Information about the Swiss Payment Traffic Systems Compliance in Swiss payment traffic EBPP – Electronic Bill Presentment and Payment New developments within the SIC-system VOLUME 20 | June 2004
Information about the Swiss Payment Traffic Systems
Compliance in Swiss payment traffic
EBPP – Electronic Bill Presentment and Payment
New developments within the SIC-system
VOLUME 20 | June 2004
Content ClearIT, Edition 20
2
EDITORIAL 3
FINANCIAL SANCTIONS – A PAYMENT TRAFFIC CHALLENGE 4
Compliance is today’s watch word. Financial intermediaries are in an environment marked by
an uneasy relationship between sanctions regulations and their implementation.
An interview with Roland E. Vock, Head of Division, Export Control Policy and Sanctions,
State Secretariat for Economic Affairs (seco).
COMPLIANCE FILTER AT CREDIT SUISSE 7
Comparing payment orders with embargo lists by governmental organizations, the filter
prevents illegal and suspicious payments from being settled.
EBPP – ELECTRONIC BILL PRESENTMENT AND PAYMENT 8
ClearIT starts a series on electronic bill presentment and payment by showing how
EBPP systems work.
LIECHTENSTEIN AND THE UNIFORM EURO PAYMENT TRAFFIC ZONE 10
The principality on its way to SEPA (Single Euro Payments Area).
NEW DEVELOPMENTS WITHIN THE SIC SYSTEM 11
The influence of the euro and CLS (Continuous Linked Settlement) on the Swiss payment traffic.
THE FUTURE FOR IBAN AND IPI 13
How widespread is the use of the two international standards for the standardization of
account numbers and payment receipts?
THE LSV (DIRECT DEBIT) SERVICE IS BEING REDESIGNED 14
The Swiss Interbank Clearing Ltd. board of directors has approved the detailed draft
for the LSV (direct debit) redesign and signed off on its development.
CONVERSION TO FINANCE IPNet UP AND RUNNING 15
May 1st marks the beginning of the final phase of the conversion from TELOSnet X.25 to
Finance IPNet.
A consensus-driven culture tends to be equated with inefficiency. Are there exceptions that prove the rule?
Joint definitions of functions and interfaces are mandatory wherever and whenever parts of the value-added chain are to be combined. The pay-
ment traffic community of the Swiss financial institutions has turned another challenge into an opportunity and done it in such a way that the final
product is indeed equipped with tangible value added, a ConsensusPLUS culture result, as it were. The «PLUS» stands for the added value men-
tioned above, which in turn evolves from the tenacious process of finding the consensus. The adaptation of the almost 30-year old LSV direct debit
services to the new reality and conditions beautifully illustrates this very culture.
On March 22, the Swiss Interbank Clearing Ltd. board of directors ordered the direct debit product «LSV(new)» to be operational in 2007.
«LSV(new)» is a leading-edge, modular product mix for the direct debit process. This decision extended the LSV life cycle; how did that come about?
And what additional benefits or values are offered to the customers and the financial center? A survey conducted during the last year brought a
very unambiguous result: LSV has its justified market position and will continue to prevail throughout the next few years. It is also perceived as a
complement to the EBPP (Electronic Bill Presentment and Payment) systems and less as a substitute. However, in the era of electronic interfaces,
the delivery channels are no longer timely. (Last year, close to 1,000 data carriers were still being delivered to Telekurs on a daily basis.) Add to
that the fact that – as any highly complex and historically evolved construct – LSV has become expensive to operate and maintain. Hence the motto:
redesign – yes – but thoroughly, prudently and at low-risk. Once again, one of the greatest strengths of the Swiss financial center – the willingness
and ability to effectively cooperate among various institutions and organizations and develop solutions for important challenges in partnership –
prevailed. This evolutionary process, spanning several years, is further proof. Since early 2001, papers have been written, concepts developed, dis-
cussions were held resulting in decisions and fine-tuning. The modular, elegant product ultimately introduced in the detail concept is impressive:
Data is primarily submitted via e-banking interface, a central delivery option has been retained, the financial institutions can choose from among
several delivery formats, the transaction fee will be more than halved and designed variably, depending on transaction volume, and all direct
debits can be rejected.
With that, the monolithic LSV has been replaced by a flexible solution with modular, combinable building blocks. Even though the design and de-
cision phase lasted several years, it has produced a worthy, convincing product commitment by all participating financial institutions. A clear case
of «Design by ConsensusPLUS».
