REAL-TIME PAYMENTS (RTP) SUMMIT 18 May, 2018 THE FIRST NEW PAYMENTS SYSTEM IN OVER 40 YEARS Pete Kooner Head of Product, Treasury Services J.P Morgan, Australia & New Zealand 2018
REAL-TIME PAYMENTS (RTP) SUMMIT 18 May, 2018
THE FIRST NEW PAYMENTS SYSTEM IN OVER 40 YEARS
Pete Kooner
Head of Product, Treasury Services
J.P Morgan, Australia & New Zealand 2018
Technology is driving massive changes to the global payments landscape
Global Mobile Users1
Trends and shifts in the payments landscape
1995 – 80M – 1% Population Penetration
2014 – 5.2B – 73% Population Penetration
2017 – 7.1B – 95% Population Penetration
Global Smartphone Users2
First iPhone released a decade ago – today 715
million in use
2014 – 2.6B – 36% Population Penetration
2017 – 4.3B – 57% Population Penetration
Global Internet Users3
1995 – 35M – 0.6% Population Penetration
2014 – 2.8B – 39% Population Penetration
2017 – 3.2B – 43% Population Penetration
What does this mean for payments?
People are now accustomed to obtaining information in real-time and expect no less from payments
The payments landscape has been driven to real-time by the increasingly connected and accessible consumer
1 Ericsson 2017 Mobility Report, Kleiner, Perkins, Caufield and Byers, Internet Trends 2015 2. Ibid 3. Ibid
1
Faster Payments offering around the globe
Countries around the world are implementing faster payment systems
Faster Payments live
Faster Payments under development
2
Immediate Payments: The global view - a sample of global instant payment schemes
Country Name Year Settlement Working hours Message Format Technology
Japan Zengin 1973 DNS or Gross 08.30-16.40 ISO 20022 (for some msg) Home built
Switzerland SIC 1987 Gross 24/7 ISO 20022 by 2018 Home built
Taiwan FISC-FIS 1993 Prefunded 24/7 Proprietary XML Mobile focus, MNOs and Banks
South Korea KFTC 2001 DNS TBC Proprietary XML Home built
Brazil SITRAF 2002 Hybrid 07.30-17.00 ISO 20022 Home built
Mexico SPEI 2004 Hybrid 23/24 Proprietary Home built
South Africa RTC 2006 DNS 24/7 ISO 8583 (20022 planned) BankServ SA
U.K. FPS 2008 DNS 24/7 ISO 8583 Vocalink
Chile TEF 2008 DNS 24/7 TBC Home built
India IMPS 2010 DNS 24/7 ISO 8583 TATA Consulting
China IBPS 2010 DNS 24/7 ISO 20022 planned Home built
Poland Express Elixir 2012 Prefunded 24/7 ISO 20022 CapGemini
Sweden BIR 2012 Prefunded 24/7 ISO 20022 Home built with Fundtech
Turkey RPS 2014 Gross 08.30-17.30 TBC Home built
Singapore FAST 2014 DNS 24/7 ISO 20022 Vocalink
Denmark NetsRT 2014 DNS 24/7 ISO 20022 NETS
Australia NPP 2017 Gross 24/7 ISO 20022 SWIFT
U.S. TCH RTP 2017 DNS 24/7 ISO 20022 Vocalink
EBA EU SCT Instant 2017 DNS 24/7 ISO 20022 SIA
Spain SCT Instant 2017 DNS 24/7 ISO 20022 RedSys
Netherlands TBC 2019 TBC 24/7 ISO 20022 TBC
3
Instant Payments in Europe: Single European Payments Area (SEPA Instant)
J.P. Morgan is an original funding member of EBA Clearing’s SEPA Instant Payments driven by the
European Retail Payments Board. The interbank rules are:
1 15,000 limit is expected to rise over time, in line with historical rollouts of real-time payment systems globally.
