ASEAN Payments Market Trends, Xiao Qinwen, SWIFT

ASEAN Payment Market Trends

SWIFT Business Forum, Singapore

Qinwen Xiao

Payments Market, Asia Pacific, SWIFT

July 9th, 2014

Singapore Business Forum 2014

Rapid transformation in payment system development

• Fighting Financial Crime & SWIFT Compliance Services roadmap• CPSS-IOSCO, Sanctions, FinInform, Intraday liquidity

• The trend to real-time payments

• RMB internationalisation

• ASEAN Economic Community (AEC) 2015• ISO 20022 and market practice

• Reliability of systemically important payment systems

Regulatory Developments

Resiliency

Renminbi

Regionalisation

Real-time innovation


The Macro Context - ASEAN growth is high and tightly coupled to China

2006 2007 2008 2009 2010 2011 2012 20130%

20%

40%

60%

80%

100%

120%

140%

ASEAN

CN

Rest of APAC

SWIFT Total

CARG

ASEAN 9.5%China 10.2%Rest of APAC 7.3%SWIFT Total 6.65

Customer Payments: MT 103 sent in volumes (2006 – 2013)

Regionalization

-2%

4%

Volume Value

Within ASEAN Countries Payments Sent YOY ChangeCustomer initiated (MT103) and institutional payments (MT202 excluding cov), excl. central banks

1%

5%

Volume Value

Series1-1%

-6%

Volume Value

10%

3%

Volume Value

Series1

7%

-3%Volume Value

Series1

3%

-12%

Volume Value

Series1

-2%

-1%

Volume Value

Series1

-16%

29%

Volume Value

37%

27%

Volume Value

132%

12%

Volume Value

Source: Watch growth in 2013 compared to 2012 in volume and in valueSingapore Business Forum 2014

Regionalization


Regionalisation - Developments in the Financial Infrastructure will facilitate economic activity

Common Standards

Interoperability

Common Platform

Single system and process

Central system and currency

Regionalization


Towards AEC 2015: the role of standards and a common community

6

AU

Zengin, JP

CNAPS2, CNIN

Low-value

High-value

CIPS, CN

BOJNet, JP

Live

NZ

TH

PG

BN

SG

MA

Live

ISO 20022 movers Payment systems

ASEAN:• Thailand• Singapore• Philippines• Brunei (2014)• Malaysia (2015)

These systems use SWIFT today:

Asia Pacific:• Australia• New Zealand• Taiwan• Macao• Hong Kong• Fiji• Sri Lanka• Papua New Guinea• India (end 2014)

Live

Regionalization


Real Time - ASEAN Countries have opportunities to “Leap Frog” their payment infrastructures and work across borders

Deferred Net Settlement (DNS)

Real time Gross Settlement

(RTGS)

ACH(Automated

Clearing House)

Real time Low Value

Batches Single Payments

HighValue

LowValue

Time Criticality

Sizeof

paymentHybrids

Mu

ltip

le b

atch

es

Real-Time


Renminbi

Significant evolvement in RMB offshore clearing

Hong Kongthe leader ~74% share(BOC)

ThailandAnnounced interest to establish clearing bank

London 4th Clearing bank(CCB).

China (CIPS)New international RMB clearing system by 2015

Singapore3rd Clearing bank(ICBC)

Luxembourg RMB clearing MOU signed

With Clearing Bank approved by PBOC

Potential, or in progress

Shanghai FTZ Piloting liberalisation of RMB financial services

RMB “centres”

9

• Political drive to reduce dependency on USD

• RMB sitting in top 10 payment currencies

• Mushrooming offshore clearing centre environment

Taiwan2nd Clearing bank(BOC)

MacaoRMB clearing (BOC)

Frankfurt 5th Clearing bank(BOC)

With Clearing Bank approved by local central bank

LaosRMB clearing (ICBC)

MalaysiaRMB clearing (BOC)

CambodiaRMB clearing (BOC)

PhilippinesRMB clearing (BOC)

MoscowRMB clearing (BOC)

ParisRMB clearing MOU signed

SeoulRMB clearing service to be set up

RMB

Competition among RMB “centres” is intensifying

Source: SWIFT Watch Customer initiated and institutional payment, inbound & outbound, based on value

RMB

26% offshore (outside China and Hong Kong)

SWIFT support for financial institutions in RMB?

• STP & automation (e.g. market practice guide)

• CIPS (China International Payment System)

• RA for 20022

• Industry dialogue – onshore/offshore RMB groups

• RMB Tracker

• RMB Market Insights

• Customised insight services

• Watch Value Analyser

• White Papers

BusinessIntelligence

Standardisation& Automation

• Clearing centres – RMB RTGS on SWIFT (HK, TW, SG)

• Bank reach

• ~10,000 globally

• ~3,000 in Asia-Pac

Connectivity


RMB


Resiliency


What do we mean by resiliency?

Resiliency

2011 - RTGS outage of 4 hours

Software bug

2013 - RTGS 9 hours unavailable

Wrong parameterization

In 2011 both main sites of an PMI were nearly

flooded

Natural events

Risk of being

unavailable for

days, weeks, months

Data Corruption

From which “golden position” can I restart?

Staff unavailability

Diversity with peers and/or 3rd party staff?

Loss of essential services

Service diversification & geography

9/11could be on an FMI?

Terrorist attack Cyber attack

Who accessed my confidential data base?

Threats are everywhere


Resiliency

2011 - RTGS outage of 4 hours

2013 - RTGS 9 hours unavailable

In 2011 both main sites of an PMI were nearly

flooded

9/11could be on an FMI?

Data Corruption

Cyber attack

Staff unavailabilitySoftware bug Wrong parameterization

Terrorist attackNatural events Loss of essential services

From which “golden position” can I restart?

Which staff will be really available?

Service diversification & geography

Who accessed my confidential data base?

Geographicdiversity

Staffdiversity

Technical and geographic

diversity

Technical diversity

Technical diversity

Technical diversity

Technical diversity

Geographicdiversity

Risk of being

unavailable for

days, weeks, months

Need for a different approach


Resiliency

Paymenttransactions

Paymenttransactions

Payment settlement system

So , how do we do this?Payment system resiliency only as strong as weakest link

MIRS:Market

Infrastructure Resiliency

Service

Alliance Lifeline

Alliance LifeLine


Resiliency


Regulation

Financial Crime Compliance Roadmap

FATF 16 Information quality

Compliance Analytics

Sanctions list Mngt service

Sanctions KYC AML

Processingservices

Traffic analysis

Standards

Data repositories

KYC registry

AML testing & tuning

Sanctions Screening

Sanctions Testing & tuning(transaction & client systems)

Traffic restriction (RMA)

Live

Development

Qualification

Exploration

QualityAssurance

Client/Name screening


Regulation


The Future and Opportunities for the ASEAN / APAC Financial Infrastructures will Revolve Around These Themes

Regulatory Developments

ResiliencyRenminbi

RegionalisationReal-time innovation


Commonchallengesuniquesolutions

20

Presentations & Public Speaking

ASEAN Payments Market Trends, Xiao Qinwen, SWIFT