The Global Transformation in Payments is Happening Today!

The Global Transformation in Payments is Happening Today!

Karen Willis, Partner & CTP

Agenda✓ Elire Introduction & Industry Experience

✓ Global Payment Trends

✓ ISO Payment Trends

✓ SWIFT ISO Adoption Study

✓ How to Prepare for ISO enablement

✓ ISO Client Projects

✓ ISO ROI & TCO Benefits

✓ Q&A

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• Cloud Strategic Roadmap• Kyriba Treasury Workstation• Oracle Cloud Cash Management• FIS Treasury Workstation

• Oracle/PeopleSoft ERP Treasury• Oracle/EBS Treasury

• PMP Project Management• TMS RFP Vendor Selection• Bank Services Rationalization• Best Practices Process Improvement

Elire Treasury Practice Areas

Global Payment Trends

R3


✓ Enterprises now outpace consumers in adoption of emerging technologies—Artificial Intelligence, APIs, Blockchain, RPAs, Digital Assistants…and the Internet of Things (IoT) (Oracle 2019)

✓ 60+ open banking platforms are making APIs available around the world--a growth rate of 73% since 2017 (Medjaoui & Boyd, 2018)

✓ ISO 20022 is the key standard in next generation payment schemes, including instant payments move to 24x7, supporting open banking over APIs, and others (SWIFT 2020)

✓ FinTech solutions such as R3 Corda, RippleNet, Tipalti, Currency Cloud FX, Stripe, Zipmark, have created Blockchain/SaaS payments (Forbes 2014)


✓ 80% of firms are currently transitioning B2B payments from paper checks to electronic payments for increased efficiency and reduced costs (AFP/Bottom Line 2018)

✓ Fraud remains a top concern, with 55% of firms surveyed listing it as the top payment-related challenge that their team faces (Foresters 2019)

✓ NACHA requires Corporates to protect DFI Account Numbers by Data Masking to when stored electronically—2021 (6M+ volume) and 2022 (2M+ volume) (NACHA 2019)

✓ Virtual Card payments doubled 2015-2018 to $160 billion...expected to reach half a trillion $ by 2024.

Cloud Trends by 2025

✓ 80% of all enterprise workloads will move to the cloud

✓ 90% of enterprises will use an SSO (single identity platform) with MFA (multi-factor authentication) that bridges on-premise applications and the cloud

✓ 85% of customer interactions will be automated

✓ 70% of IT functions will be automated

✓ Security related events will increase 100x…making automation critical to prevent, detect, and mitigate threats

(Oracle 2019)

ISO Payment Trends

What are ISO-20022 Payments?✓ ISO-20022 is a set of “XML” message standards across major

financial services (cash, securities, trade, card, foreign exchange) based on a shared data dictionary and business process model

✓ Designed originally to standardize payments across the Eurozone…as SEPA credit transfers began 2008 and SEPA direct debits/cards in 2009

✓ Emerged as a single, common “language” for global financial communications

✓ Supports High Value (HVP/wire), Low Value (LVP/ach), and Real-Time Payments (RTPs)

✓ Standardizes use of the Unique End-to-End Payment Reference “UETR” which returns on the bank statement to optimize STP automated reconciliation of accounts

✓ ISO messages have far fewer payment failures

ISO Payment Trends✓ By 2023…ISO-20022 will represent 79% of the market volume for

High Value Payments (HVP) and will be 87% of $$ value. (SWIFT 2018)

✓ All reserve currencies are live now on ISO-20022 or have declared a live date: USD, EUR, JPY, GBP, CNY, CHF (refer to graph next slide)

✓ Adopted by market infrastructures in 70+ countries replacing legacy formats

✓ US Federal Reserve and CHIPs delayed their Nov-2020 start date for ISO-20022 Fedwire adoption to consider a “big bang” cutover in 2023 rather than a 3-Phase approach

✓ SWIFT ISO global cross-border payments—$300 Billion+ USD daily

✓ SWIFT gpi tracker service shows--40% of payments credited to beneficiaries in 5 minutes or less…and 50% in 30 minutes

(SWIFT March 2020)

SWIFT ISO-20022

Adoption Study

SWIFT ISO-20022 Global Adoption Study

✓ Three Phases planned by SWIFT for the legacy payments transition to ISO-20022…but final dates are driven by the users & banking community

✓ First only a Closed User Group (CUG)--typically Banks--can use ISO20022

✓ Coexistence period with 2-way translation—MT to ISO, ISO to MT

✓Users may continue to exchange MT with one another

✓ISO 20022 users can exchange ISO 20022 with one another

✓ Full Functionality will be ISO20022 only—MT messaging will be decommissioned…after 90% of funds traffic is using ISO

ISO-20022 Global Adoption Study

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

HVP LVP RTP

10%3% 7%

60%

11%

43%

30%

86%

50%

Live Now – Payment Types by Region

America Asia-Pacific Eur/ME/AFR

How Can Your Firm

Prepare for ISO-20022?

