RTP - Worksession

Real-time retail payments:

building for the future

13 April 2016

Pat Antonacci

Frank Van Driessche

Context Design

guidelines How can

SWIFT help

SWIFT Business Forum Canada - Real-time retail payments: Building for the future - 13 April 2016

Agenda

24x7: payments can

be sent and received

all times of the day,

every day of the

year

24 x 7 Instantaneous Irrevocability Certainty

Instantaneous:

good funds must

be available on the

beneficiary’s

account in,

typically, less than

a minute

Irrevocability: once

payments are

processed, they

can’t be recalled

Certainty: payments

sent to a beneficiary

bank are individually

explicitly confirmed (to

both payer and payee)

or rejected


Key features of real-time retail payments


18 countries ‘live’

12 countries ‘exploring’ / ‘planning’ / ‘building’

17 additional Eurozone countries ‘exploring’

Planning

Eurozone

Live

Real-time retail payment systems

Live adoption in 18 markets, many more in the pipeline

RFP for Eurozone

system to be live by

2018

French

domestic and

pan-European

initiative

Denmark

domestic

initiative

Spanish

domestic

initiative

Pan-European

initiative

UK domestic

initiative

Canadian

payment

modernisation

US Faster Payments

Task Force and a US

Secure Payments

Task Force

US domestic initiative

US domestic

initiative

Japanese

domestic

initiative

Singapore

domestic initiative,

central addressing

service in review

Need for at least one

solution for the Eurozone

according to ERPB

Defining SEPA SCT

Inst scheme on request

of ERPB

Australia National

Payments Platform to

be live by 2017

Thailand

Mobile Instant

payments in

review

Indian domestic

initiative


A selection of initiatives


High growth of mobile and Internet technology

Ability to do business on-line, anywhere, anytime

High customer expectations Set by m- and e-commerce - must be simple,

immediate, certain with cost transparency

Competition from agile new entrants New business propositions and improved customer experience, not hindered by existing legacy

Increased regulator focus • Consumer protection • Financial inclusion • Transparency • Financial crime compliance • Credit card interchange fee caps • Regional harmonization

Emergence of new technologies

New technologies, such as block-

chain / distributed ledgers, will facilitate the implementation of

new payment systems

Meaning for banks

• Disruption operating models • Large investments vs limited

revenue potential • Impact on compliance and

fraud detection processes

Retail Payments

Drivers... Simpler... Anywhere… Anytime... Immediate... Secure...


Context Design

guidelines How can

SWIFT help

Agenda

Key success factors/opportunities

Customer excellence • Data rich and timely payments

• Shielding from payment complexity: proxy resolution

to facilitate ramp-up

• Business innovation and easy integration with overlay

services: e-commerce/e-invoicing platforms…

Business case optimisation • Banks’ value proposition to indirects, corporates and

overlays

• Community approach for non-competitive features

• Longer term vision of infrastructure rationalisation

Platform robustness • Highest levels of operational excellence, security and

resilience

• Clear liability framework supported by authentication,

non- repudiation, controls on business rules and

roles…


Industry standards

Cater for ubiquity

Manage settlement

risk

Cost efficient End-user

convenience

Richer data

Easy integration

Platform Design

Guidelines

Real-time 24/7/365 services

Payments modernisation

Platform design guidelines


Context Design

guidelines How can

SWIFT help

Agenda

Domestic Messaging Channel

(DMC)

in-country messaging solution

that supports low latency, high

message volumes, on a

24/7/365 basis,

without downtime

Payment Gateway (PAG)

supports exchange of clearing

and settlement messages,

and APIs that enable value-

added (addressing, fraud

detection) and overlay

services (business platforms)

Addressing Database

links short name alias, email

address or mobile phone

number to customer’s bank

account number

ISO 20022 standards and

(RT-RPS) market practice

enables long-term

interoperability with other

market infrastructures

SWIFT ‘FNAO’ Performance

40 years of operational excellence – 5x9s resilience,

reliability, privacy, PKI security and round the clock

support,

on a 24/7/365 basis

Solution basics

Multi-functional, modular payments platform

FNAO

Performance

Payment

Gateway

Domestic

Messaging

Channel

Addressing

Database

ISO 20022

Standards

SWIFT’s solution

A lighter hub model

Clearing & Settlement Hub

Ordering Customer

PAG

Ban

k C

han

nel

s

PAG

Addressing Database

$ 24h

Overlay Services

Beneficiary Customer

Payment Gateway

Ordering Customer Bank

Beneficiary Customer Bank

Value Added Services

Messaging Solution

DMC

ISO 20022

Fraud Management

RTGS

Ap

plic

atio

n

Access Models

Ban

k C

han

nel

s

Ap

plic

atio

n

Access Models Pre-clearing

PAG

SWIFT Business Forum Canada


Channels

Branch

Mobile

Phone

Online/

Internet

New

services

Ordering

Customer

Corporate

Ordering Customer

Bank

Ba

nk

Ap

plic

ation

s

Aim for more than just real-time

payments. A vision of platform

rationalisation over time, driving

efficiency and innovation for the banking

community

Retail payments in the future

Acquiring channels

Supported payments

• Attended payments (real-time,

including time-out mechanism)

