Update on SWIFTNet Workers Remittances SWIFT s Interbank Remittances Framework for Authorization, Clearing & Settlement. Joanne Strobel
SWIFTNet Workers Remittances SWIFT s Interbank Authorization, Clearing & Settlement Framework for Remittance Payments What is it? How does it work? What is the status? A bank s perspective Joanne Strobel 6/2/2008 page 2
Definition - What is a remittance? An international remittance is a cross-border, person-to-person payment of relatively low value. CPSS/World Bank Consultative Report on Remittances, March 2006 Joanne Strobel 6/2/2008 page 3
WRAG identified Issues & requirements Customer Service Interbank Clearing & Settlement Regulatory Environment Issues Cost transparency Time transparency Complexity After sales (track & trace) 100 s of market practices Complex settlement Low STP High processing costs Service scalability Reputational risk Compliance costs Lack of level playing field Requirements Charges transparency Assured timeline Easy to use Clear market practice Messaging rules and usage guidelines Common architecture Level playing field Joanne Strobel 6/2/2008 page 4
Roles and governance of the SWIFT WRAG Role define the messaging services and architecture define the messaging standards and market practice framework implement and drive live usage of the solution if commercial and technical feasibility is proven Governance WRAG Chairperson is SWIFT Board Member Arthur Cousins, Standard Bank of South Africa WRAG reports to the SWIFT Board via the Banking and Payments Committee. Joanne Strobel 6/2/2008 page 5
SWIFT role Facilitate definition of standards and usage rules Facilitate the definition of market practice Design the common messaging platform for clearing and settlement Design enhanced messaging solutions (e.g. message copy, reference data ) for the clearing and settlement Work with IT vendors to facilitate integration with back office systems Joanne Strobel 6/2/2008 page 6
SWIFT Board decision December 2007 3 phases approach for the service development recommended by the WRAG approved by the SWIFT Board 2008 : Implement and pilot phase 1 : Messaging standards using cover payment with bilateral settlement 2009 : Develop architecture for phase 2 and 3 : Phase 2 : distributed settlement architecture for instant payment Phase 3 : architecture for cash-pay-out anywhere Roll-out phase 1 live services Implement phase 2 and 3 Joanne Strobel 6/2/2008 page 7
SWIFT Workers Remittances Advisory group (WRAG) Banco do Brasil Bank of New York BBVA Citigroup Deutsche Bank Equitable PCI Bank ICICI Bank Ltd INTESA SANPAOLO S.P.A. La Caixa Société Générale Standard Bank of South Africa Standard Chartered Swisspost Brazil United States Spain United States Germany Philippines India Italy Spain France South Africa Singapore Switzerland Joanne Strobel 6/2/2008 page 8
Vision and scope An interbank platform comprising the market practices and architecture for the authorization, clearing and settlement of cross-border, consumer-to-consumer payments that: but: accommodates and-to-any retail payment media; delivers global scale and reach; delivers high STP rates; enables high speed end-to-end transactions and track and trace. remains in the interbank, collaborative space; doesn t extend to bilateral commercial arrangements; doesn t restrict choice of settlement providers or currencies; enables highly distributed processing. Joanne Strobel 6/2/2008 page 9
Market practices and rulebook Participation Products Charging practice Clearing - Direct Participants - Indirect Participants - Settlement Service Providers - Service levels (instant, urgent, non-urgent) - Two product groups - Transaction ID specification (sender defined) - OUR charges recommended as the exclusive option - Reject/returns charging practices - Definition of sorting, transmission etc. - Transmission timing relative to service level Settlement Joanne Strobel 6/2/2008 page 10 - Gross bilateral settlement - Guidelines for transmission of settlement instructions - No restrictions on provider or currency choice in either option
Service framework Three service-levels Standard (non-urgent): value to beneficiary T+2 Urgent: value to beneficiary within 4 hours or next day Instant: value to beneficiary within 15 minutes Two product groups: Credit to beneficiary financial account; Non-account based disbursement Clearing and settlement topology Bilateral settlement (cover payment) Payment instructions: FileAct + ISO 20022 Settlement instructions: FIN MT cat 2/9 + guidelines Joanne Strobel 6/2/2008 page 11
Phase 1 : architecture of the service framework for clearing and settlement of remittances IP = Indirect Participant DP = Direct Participant CB = Correspondent Bank Rules + Guidelines Architecture sender IP DP Ref. data DP IP beneficiary Distribution network sending country FileAct S&F ISO UNIFI 20022 MT cover payment Distribution network Receiving country CB Settlement CB Joanne Strobel 6/2/2008 page 12 Max: T+2 days