Payments Business Process Redesign

Organization & Payments Strategy

Payments Workflow & Processes

Payments Landscape Normalization

Current State❖ Decentralized

❖ Localized

❖ Time lags

Solution➢ Virtualization

➢ Centralization

➢ Local empowerment

Future State✓ Centralized payment factory

✓ Enhancement of database

✓ Scalability and growth

Current State❖ Many different processes

❖ Lacks standardization

❖ Labor intensive

Future State✓ Uniform processes

✓ More with less

✓ System integrated controls

Solution➢ Simplification

➢ Standardization

➢ Enhance compliance

Current State❖ Multiple banks &

accounts

❖ Multiple e-banking tools and payment portals

Solution➢ Independence

➢ Rationalization

➢ Balancing bank fees

Future State✓ Balanced banking

✓ Simplified account structure

✓ Reduced Dependency on Bank Portals

ISO-20022 Project Methodology

ISO Payments - Treasury Integration

ISO-20022 Projects

✓ Industry - Loyalty Marketing (Air Miles, Rewards) & Banking/Credit Card Issuance

✓ Regions - USA, Canada, Europe

✓ Employees - 20,000

✓ Total Assets - USD $30 Billion

✓ Revenue - USD $8 Billion

✓ Net Income - USD $800 Million

ISO Project #1 – Intl Treasury & ERP Pmts

ISO Project #1 – Intl Treasury & ERP Pmts✓ Selected ISO Formats in Scope – gathered Bank requirements for

HVP, LVP & SEPA✓ Map from ISO standards => Bank Requirements => ERP data

elements in software Vendor/Beneficiary Masters

✓ Vendor/Beneficiary Master Data Cleanup✓ Added international addresses, pay from/to account data scrubs,

IBANs

✓ Accounts Payable ISO set up - any new Pay Cycles needed in ERP✓ LVP made in bank accounts same currency = EFT - AP

✓ HVP made in bank accounts currency not the same = FX – Treasury

✓ LVP to APAC with non-English characters = Bank Portal – Treasury

✓ Exception/Immediate HVP – (EFT or Wire) – Treasury

✓ Created alerts in advance for payments that may cause repair✓ Alert if bank account currency <> payment currency

✓ Pay date/Value date (i.e. – need T+1 or T+2 business days for FX)

ISO Project #1 – Intl Treasury & ERP Pmts

✓ Industry – Insurance Services & Risk Management

✓ Regions – Global in 100+ Countries




✓ Net Income - USD $1.5 Billion

ISO Project #2 – Global Cash Pools & Funding

✓ Cash Pool Header / Pool Participant account structure

✓ Local in-country funding requests for operating needs

✓ Corporate USD pool position dashboard view

✓ Local in-country view via dashboard for FX funding needs

✓ Cash sweep/funding bi-directional structure initiates ISO transfers in HVP or LVP format as needed

✓ Centralized Corporate Treasury approval process for ISO transfers



✓ Industry – Investment, Banking & Brokerage Services

✓ Regions – North America & Europe




✓ Net Income - USD $385 Million

ISO Project #3 – Cloud Cash Mgmt & Global Pmts


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Users


ISO Project #3 – Cloud Cash Mgmt & Global Payments -Realized Benefits

Cloud ISO Global Payments – A Sampling of Providers

✓ An ISO Pmts Gateway…lowers risk…regulatory & operational

✓ An ISO Pmts Gateway…improves funding of intraday liquidity

✓ An ISO Pmts Gateway…lowers the cost of reporting & improves analytics

✓ An ISO Pmts Gateway…automates the workflow approval process

✓ Mobile review & approvals on iPhone, iPad, Android

✓ Easier integration of subsidiary & acquisition payments

✓ Ease of implementation for POBO & SSCs (shared service centers)

✓ Reduces the number of bank accounts and fees

ISO Payments - ROI & TCO Benefits

✓ Technical support costs for a singular ISO approach are significantly lower and reduces operational risk

✓ Ability to consolidate on the number/types of bank connections

✓ Reduction in file transfer fees by consolidating into fewer files

✓ ISO significantly improves STP bank reconciliation via rule for“end-to-end” payment id

✓ Simplifies global funds transfer across borders

✓ OFAC & AML can be centralized more easily to improve oversight, automate alerts, and regulatory/audit reporting

✓ Risk of OFAC & AML exceptions is then significantly reduced


Questions?Contact Karen Willis ([email protected])

Thank You!

Addenda & Citations

SWIFT – The State of APIs Today


✓ Technical support for a singular ISO approach for all payment types makes support costs significantly lower and reduces operations risk

✓ Ability to standardize on the number and types of bank connections


✓ ISO rules for full life-cycle “end-to-end” payment identification significantly improves STP bank reconciliation

✓ New ISO-related technology will simplify global funds transfer across borders

✓ OFAC/AML can be centralized more easily to improve oversight, automate alerts/resolution, and regulatory/audit reporting



✓ Technical support for a singular ISO approach for all payment types makes support costs significantly lower and reduces operations risk

✓ Ability to standardize on the number and types of bank connections


✓ ISO rules for full life-cycle “end-to-end” payment identification significantly improves STP bank reconciliation

✓ New ISO-related technology will simplify global funds transfer across borders

✓ OFAC/AML can be centralized more easily to improve oversight, automate alerts/resolution, and regulatory/audit reporting


Citation for References1) SWIFT ISO 20022 Migration Study Consultation Paper (April 2018)

2) SWIFT gpi, Delivering the Future of Cross-border Payments (March 2019)

3) PSD2: Taking advantage of open-banking disruption, McKinsey & Company (January 2018)

4) Global payments 2018: A dynamic industry continues to break new ground, McKinsey & Company (October 2018)

5) 2015 AFP Payments Cost Benchmarking Survey Report of Survey Results, AFP/Bottom Line (2015)

6) Outlook For 2019: The State Of Retail Payments Report, Foresters (November 2018)

7) Electronic Payments Survey Report of Survey Results 2016, AFP (December 2016)

8) Customer Credit Transfer Initiation V3, ISO 20022 XML Message, Bank of America Merrill Lynch (November 2011)

9) Oracle’s Top 10 Cloud Predictions 2019: Predicting the future of the enterprise cloud by 2025, Oracle (2019)

10) Banking APIs: State of the Market Report, Medjaoui & Boyd (2018)

The Global Transformation in Payments is Happening Today!

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