• Unattended payments batched

or un-batched

• High and low value

PAG

File

handler


Channel

s

Branch

Mobile

Phone

Online/

Internet

New

services

Ordering

Customer

Corporate

Ordering Customer

Bank

Ba

nk

Ap

plic

ation

s

An addressing resolution database helps

to generate volumes for the system in the

P2P space


Addressing resolution

Addressing service

• Convert e-mail address, phone

number into payment

information

• Same principles for potential

central fraud detection platforms

PAG

File

handler

Addressing

database PAG


Channel

Branch

Mobile

Phone

Online/

Internet

New

services

Ordering

Customer

Corporate

A

B

Ba

nk

Ap

plic

ation

s

Beneficiary

Customer Pre-clearing

Beneficiary

Customer Bank

Ba

nk

Ap

plic

atio

ns

PAG PAG


Pre-clearing

An interface software is needed

to offer the necessary security

protections, non repudiation with

a neutral party and facilitate

messaging

Pre-clearing

• Pre-clearing aims to verify beneficiary

details

• Posting can happen after pre-clearing,

based on risk profile

• Payment details only shared with

parties involved

DMC

File

handler

Ordering Customer

Bank

Channel

Branch

Mobile

Phone

Online/

Internet

New

services

Ordering

Customer

Corporate

A

B

Ba

nk

Ap

plic

ation

s

Beneficiary

Customer Pre-clearing

Beneficiary

Customer Bank

Ba

nk

Ap

plic

atio

ns

PAG PAG


Pre-settlement

Solution for optimal resilience,

high scalability and data privacy

by design

DMC

File

handler

Ordering Customer

Bank

Pre-settlement

• Accounting in central hub

• Liquidity management features

• Prepare settlement in RTGS

system

hub A B

Acc

ou

nts

RTGS

A’ B’

Acc

ou

nts

Real Time Payment

balances

P

AG

Pre-settlement

Small

Bank

Beneficiary

Customer

Pre-clearing

Ba

nk

Ap

plic

ation

PAG PAG


Participation

hub A B

Acc

ou

nts

RTGS

A’ B’

Acc

ou

nts

Real Time Payment

balances

Pre-settlement

FI aggregator

Service bureau

Sponsorship of indirect

participants helps the

business case of direct

members

Participation options

• Direct

• Direct through service bureau

• Indirect participant (relay model)

• Direct/indirect settlement

P

AG

PAG

Pa

ym

en

t

Ap

plic

ation

Small

Bank

Small

Bank

Beneficiary

Customer Bank


Overlay services

Pre-clearing

Bank

Applications

Payer Bank

Bank

Applications

Payee Bank

Customer

E-commerce Platform

Initiation

Delivery

hub

A B

Acc

ou

nts

RTGS

A’ B’

Acc

ou

nts

Real Time Payment

balances

PAG PAG

P

AG

PA

G

Pre-settlement

Supplier

Order request Order paid

1

2

3

4

5

6

Integration with overlays helps the

bank’s business case, but is also a

key source of volumes

SWIFT’s solution

A lighter hub model


Ordering Customer

PAG

Ban

k C

han

nel

s

PAG

Addressing Database

$ 24h

Overlay Services


Payment Gateway




Messaging Solution

DMC

ISO 20022

Fraud Management

RTGS

Ap

plic

atio

n

Access Models

Ban

k C

han

nel

s

Ap

plic

atio

n

Access Models Pre-clearing

PAG

SWIFT Business Forum Canada - 13 April 2016


Advantages of the lighter hub solution

Lower processing

complexity Through advanced PKI

processing, decentralised

pre-validation and

beneficiary details pre-

processing

End-user data confidentiality Complete payment details are only

shared between the clearing parties,

the solution only processes a sub-set

which reduces processing complexity

Higher levels of security Payment messages are ‘signed’ by

the sender. This is different from a

centralized model, where the hub

acts as a third party and signs all

instructions

Higher flexibility The solution can accommodate different payment

use cases through business CUG’s and allow FIs

to offer innovative new services to their customers

Higher resilience No single point of failure. Banks can post funds

after clearing and before settlement even if

settlement party is not available

Higher throughput If pre-clearing fails, a settlement request will not

be generated by the PAG and so will not burden

the settlement application.

Ordering Customer

PAG

Ban

k C

han

nel

s


Addressing Database

$ 24h

Overlay Services


Payment Gateway




Messaging Solution DMC

ISO

20022

Fraud Management

RTGS

Ap

plic

atio

n

Access Models

Ban

k C

han

nel

s

Ap

plic

atio

n

Access Models

PA

G

PA

G

SWIFT’s solution

A full hub model

PAG


Agency services

Customers

RT-RPS

ACH

RTGS

Value added services

Overlay services

Correspondents

• Reuse SWIFT ‘single

window’

footprint to connect to all

your payment infrastructures

and counterparties

• Use a trusted, cost-

efficient, reliable and

secure network

• Use an API framework to

integrate value added

services such as

e-commerce platforms and

mobile payment services for

real-time retail payments

• Offer agency services to

indirect participants

• Route payments efficiently

• Orchestrate automated

payment flows

• Ensure flawless STP

through validation

Single window for all your payment needs

Customers


www.swift.com


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RTP - Worksession