André Bamat, CEO Swiss Interbank Clearing Ltd.
Editorial
3
DEAR READER
Compliance ClearIT, Edition 20
4
ClearIT: What is seco’s responsibilityin connection with financial sanc-tions?
Roland E. Vock: seco is responsible
for the implementation of internatio-
nally supported sanctioning mea-
sures in Switzerland. In particular,
that refers to measures the UN Secu-
rity Council orders based on Chapter
VII of the UN Charta (Maintaining or
Reestablishing World Peace or Inter-
national Security). Switzerland is
bound by international law to imple-
ment these resolutions. De facto,
Switzerland has participated in all
non-military UN sanctions since the
early 1990s. Generally speaking,
Switzerland also adheres to sanctio-
ning measures introduced by the EU.
In Switzerland, the EU embargo law
EmbG, effective as of January 1, 2003,
forms the legal basis for the imple-
mentation of the sanctioning mea-
sures. Supported by this legal frame-
work, the Federal Council implements
sanction decrees containing the spe-
cific measures in detail. Currently,
there are seven such sanctions in
force: the regulation about measures
towards persons and organizations
with connections to Osama bin-
Laden, the al-Qaïda organization or
the Taliban, as well as regulations
concerning Iraq, ex-Yugoslavia,
Liberia, Myanmar (ex Burma), Sierra
Leone and Zimbabwe.
Most of these resolutions also con-
tain financial sanctions. While re-
gimes sanctioned earlier included
comprehensive financial sanctions,
(e.g. prohibition of any fund transfers
to Iraq), measures in force nowadays
are more purposeful, they refer to a
specific, often defined circle of natu-
ral or incorporated persons. Usually,
financial sanctions contain two
FINANCIAL SANCTIONS – A CHALLENGE FOR THE PAYMENT TRAFFIC
norms to be implemented by finan-
cial intermediaries: on the one hand
the freezing of funds (e.g. blocking
accounts) belonging to or under con-
trol of the persons in question and on
the other hand, a transaction ban
affecting those same persons.
What are the specific payment trafficmonitoring requirements?
The sanction regulation issued by the
Federal Council contains only a gene-
ral prohibition to transfer or to some-
Roland E. Vock (seco): «In the end this is also about the image of the Swiss financial center.»
5
Compliance
how directly or indirectly provide to
the persons under the ban. How and
by which means the financial inter-
mediaries apply this prohibition is
not defined in detail. Thus, in this
regard, the Federal Council’s sanction
are not as far reaching as other legal
norms, such as the money laundering
laws issued by the Federal Banking
Commission (FBC). Of course proce-
dures that were developed in the
area of money laundering can be
applied in the area of financial sanc-
tions. Generally speaking, from our
point of view it is feasible for smaller
institutions to outsource the payment
traffic monitoring if they lack the
funds to make some of the conside-
rable investments in the IT area.
What must the Financial Institutionsreport to you?
Blocked funds, e.g. frozen accounts,
must be reported to seco immedia-
tely. These reports must contain the
names of the beneficiaries as well as
the amount of the blocked funds.
There is no such mandatory reporting
in the area of prohibited transac-
tions. Nonetheless, banks have re-
peatedly communicated with seco in
various cases to verify that a certain
payment doesn’t fall under the trans-
action ban. However, the primary
responsibility for this clarification lies
with the financial intermediary, along
the lines of the ‘know your customer’
principal. Of course, seco is eager to
support financial intermediaries in
their efforts to the best of our ability.
During the years of 1998/1999, Switzerland focused on the issue ofacross the board financial sanctions, organizing, among other things, twointernational conferences in Interlaken, supported by the UN SecretaryGeneral. The stated goal was the introduction of differentiating smart sanc-tions that would only affect the liable ruling elites while protecting the gene-ral population. The first time the approach developed in Interlaken wasimplemented, it was directed at the Taliban regime, later against al-Qaïda.Which role does the State Secretariat for Economic Affairs (seco) playwhen applying the sanctioning regulation in Switzerland? How is the infor-mation exchanged between the financial institutions and the federal administration?How do sanctioning regulations affect the payment traffic? How do thefinancial intermediaries implement the bans?An Interview with Roland E. Vock, Head of Division, Export Control Policyand Sanctions, State Secretariat for Economic Affairs (seco).
Compliance ClearIT, Edition 20
6
How can you verify that the banksindeed implement your requirementswith due diligence and on time?
