1 Payments Work Session What’s happening in the payments marketplace? George M Doolittle, Head of Global Payment Services, Global Transaction Banking, Wells Fargo Liba Saiovici, Managing Director, Latin America Product Management, Global Treasury Solutions, Bank of America Merrill Lynch @swiftcommunity #LARC2013
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Payments Work Session
What’s happening in the payments marketplace?
George M Doolittle, Head of Global Payment Services, Global
Transaction Banking, Wells Fargo
Liba Saiovici, Managing Director, Latin America Product Management, Global Treasury Solutions, Bank of America Merrill Lynch
@swiftcommunity #LARC2013
George M Doolittle Executive Vice President Global Transaction Banking Wells Fargo International Group Cartagena, Colombia, Julio 2013
• Provide a truly global forum to drive better market practices which, together with correct use of standards, will help in achieving full STP and improved customer service:
• The PMPG mission is to:
– take stock of payments market practices across regions
– discuss, explain and document market practice issues, including economic viability
There are a number of forces at work which are shaping the direction of the global payments industry
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Globalization
With the increasing volumes of electronic payments, there is a focus on improving infrastructure to transform how payments circle the globe
While the forces at work are similar across the globe, focus areas vary by region:
North America - focus on mobile and near-field communication (NFC) payments, and a number of regulations
EMEA – SEPA implementation and the impact of an integrated market
Asia Pacific - increase in electronic payments and payment options
Latin America - growth of person-to-person (P2P) payments and electronic payments as a result of an increase in non-cash usage.
Global volumes of non-cash payments increased by 7.1% , reaching $283 billion during 20101.
Mature economies contributed nearly 80% of the volume, however, the 4.9% growth rate of mature economies was far outpaced by the 16.9% growth rate in developing economies.
Use of non-cash payment instruments continues to grow exponentially.
Heightened importance of emerging markets in driving global economic growth has highlighted the growth of intra-regional trade and has increased the need for enhanced cross-border settlement and cross-currency payment solutions.
Payments is one of the fastest growing industries worldwide and future growth potential remains enormous
1 Source: World Payments Report 2012
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Standardization
But… a lot of companies in Latin America are still unfamiliar with ISO 20022
ISO 20022: the lingua franca in payments and securities
ISO 20022 has been widely viewed as the ‘holy grail’ of message standardization for the future.
The standard offers great potential for reengineering the payments industry and for process improvement.
Use of the standard has been greater in more developed markets with emerging markets, such as LatAm, being slower to adopt, however, usage continues to grow.
Global embracement of the standard will be critical if industry participants are to reap the full benefits of global standardization.
Widespread adoption will most likely drive further changes in consolidation, competition and technology.
Standardization initiatives aimed at improving efficiency, streamlining processes and reducing costs continue to gain widespread industry attention and participation.
Organizations such as SWIFT have become a critical voice on the standards front and have emerged as catalysts towards global standardization of processes.
In a recent Anthemis Group report, SWIFT was highlighted as still being “the preferred infrastructure when we talk about international payments” through its core “strategic positioning”.
Standards are particularly key in the emerging mobile space with the need for mobile payments standards definition and management.
Historically the lack of a common global standard and variations between systems have reduced the ability to seamlessly pass data between counterparties
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What is ISO 20022?
For payments
Implemented by banks, corporations, payment systems and financial applications providers to conduct payment operations
The future (and present) standard in use with a number of the world’s clearing and payment systems
Frequently appearing in corporate cash management RFPs where multi-bank, multi-country reach is required
For financial services
A harmonized set of standards across financial services domains:
– Cash, Securities, Trade, Card, FX, Remittances and other
Freely available to all members of the financial services community
Based on a partnership of multiple standards organizations including SWIFT, IFX, OAGi, x9, TWIST, and others
A single set of globally relevant financial services messaging standards
The focus of SWIFT’s future standards development (SWIFT MX)
Many view ISO 20022 as the ‘holy grail’ of message standardization for the future
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Who (and what) is driving adoption?
Drivers
- Harmonization (driven by regulation or innovation)
- Renewal of legacy systems
- Further automation required
- Creation of new services
- Interoperability with other systems/players
New initiatives
- Market infrastructures
- Global harmonization & regulation (e.g., SEPA in Europe)
- Automation in specific markets (e.g., the ‘funds’ market)
New players
- Corporates, fund managers
New technology
- XML, SOA, web services
Bank of America Merrill Lynch is a leader, very actively supporting ISO 20022 adoption globally
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ISO 20022 Payment Market Infrastructure Adoption
CA
IN
JP
CN
CO
PE
BR TH
EU-EPA EU-
Target 2
DK
SADC
AU
CH
IPFA
GB
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Regulation
It is important to note that while the myriad regulatory changes taking place across the globe represent unique challenges, they also bring with them
opportunities for firms who are able to seize them
The evolving regulatory landscape: the list that keeps on growing
Dodd-Frank
SEPA
FATCA
Basel III
Regulatory changes around the globe are impacting the operational, technological and competitive models of payments.
Pace of regulatory change brings with its own challenges for firms to keep current on existing, and emerging regulations at a global, regional and local level.
A wide range of global and regional regulatory and industry initiatives are reshaping aspects of the payments market
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Innovation
Familiarity with the latest advances in technology innovation will prove invaluable for firms looking to stay ahead of the global payments curve
Mobile technology: Revolutionizing financial services throughout the world
Mobile is widely viewed as a game changer, globally, in the evolving payments landscape.
Increasing penetration of smart phones and mobile tablets.
The user experience with a mobile device has evolved to be much richer and is contributing to channel convergence.
The emergence of mobile as a ubiquitous delivery channel is also seen as fueling the drive to real-time payments.
Mobile has become increasingly important in the emerging markets where the use of mobile devices continues to climb and be seen as an important delivery channel for services.
Financial institutions have the chance to leverage their reputation as trusted payment providers and effective risk managers to strengthen their role in the mobile payments ecosystem.
Enhanced automation through technologies, such as mobile , and the evolution of artificial intelligence and straight-through processing abilities, are quickly reinventing industry payment methods and vehicles.
With advances in technology and adoption of industry standards, there is a tremendous opportunity for firms to deliver more “value added services” to differentiate themselves in an increasingly level playing field.
Advances in, and adoption of, technology continues to fuel and foster the introduction of new innovations
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Forces at Work in the Global Payments Industry
Adapting to an increasingly connected global industry
It is clear that the future payments landscape will be very different in the coming years compared with what it is today.
In order to fully embrace and capitalize on this change, collaboration at all levels of the industry is required.
The pace of regulatory change will continue to increase as regulatory and industry participants adapt to a more globally connected industry.
Newer technologies , such as the ubiquity of mobile, are going to be game changers.
SWIFT will continue to play a pivotal role as the drive towards global standardization continues.
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Disclaimer
"Bank of America Merrill Lynch" is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation ("Investment Banking Affiliates"), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered as broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed
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