Phase 2 and 3 concepts Phase 2: instant availability via distributed risk management architecture Deliver instant for any type of product Reduce no. of collateral accounts + total collateral Maintain open framework for new services (e.g. mobile payments) Remain non-restrictive in terms of settlement providers/currencies Phase 3: non-account based cash disbursement capability Direct alternative to MTO franchises Ease of use for branch and client Maximize retail distribution reach Phases 2 and 3 more complex Require feasibility assessment to be conducted in 2008 Joanne Strobel 6/2/2008 page 13
SWIFTNet Workers Remittances Consumer needs Convenient and easy to use Reliable and preferably fast Low cost SWIFTSolution Benefits 1 2 3 4 Standards Messaging Rulebook Ref. Data Joanne Strobel 6/2/2008 page 14 UNIFI ISO 20022 FIN MT Cat 2 and 9 for settlement SWIFTNet FileAct SnF SWIFTNet FileAct Header Market Practice Rules, Message Usage Guidelines, and more Supports the market practice rules and enables payment STP Brings efficiency and scalability Enhanced customer service ( SLA ) Participants retain control and choice of: Settlement provider and currencies Com. agreements Channels & products
Message Standards 1 Standards Message standards for SWIFTNet Workers Remittances are being developed in consultation with a sub-group of the Workers Remittances Advisory Group Message Usage Guidelines include: ISO20022 pacs messages MT Cat 2 and Cat 9 FileHeader XML message New guidelines over existing standards Mapping rules New specifications Joanne Strobel 6/2/2008 page 15
SWIFTNet Messaging 2 Messaging Feature Store-and-Forward mode Real-Time communication Closed User Group Non-repudiation Usage Mandatory Not used Mandatory Optional Comments for FileAct Requirements: FileAct SnF SWIFTNet release 6.1 Delivery notification Enabled FileInfo field Mandatory FileHeader Copy Not used Mandatory for Phase 1 for Phases 2 and 3 File compression indicator Mandatory SwCompression=None File compression Not used Files are not compressed Message validation Not used Access control Mandatory RBAC used to control outbound traffic End to End signature Mandatory Traffic priority indicator Not used Joanne Strobel 6/2/2008 page 16
Solution Rulebook 3 Rulebook Comprehensive set of rules to support the business, technical and operational objectives of the solution. Product Requirements Business Rules Service Levels Messaging Rules Standards Rules And more Joanne Strobel 6/2/2008 page 17
Reference Data Directory 4 Ref. Data Reference Data Directory includes: Registered direct and indirect participants Participants service capabilities List of Point of Service (POS) Management of the Directory Data collection Data management Data distribution with access control Joanne Strobel 6/2/2008 page 18
Product scope and differentiation opportunities The product aims at providing an homogenous solution for the inter-bank space while offering front-end differentiation opportunities for vendors in Payment collection (channels, CRM, ) Payment processing (AML, KYC, Translation, Settlement, Reconciliation ) Payment tracking (status, E&I, ) Payment distribution (POS, Routing, ) Joanne Strobel 6/2/2008 page 19
Message Flows SWIFTNet Workers Remittances Bilateral settlement service pacs.008.001.01 pacs.004.001.01/ pacs.002.001.02 MT 202 MT950 File Header Copy to 3rd Party SSP pacs.008.001.01 pacs.004.001.01/pacs.002.001.02 File Header Copy Serial pacs.008.001.01 pacs.008.001.01 Joanne Strobel 6/2/2008 page 20 pacs.004.001.01/pacs.002.001.02
Reference Data What? Means for direct participants to store, maintain and exchange routing, product and processing data about their direct and indirect distribution network Content Participant routing and settlement data Participant product and processing capabilities Enabled Point Of Service (POS) Why? Support STP between participants facilitate automatic form-filling of payment instructions Support ease of use for end-customer Joanne Strobel 6/2/2008 page 21
Project timeline Product Definition - Standards Workgroup - Reference Data CRS - Ref. Data Structure - SWIFTSolutions Pack Implementation - Pilot selection - Vendors selection SWIFTNet Workers Remittances release 1.0 deliverables: - Service Description - Rulebook - Messages Usage Guidelines - Reference Data Specs - FileAct SnF CUG set-up Test and Pilot - Pilot preparation - Pilot testing Live services May go-live if exit criteria are met Oct Nov Dec JanFebMarApr May Jun Jul Aug SepOct Nov Dec Jan Feb Mar Joanne Strobel 6/2/2008 page 22 2007 2008 2009
SWIFTNet Workers Remittances A Bank s Perspective What value does it bring? Phase 1 Multilateral Service Level Common Market Practice Agreement Common Standard Remittance Format Scalability Still need Bilateral Agreements with trading partners Phase 2 & 3 TBD Joanne Strobel 6/2/2008 page 23
SWIFTNet Workers Remittances A Bank s Perspective DB will remain a member of the SWIFT WRAG and monitor the progress SWIFTNet Workers Remittances Phase 1 does not offer anything more than what the Eurogiro network can already deliver via a MT103. DB will leverage the Eurogiro network as its strategic remittance platform Joanne Strobel 6/2/2008 page 24
SWIFTNet Workers Remittances Questions? Joanne Strobel 6/2/2008 page 25