There is no systematic monitoring on
our part. But we are continually in
touch with several financial interme-
diaries and therefore rather well
informed about efforts undertaken in
that area (e.g. development of trans-
action monitoring IT systems). This
dialogue with the financial interme-
diaries is important to us. It allows us
to present and make information
available on our web site
(www.seco.admin.ch), e.g. the lists of
sanctioned persons and institutions,
in the most user friendly way.
seco, of course, obtains information
about payments executed over bans
from various sources. These viola-
tions and infractions are prosecuted.
Serious cases may be punished with
prison sentences of up to five years
as well as fines of up to CHF 1 million.
How does Switzerland compareinternationally when it comes to theimplementation of these require-ments?
From our contacts with other nations,
especially within the context of the
UN, we have been shown that we are
indeed doing quite well. Over the
past few years, Switzerland has been
actively involved in the area of finan-
cial sanctions and contributed much
to the conceptual development of the
smart sanctions. This has been end-
orsed internationally. But our com-
mitment also means that we may not
rest on our laurels. The financial
intermediaries and we of the federal
administration are continually dea-
The Wolfsberg Group, a commission made
up of representatives from twelve leading
financial institutions worldwide, has
published Principles about Money Launde-
ring Prevention in Private Banking (2000)
and Correspondent Banking (2002) as well
as Statements to Fight Terrorism and the
Financing of Terrorism (2002). Within the
framework of their exchange of expe-
riences, the group thoroughly addressed
the challenge of the practical implemen-
tation of smart sanctions pertaining to the
realization of these topics. The results were
summarized in their statement about Moni-
toring, Screening und Searching, published
in 2003 (www.wolfsberg-principles.com/
monitoring.html). In addition to the topic of
implementing smart sanctions (screening),
it also contains policies for account and
transaction monitoring.
WOLFSBERG GROUP
It is relatively easy to implement a sanction
targeting a single country and to ensure
that no barred transactions take place: any
payment traffic with that country is shut
down. However, if the sanction is defined
more specifically (only affecting selected
parties), the effort increases exponentially.
The only possible solution is an approach
coupled with the payment system with the
ultimate goal to check incoming and out-
going payments for matches with those
sanctioned parties found on the lists
published by the public authorities. As
easy as that may sound, the challenge is
tremendous. In fact, the filter mechanisms
are installed in a system built for speed.
They intervene before what appears to be
an unlawful transaction is processed, for-
warding the transaction to manual pro-
cessing.
CHALLENGING THE FINANCIAL SERVICESPROVIDERS
ling with new challenges. In the end
this is also about the image of the
Swiss financial center.
Interview: André Gsponer,
Enterprise Services AG,
7
Compliance
The filter is used exclusively for outgoing payments
processed by the CS in-house payment traffic
systems NZV (Neuer Zahlungsverkehr = new pay-
ment traffic) and AWZA (Automatische Weiterlei-
tung von Zahlungsaufträgen = automatic forwar-
ding of payment orders). In the NZV system, all out-
going payments with CS as the ordering bank are
screened, whereas in AWZA those payments re-
ceived by CS from a third party bank to be forwar-
ded automatically to the beneficiary with banking
relations at another third party bank are screened.
In the latter case, CS acts as a correspondent bank.
The filtering is handled by an embargo controller –
an application-independent module which is
accessed by NZV and AWZA. The address and copy
entries of the outgoing payments are verified.
Suspicious payments are labeled «pending» in the
database of the corresponding system and routed
into a wait queue – the exception queue. There,
they are inspected via a user interface by a pay-
ment traffic staff member and processed according
to the in-house regulations.
The central component of the filter is an administra-
tion tool, a PC based Windows application. Internal
files are generated from the imported sanctions
lists and filter regulations and transferred to the
host. Here, they are reconfigured and stored in a
special data area. Within the tool itself, the filter is
parameterized, including the fine tuning necessary
to keep the error rate of wrongfully stopped pay-
ments as low as possible. In addition, with the help
of this tool, new or modified sanctions lists are
being prepared in order to import them on the host
via file transfer.
The payment orders transferred to the exception are labeled for
auditing purposes and filed in the ELAR – the electronic archive.
The number of interfered payment orders, the reasons they were
stopped, and information on whether the payment was rejected,
altered or executed, and by whom they were processed can be
made available in a report.
