid any kind of disruptive innovation like the
one presented in IFSA. Secondly, It shows the UK Regulators are not
only bold and courageous but they are capable of re-engineering the
economy if they have a vision (as they have done before with the
LEAP Project in their e-government initiative). They go where no other
economy dare even to think going… They are going to redress an
entire economy, comprehensively rebuilding their payments systems as
if none had existed until this point a kind of strategy I myself deem
point,
as an Inter-Economic Bridge Strategy. Thirdly, they are making sure to
take a quantum leap while technologically enabling the
economy, much ahead of what I was wandering was possible for an
ongoing economy> Food For Thought I would deem to say!

6. Item III: Is innovation possible from inside an
ongoing,
ongoing established economy
So, now let me stop beating around the bush and pin myself down
to what is really my point of view and wherefrom my
comments are stemming from:
But, just before delving definitively into the subject of these
, j g y j
comments, let me also scratch the surface of another
peripheral issue, a bit of another digression, even assuming
some risk of sidetracking my main argument. I deem this
paragraph extremely important. Let’s talk about
Innovation: I
I ti Innovation is a very d ff l process b
difficult because
at some point it threatens the dearest feelings that our souls
protect, that meaning, those overarching principles that hold
together the underpinnings of our own existence. But there
are d fi i moments i an i d t where a bi country lik
defining t in industry h big t like
yours can not rest in its “laurels” and just let a trend past them
by without acting on and out decisively …

7. Item III
Well Mr. Farrar, my final words and the real
recommendations are forthcoming along these lines:
So, with due consideration and reiteration of
respect to what I might not be aware of at the time
of these writings, let me please state my surface-
g p y
scratch recommendations beginning on next slide:

8. Item IV - Recommendations
I.
I United States Payments Systems should be
comprehensively re-engineered in the wake of
international trends, standards and technology to
, gy
fully integrate all available knowledge and
technologies, to conceive new payment processes
and infrastructures that will be flexible and
capable of accommodating all future
developments.
d l t

9. Item IV
II.
II This Payments System Reengineering should start
with careful diagnosis of available knowledge
and technologies and an in depth assessment of
g p
the needs of the ultimate customer which is, to put
a very simple spin on it: The Entire Economy.
III. By dealing with these important issues
competitiveness for the entire country will be
raised by doing away with, to mention just a thing,
“paper”.

10. Item IV
IV. In so doing the Payments Systems Regulators,
g y y g ,
Technocrats, and the legal bodies entitled to protect
the financial system that supports the economy, should
be committed to a single purpose: Designing and
implementing payments systems that will comply with
all current needs of the economy, and I am talking
seriously here, all economy agents should be satisfied
in the new conception: Individual and Corporations;
C p
Compliance Agents; Channel Operators; Service
g ; C Op ; S v
Management Agents; International Payments Systems
and others…

11. Item IV
VI. Main issues to deal with might be shortlisted superficially:
VII. High d Low Value Payments systems i
Hi h and L V l P integration.
i
VIII. Payments and Settlements risks should be comprehensively been dealt with from all current
standpoints.
IX. Compliance should be at the heart of the System.
X. A single infrastructure and architecture model should be a MUST. Dealing with several
systems impose such an unnecessary burden to the economy…
XI. Channel Management should be at the heart of the re-conception to deal with the fact that
new technologies and media will continue to evolve;
XII. An Integrative System conception to manage the obsolescence and asynchronic connection
to any single partner or instance;
XIII. Institutional restructuring must be considered if necessary.
XIV. E-Money must finally come to live enacting an e-Money Act that would define what will be
e-currency in these new environment: Payment Finality, the absence of Paper, emulation of
current processes and everything should be handled in the new e-economy processes.
XV. While many other issues should be considered these are some those which pop up to my
mind at the time of these writings.

12. Item IV
xvi. From a Service Management Standpoint the Payment
System should be Financial Value Chain model supporting all
domestic and cross border transactions and seamlessly integrating the physical
and virtual value chain with a common new mantra: The Financial
Industry should be entitled with handling all financial
content originating by the commercial transactions of the
g g y
economy. Where there are physical exchange of goods the Payments
infrastructure should accurately reflect these exchanges of information, because,
in fact, Money in the E-conomy, becomes an information item tied to Payment
Finality by-laws of the reengineered financial system of the USA.
xvii. This aspect will also comprise e-invoicing and all related procedures. And
because “channels” are natural to the new system an invoice might become, in
fact, information presented in terms of “obligations” in the new Payment Finality
Model. That said, an e-invoice would be related more to the content than to the
media the information would be presented In such a perfect virtual world
presented. world,
payments and invoices will be so naturally intertwined that presenting the invoice
and executing the consequent payment will just be a digital signature activity
away.

13. Item IV
SO GUYS… This is good-bye for now:
I have to beg your pardon for being so direly bold to propose such a
daring undertaking to such prestigious constituency as you are.
I just like to express myself whenever anything dawns on me and while
being exposed to such a good deal of information these ideas just came
up.
Also: Bear in mind I still has some trouble understanding the differences
of CHIPS and Fed Wire, but please, don’t crucify me for being bold…
I will finally accept a mild feedback on my comments from you, but just
a “Thanks, we have received your comments…” will do to get my effort
compensated.
With due respect and consideration
Jose Payano
Attendee to IFSA Global Payments Conference 2008
New York