Speed
Money available to payee
within ten seconds
Availability
SEPA CT ‘inst’ payments available 24/7/365
Reach
All SEPA participants are
eligible; but full 34 not
expected to initially go live
Amount
Credit Transfers in EUR
Up to maximum 15,0001
10 EUR 15,000
24 / 7 / 365
PAN EURO
Limited Pilots Scheme Published
Industry Build Community
Review Expected
Industry Take-Up Consultation
April 2016
July 2016
November 2016
November 2017
Middle of 2018
Timeline
4
Real-Time Payments in the U.S. market
RTP will address the gaps in current payment methods
ISO 20022 supports sophisticated applications
Messaging
ISO 20022
Security
Sender initiates the transaction from their own funded DDA
Credit Push
Money is available to payee within fifteen seconds
Speed
15 seconds
Availability
Instant payments available 24/7/365
24/7/365
Credit transfers in USD of up to a $25,000 maximum
Amount
$25,000
The first new U.S. payment system in over 40 years RTP use cases
Real-Time Payments (RTP) are immediate, irrevocable, secure, contextual,
and convenient
JPMorgan Chase is an Early Adopter Bank in the U.S., acting as part of a
consortium of banks participating in the new payment rails developed by The
Clearing House1
API and channel-based, which supports unified payments integration and
contextual commerce2
Robust remittance detail allows for streamlined reconciliation with payment
confirmation and reporting of information-rich content
Business-to-business (B2B)
A supplier sending a Request for Payment (RFP) message to a
manufacturer, who then responds by initiating a RTP3
A merchant transferring funds from his online wallet to his DDA
Business-to-consumer (B2C)
A service provider issuing a refund to a customer directly to her phone
An insurance company adjustor reviewing a claim and providing funds to
the policy holder
Consumer-to-business (C2B)
A consumer paying a utility bill last minute to avoid service cancellation
A car owner paying the final balance on a car loan
1 https://www.theclearinghouse.org/press-room/in-the-news/20171114%20rtp%20first%20new%20core%20payments%20system 2. Channel-based RTP is a future functionality that is anticipated to launch in Q4 2018 3. Request for Payment is a future functionality that is anticipated to launch in Q4 2018
5
RTP is a scalable solution for audiences of all sizes
RTP data elements drive new opportunities while supporting integrated and contextual commerce
Business-to-
Business
(B2B)
Eliminating paper and manual reconciliation: Request
for Payments (RFP) on recurring and one-time invoices
Drives efficiencies and potentially enhances
working capital in the order-to-cash and
procure-to-pay cycles for our clients
Business-to-
Consumer
(B2C)
Enhancing customer service: using payments as a
differentiator for resolving customer complaints, issuing
royalties, merchant settlements, refunds, rebates,
incentives, settling claims, etc., anytime
The customer experience is greatly enhanced
by providing real-time resolutions
Consumer-to-
Business
(C2B)
Let them choose: providing choice for consumers on how
and when to pay
Encourages consumers to shift from cash and
cheques
Payment Finality and Visibility Enhanced Client Experience Automatic Reconciliation Improved Liquidity Management
No returns, reversals, or chargebacks
Real-time view of cash positions
Real-time confirmations
No cut-off times- 24/7/365
API based – supports unified payments integration with robust messaging and acknowledgments
Invoicing capabilities with RFP reducing days sales outstanding
ISO 20022 allows for information rich messaging
Reduced settlement times allow for last-minute payments
Increased control and immediate funds availability
6
Innovation: U.S. Real-time payments
Premise
Every day thousands of companies deliver physical goods to food stores,
package stores, restaurants and supermarkets
Store personnel accept these shipments and pay the driver / delivery agent
onsite
Shipment invoices can be changed at time of delivery based on current store
inventory requirements
Invoice payment is often made by paper cheque or in cash to the delivery
person
This is problematic as…
Although cheque and cash acceptance is a risk for the delivery provider, it is a
preferred method of payment for the payor
Invoice and payment reconciliation is manual and after-the-fact when drivers
end their daily route
Proposed M-Commerce Solution
A Real-Time Payments enabled bank receivables mobile app can eliminate the need to take cash or cheque payments and immediately reconciles the invoice to the payment.
How it works Benefits
The driver can deliver the goods, make changes to the invoice and
immediately send it to the store manager via a mobile app
The store manager can immediately see the invoice through a mobile phone
via an online banking app and clicks ‘Pay’
Transactions are completed immediately
The driver no longer needs to deposit the cheques or carry cash to the bank
Delivery invoice data to payment amounts are recorded and reconciled at
point of receipt
Invoice date is available to the store owner for shipment and order tracking
Less expensive than transporting and depositing cash, cheque and card
payment processing
The Clearing House business-to-business pilot use case – Cashless / Cashless Cash On Delivery (COD)
7
What do corporates need to do to prepare for NPP?
Review and upgrade existing technology e.g. ERP systems
Shift from scheduled payments to real-time e.g. API payment technologies
Assign resources to develop business use cases which will add customer value or internal efficiencies
Partner with your bank to plan your organisational change for real-time payments
J.P. Morgan Corporate
8
Interbank Information Network (IIN)
Interbank Information Network (IIN)
9
Interbank Information Network (IIN)
A secure, decentralized, permission-based network to safely exchange information and address the current
and future friction points within the payments chain
Streamlines and automates compliance-related inquiries reducing delays and inquiry turn-around times
Enables cross-border payments to reach beneficiaries faster while reducing costs associated with compliance inquiries
Maintains Personal Information (PI) within secure network provisioned for validated payments
Actively growing network with key foreign correspondent banking clients to further enable faster payment execution
Client benefits
Key features
A network that leverages J.P. Morgan’s Quorum, a blockchain technology to streamline payment-related
compliance inquiries
Information is exchanged and maintained through a
secure and permissioned network
Enables faster and more comprehensive payment tracking
Facilitates informed, real-time risk management with real-
time sanctions, AML and fraud management tools
Establishes a foundational structure of technology,
network and utility services for the development of future
value-added services
IIN model for compliance inquiries
Interbank Information
Network
Remitter
Remitter Bank
Correspondent Bank B Beneficiary
bank
3
2 2
Compliance inquiry
1 4
1 Data request 2 Data exchange 3 4 Data remittance
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