Benjamin Hollenstein,
Legal & Compliance, Credit Suisse Financial Services,
APPLICATION OF A COMPLIANCE FILTER AT CREDIT SUISSE
Credit Suisse is using the OFAC Guard-Filter, an ACE Software Solutions product. It is respon-sible for preventing illegal and suspicious payments from being settled, based on sanctions listsdeveloped by governmental organizations (e.g. Office of Foreign Asset Control, OFAC, in theUSA and seco in Switzerland).
1. Payment Transfer for inspection to the controller2. Payment Transfer for inspection to the filter3. Reply from the filter (ok/nok + details)4. Storing possible embargo details in database5. Reply by the controller (ok/nok + embargo detail ID)6. Storing the embargo details in ELAR
Embargo-pending payments are examined and processed via theuser interface.
EBPP ClearIT, Edition 20
8
The idea at the basis of EBPP is straight through
processing of invoices and their payment. The ent-
ire process from billing over receiving the invoice,
the settlement and the clearance up to the pay-
ment steps are processed electronically and ideally
fully automated. As are result, there is no paper
involved – neither for the bill nor for the payment.
With the use of EBPP the new data input into the
systems of the recipient has been eliminated. Once
the cumbersome typing or scanning of numbers is
dispensed with, many errors and mistakes common
to the current system will be eliminated, the effort
will be greatly reduced. As a result, the entire pro-
cess will be accelerated considerably.
EBPP from the creditor’s perspective
Participants of an EBPP system no longer mail out
invoices by mail, instead, the billing and payment
information is transferred electronically. The EBPP
‘holds’ the invoice data for the appropriate custo-
mer to retrieve. The payment data usually printed
on the conventional payment slip is transferred
electronically to the client’s e-banking system
where it is presented in the form of an e-bill.
Here are some of the advantages and benefits:
● E-billing provides considerable savings by
eliminating printing and paper costs, paper
processing and postage.
● The billing process is accelerated since the
client receives the invoice much sooner.
● Eliminating the manual data transfer steps by the customers,
avoiding a common source of errors.
● Invoices are no longer lost or misplaced.
EBPP from the debtor’s perspective
Those customers already participating in an EBPP system of a
financial institution offering e-banking are able to call up their
electronic invoice directly from e-banking and authorize payment.
The client is able to determine the processing date, change the
billing amount, or reject the payment altogether. Invoice status
and details can also be obtained from e-banking at any time.
Here are some of the advantages and benefits from the debtor’s
perspective:
● Option to review and pay invoices from different creditors
simultaneously.
● Simplified bill paying without manual data input.
● Invoices remain available in e-storage for a certain amount of
time even after settlement.
● The invoice cannot be lost.
● No paper filing necessary
● Electronic archiving of the invoice data using the EBPP system
available as an option.
EBPP systems in Switzerland
In Switzerland the two EBPP systems, PayNet and yellowbill, are
operating independently.
PayNet, a Telekurs Group product, has been continually involved
EBPP – ELECTRONIC PROCESSING OF BILLS
EBPP (Electronic Bill Presentment and Payment) takes payment traffic directly into the future:bills can be received and paid electronically, turning much paperwork into a thing of the past.Switzerland has two operating, independent EBPP systems, PayNet and yellowbill.
9
EBPP
in EBPP for several years and is consi-
dered a pioneer in Europe. Starting in
January 2004, the Zurich Kantonal-
bank and the Hypothekarbank Lenz-
burg were the two first Swiss banks to
offer their customers EBPP services
via PayNet. As of June 2004, UBS,
Credit Suisse, and the Canton banks
of Aargau, Berne, the two
Basels and Jura, the regional banks
along with Migrosbank and Bank
Coop have joined in and are now also
providing electronic billing using Pay-
Net. Additional information can be
found by visiting www.paynet.ch.
PostFinance has been offering its
customers a similar system for appro-
ximately eighteen months. yellowbill
– with a growth rate of up to 40% per
month – has processed approxi-
mately 40,000 transactions by the
end of March 2004. 21,000 custo-
mers are currently registered with the
PostFinance system. Hypothekarbank
Lenzburg started offering yellowbill to
its clients in November of 2004. Addi-
tional information can be found by
visiting www.postfinance.ch/yellow-
bill.
André Gsponer,
Enterprise Services AG,
Roles in the EBPP process using the PayNet example
Biller Service Provider (BSP)The biller service provider is the gateway to the PayNet network for the creditor.
It accepts data from the creditor in various formats and forwards it to the Pay-
Net consolidator.
In addition, the BSP is able to provide additional services to the creditor, such
as the presentation of billing details for the creditor’s clients on the Web, prin-
ting services for non-electronically billable invoices, archiving, etc.
Customer Service Provider (CSP)The CSP is the service provider for the invoice recipients. The CSP accepts the
billing data from the PayNet consolidator, presents the invoice on its Web por-
tal (Web-CSP), or delivers it to the payer in the appropriate EDI format (EDI-CSP)
for automatic integration into their ERP system.
CSP can offer various options to the invoice recipient for additional services like
archiving, direct payment options, and also new marketing opportunities.
Payment Service Provider (PSP)The PSP role can only be filled by financial institutions. PayNet participants can
initiate the payment of their e-bills from accounts at these organizations
directly via the PayNet network. PayNet then forwards these payment orders to
the appropriate financial institution.
ConsolidatorThe PayNet consolidator is the core element within the EBPP network. All ser-
vice providers are connected with it. The invoices of all BSP are sorted by invo-
ice recipients and delivered to the appropriate CSP. In addition, the
consolidator keeps track of the status of all invoices and can forward payment
orders to the connected financial institutions (PSP).
This is the first in a new series of EBPP arti-
cles. ClearIT will be reporting on EBPP
systems in Switzerland and abroad, as well
as further developments and customers’
experiences in this area.
ADDITIONAL INFO
Source: PayNet
SEPA ClearIT, Edition 20
10
LIECHTENSTEIN ON ITS WAY TO THE UNIFORM EURO PAYMENT TRAFFIC ZONEDuring its parliament session on March 11, 2004, the Liechtenstein parliament has agreed tothe government’s proposal to integrate into national law the EU Regulation 2560/2001 gover-ning cross-border payments in euro. According to the fee uniformity policy embodied in theregu-lation, equal treatment of domestic and cross border payments in euro must be guaran-teed.
Liechtenstein’s principality – toget-
her with the other European Econo-
mic Area (EEA) countries Iceland and
Norway – has decided to adopt this
pricing regulation into the EEA agree-
ment. If Iceland and Norway adhere
to the legislative schedule, the agree-
ment will take effect by July 1, 2004.
In addition, a resolution of the joint
EEA Commission granted an exten-
sion until July 2005 of article 3 of the
EU Regulation for purposes of imple-
mentation.
Special relationships with Switzerland
In addition to this political process,
the practical implementation is of
importance to Liechtenstein’s banks.
For more than six months, both IBAN
account numbers and BICs are being
printed on relevant receipts and
forms. Simultaneously, the most sig-
nificant order forms have been adap-
ted. In addition to all these organi-
Andreas Zimmerli, Head of the Division Production, Verwaltungs- und Privat-Bank Aktiengesellschaft, Vaduz
In our previous ClearIT edition, we talked
in-depth about the effects of the Single
Euro Payments Area, SEPA, on the Swiss
payment traffic. Now we are focusing on the
unique situation in Liechtenstein: On the
one hand, the principality has chosen to go
the path of the EEA with Europe, on the
other, it remains closely tied to Switzerland
by means of an economical and customs
contract and through its use of the CHF as
its official currency.
Copyright «Liechtenstein Tourism»
zational measures, the implementa-
tion in reference to the payment traf-
fic fees, too, is important. Here, it is
of significance to note that the pri-
cing regulation governs payments
within the EU/EEA, and that the
Liechtenstein principality maintains
very close relations with Switzerland.
This is relevant in that from both
Liechtenstein’s and the Swiss per-
spective, payment traffic between
Liechtenstein and Switzerland is not
ADDITIONAL INFO
11
InhaltSwiss Interbank Clearing
considered cross-border, but dome-
stic. However, under the EU Regula-
tion, the domes-tic euro payment is
considered bulk payment traffic ser-
vice within the EU/EEA.
It will become apparent by July 1,
2005, whether this non-congruent
interpretation bears any applied rele-
vance. It admittedly has less bearing
on everyday business transactions
and on payment traffic fees.
The banks of Liechtenstein primarily
position themselves strategically as
premium asset/investment manage-
ment institutions rather than bulk
payment traffic processors. Accor-
dingly, the prices they charge their
customers for payment traffic servi-
ces in euro will have little or no
ART. 3, EU REGULATION2560/2001
effect. Also, solutions referring to the
compensation options for loss of pro-
fit are not a high priority for these
banks. Nonetheless, many Liechten-
stein financial institutions are in the
process of revising their pricing con-
cept in order to make it more diffe-
rentiated. In doing so, the currency is
less important than the effort re-
quired by each service rendered,
regardless in which country the payee
account is located.
Andreas Zimmerli,
Head of the Division Production,
Verwaltungs- und Privat-Bank
Aktiengesellschaft, Vaduz,
SIC DAILY TURNOVER EQUALS OF UP TO THREE QUARTERS OF THE ENTIRE SWISS GROSS DOMESTICPRODUCT
Ever since SIC started operation in 1987, the number of transactions processed annually hasmarked a continuous, steep increase. Hence, in 2003, the number of transactions had grownthreefold from ten years prior. Compared to the first full year of operations, the growth rate is animpressive 500 percent. On peak days, SIC handles more than two million payments.
As much as CHF 300 billion in volume
is processed, which represents
approximately three quarters of the
Swiss gross domestic product. During
the last year, the system handled
approximately CHF 178 billion per
average day.
How the euro affects the Swisspayment traffic
Neither the launch of the euro as a
book currency in 1999, nor its cash
introduction produced the generally
anticipated impact on the CHF pay-
ment traffic. While the euroSIC trans-
action volume grows steadily, its two
million payments annually appear
somewhat modest in comparison
with the number of SIC transactions.
This, however, in no way diminishes
the tremendous significance of euro-
SIC for the Swiss financial center as a
platform for the domestic and cross-
border euro payment traffic. It’s note-
worthy that euroSIC ranks sixth in
size among the 16 European RTGS
euro systems.
Swiss Interbank Clearing ClearIT, Edition 20
12
Marginal effect of CLS on SIC
CLS (Continuous Linked Settlement),
started up in September 2002, is a
global payment system eliminating
the fulfillment risk in the foreign
exchange trade with its step-by-step
processing. By now, foreign exchange
transactions are processed in these
11 currencies: AUD, CAD, DKK, EUR,
GBP, JPY, NOK, SGD, SEK, CHF, and
USD. Since the liquidity demand is
based on the net system, i.e. the
debits and credits in the various cur-
rencies are balanced against each
other, only the remaining peak offset-
ting amounts (long and short posi-
tions in any given currency) are sett-
led via the corresponding national
RTGS systems. The net funding requi-
rement in CLS, the total of the peak
offsetting amounts has dropped from
18 percent at the beginning to below
three percent of the trade volume.
This results in a theoretical CHF fun-
ding demand of roughly 1.8 billion or
one percent of the SIC turnover.
Based on the low liquidity needs, an
amount volume reduction of up to
one third of the daily turnover was
predicted during the preliminary sta-
ges leading to the CLS introduction.
Although today, more than 100,000
transactions of up to 1 trillion USD
gross value are processed worldwide
in CLS – Switzerland’s share of the
total turnover in CHF amounts to 4.6
percent (up to CHF 60 billions) – the
influence on the SIC volume is margi-
nal. Apparently, USD-CHF foreign
exchange trades are still executed
outside CLS, a fact reflected by the
significantly lower amount turnovers
in SIC on American (bank) holidays.
On Presidents’ Day, February 16,
2004 «only» CHF 90 billion were pro-
cessed – half of the average daily
volume.
Convergence of the low and highvalue payment processing
SIC is capable of processing both low
and high value payments. Favored
through the payment structure, espe-
cially during the lower fee night
hours, increasingly low amount pay-
ments are processed in SIC. Today,
more than 80 percent of the transac-
tions are payments below CHF 5,000.
The share of amount volume is all of
0.3 percent, compared to 1 percent of
the payments for more than CHF 1
million each and a share of more
than 95 percent of the entire turn-
over. This trend of «one RTGS fits all»
will continue throughout the next few
years for the following reasons:
● Due to the phasing out of the cen-
tral DTA (data carrier exchange)
processing, customer payments
will increasingly be routed via SIC.
● The definition of the new LSV
(direct debit) processes provides
for the debit claims to be settled
with SIC individual payments.
● Bulk payment flows between
banks and PostFinance, currently
running outside the SIC system,
will partially be redirected for
processing at SIC.
Thanks to SIC’s simple economies of
scales, additional volumes can be
processed for marginal fees. The
resulting savings are passed on to
the participants in the form of lo-
wered prices and discounts. Last
year, in addition to transaction fee
reductions of approximately eight
percent in 2002, discounts of CHF 4.6
million were granted.
With a volume of 215 million transac-
tions forecast for this year, SIC will
continue to be one of the world’s lar-
gest RTGS.
Andreas Galle,
Swiss Interbank Clearing Ltd.,
13
Standardization
The use of the IPI (International Pay-
ment Instruction) is marginal both in
the EU as well as in Switzerland. This,
even though the standard contains
all the information required for the
automated straight through payment
processing (STP). By the end of 2005,
the Swiss Payments Council (SPC) will
decide how the IPI should be used in
the domestic payment traffic.
Originally, the IBAN (International
Bank Account Number) was designed
in conjunction with the euro launch
in order to simplify the EU payment
traffic and making it less expensive
and more universal. After an initially
slow start, the development has
quickly gained momentum within the
EU zone. This fact was triggered by
the EU resolution on pricing; the dif-
ferent pricing for non-STP versus STP
payments exerts upward pressure on
the STP rate. The IBAN also contri-
butes considerably to a high STP rate.
As a result, certain countries – such
as Italy – have already voiced their
intention to replace the proprietary
account number formats with the
IBAN. Approximately 60% of all cross-
border payments within the EU zone
are already processed using IBAN.
The IBAN in Switzerland
With a mere 1 percent of all domestic
payments using the IBAN, it is still
barely used, whereas the increase in
the area of cross-border payments is
striking. More and more orders for
payment abroad reach the banks
including the IBAN, while still often
lacking the necessary BIC (Bank Iden-
tifier Code/SWIFT
address). At this
time, the inter-
bank Product and
Marketing Commit-
tee (PAM) is evalu-
ating a product
capable of supply-
ing the appro-
priate bank infor-
mation complete
with BIC, based on
the IBAN.
An inquiry at seve-
ral Swiss banks
has shown that approximately 8% of
all payment orders submitted cause
problems in processing due to
various errors in the account num-
bers. By replacing the proprietary
account number format with the
IBAN, these exceptions and resulting
manual processing expenses could
be lowered significantly. Thanks to
the check digit, the IBAN can already
be verified at the payment’s origina-
ting source. The SPC decided in
March 2004 to initiate a project fur-
thering and expanding the use of the
IBAN within the Swiss payment traf-
fic. The following activities are sche-
duled first:
● Planning the communication pro-
cedures and information policy
● Devising the impact on IT at the
financial institutions and software
companies
● Evaluating migration processes
(conversion into IBAN/clearing up
processes)
● Discussing pricing for non-STP
and STP payments
● Verify use of the IBAN on the
banks’ red deposit slips.
Hanspeter Kissling,
Credit Suisse,
PAM Chairman,
IBAN AND IPI – QUO VADIS?The two international standards – IBAN for account numbers and IPI for payment receipts –have evolved along different paths ever since their launch by the European Committee for Banking Standards (ECBS) in 1999 and their introduction to Switzerland in the fall of 2000.
Economies of scales
One other significant redesign ele-
ment is the more efficient exploita-
tion of the existing payment traffic
processes and their supporting IT
components. The economies of sca-
les achieved lead to lower costs in
the Swiss banks’ payment traffic. For
example, consider the Swiss Inter-
bank Clearing processes: Currently,
LSV orders are credited to the appro-
priate banks and debited the coun-
terparties without notification using a
dedicated application, in a specifi-
cally developed settlement process.
The processing and communication
within the future LSV is based on the
SIC platform. The «payment» of LSV
orders is executed using the familiar
message types A10 and A15, enabling
Swiss Interbank Clearing to save con-
siderably on operations costs, which
will in turn have a direct
effect on SIC transaction
fees. By lowering the indi-
vidual transaction fee, all
LSV participants benefit.
Dave Brupbacher,
Swiss Interbank
Clearing Ltd.,
Products & Services ClearIT, Edition 20
14
The comprehensive order includes
organizational and software adap-
tations affecting all LSV participants
(clients, financial institutions and
Swiss Interbank Clearing). The imple-
mentation is scheduled to include a
realization and migration phase of
several years, with the project being
completed by the end of 2006, inclu-
ding decommissioning the current
systems.
Product features
The redesign of LSV leads to some
noteworthy product features. One of
them is the right of refusal that will
be standard for all future LSV orders.
Compared to today’s process without
the option of right of refusal, this is
clearly an added value from the con-
sumer’s perspective – one that will
likely convince even the most critical
customer of the new LSV.
Due to this new LSV solution, all
debit entries not resulting from right
of refusal are eliminated, thus redu-
cing number of debit entries by 95%.
This leads to substantial savings for
both consumers and financial institu-
tions.
Another of the redesigned LSV fea-
tures addresses the issue that, with
increasing frequency, debit entries
processing in euro is requested. In
future, the Swiss banks within the
Swiss financial center will be able to
process LSV orders both in Swiss
francs and euro. This feature can
attract those additional customers
who had to use alternative payment
paths thus far.
THE BEGINNING OF THE LSV (DIRECT DEBIT) REDESIGNThe Swiss Interbank Clearing Ltd. board of directors, during its latest meeting, adopted thedetail concept for the redesign of the LSV (direct debit) service and awarded Swiss InterbankClearing its development.
LSV via online banking from the creditor’s point of view
Products & Services
THE CONVERSION TO FINANCE IPNET IS RUNNING ATFULL SPEED
May 1st, 2004 marks the beginning of the end: the last phase of the conversion from the out-dated TELOSnet X.25 technology to the new Finance IPNet was initiated. Approximately 90 percent of all financial institutions had yet obtained a new infrastructure at that point.
At the same time, Swiss Interbank
Clearing started to charge a penalty
for non-cancelled SIC/euroSIC autho-
rizations on X.25 lines. So if your
financial institution has the IP infra-
structure up and running and you still
are charged additional line fees, it is
because of these X.25 lines that are
not yet cancelled. If that is the case,
we advise you to have someone from
your company get in touch with our
line order department and our key
management team – the sooner, the
better:
You can follow along with the project’s pro-
gress by visiting www.sic.ch, News,
Projects.
ADDITIONAL INFO
Leitungsbestellungen & Key-Management
for SIC/euroSIC
Jose Enrique del Castillo &
Aneta Woytkowiak, Tel +41 1 279 41 36,
Fax +41 1 279 47 41,
E-Mail [email protected]
ADDITIONAL INFO
15
The following information events
have been scheduled for all parties
involved:
For banks:➜ at the Zurich Technopark,
on June 22, 2004, starting at 2 pm
– in German
➜ at the Geneva Crédit Suisse
Forum, on June 24, 2004, starting
at 2 pm – in French/ English
For developers of LSV software:➜ at the Zurich Technopark,
on June 23, 2004, starting at 2 pm
– in German
Starting on October 1, 2004, access to SIC and euroSIC can only be obtained
using a Finance IPNet connection or remoteGATE. In other words: Access to the
SIC platform via TELOSnet X.25 will be terminated on September 30, 2004.
Dave Brupbacher,
Swiss Interbank Clearing Ltd.,
16
PUBLISHERSwiss Interbank Clearing Ltd., Hardturmstrasse 201,
CH-8021 Zürich, Switzerland
ORDERING/FEEDBACK – [email protected]
EDITION – No. 20 – June 2004
Published regularly,
Circulation German (1300 copies), French (400 copies),
English (available in electronic format only on www.ClearIT.ch)
COUNCIL André Bamat, CEO, Swiss Interbank Clearing Ltd., Christian Bieri, RBA, Armin
Brun, PostFinance, Susanne Eis, SECB, Andreas Galle, Swiss Interbank Clea-
ring Ltd., André Gsponer (Leader), Enterprise Services AG, Gabriel Juri, Swiss
Interbank Clearing Ltd., Peter Kunz, Credit Suisse, Michael Montoya, UBS AG,
Ueli Strübi, BCV, Andy Sturm, SNB
EDITORIAL TEAMAndré Gsponer, Enterprise Services AG, Andreas Galle, Gabriel Juri (Leader)
and Christian Schwinghammer, Swiss Interbank Clearing Ltd.
MASTHEAD
TRANSLATIONFrench: Word + Image, English: HTS
LAYOUT – Mirjam Steiner Advertisement Agency
PRINTER – Telekurs Document Services
CONTACTSSIC Operation Center +41 1 279 4200,
euroSIC Operation Center +41 1 279 4700,
Product Management +41 1 279 4747,
SECB Operation Center +49 69 97 98 98 0,
Customer Service SECB +49 69 97 98 98 35
Additional information about the Swiss payment traffic systems can be found on theInternet at www.sic.ch.
The Annual General Assembly of the Telekurs Group took place on the May 12, in Zurich. From left to right: Rolf Finschi, CEO of Telekurs Services, André Bamat, CEO of Swiss Interbank Clearing and member of the Telekurs Group’s executive board,
Dr. Thomas Ankenbrand, Director of RBA-Zentralbank, and Mirko Thomas Oberholzer, legal service, Telekurs Group.
Photo: Fritz Hammer