© Copyright 2011, Fundtech Ltd. All Rights Reserved. Low Value Payments & Payments Hub Session: With the growing volume of low value payments in Asia,

© Copyright 2011, Fundtech Ltd. All Rights Reserved.

Low Value Payments & Payments Hub

Session: With the growing volume of low value payments in Asia, the search for

interoperability continues

Gil Gadot– EVP & CTO, Managing Director APAC

8th April, 2011


Low value payment – traditional definition

The “new” low value networks

SEPA /FPS/MAMBO

Interoperability mobile/Web/EIPP

Payment Spider Web

Payments HUB topology and benefits

Topics


Relatively low denomination payment Delivered and processed in a batch Non-urgent Cleared and settled over 24-72 hours Domestic & Single Currency Revocable Low care – i.e. no repair Rejects are asynchronous Examples: ACH, BUCS, SEPA, GIRO B2B B2C

Low Value Payment – Traditional Definition


Not necessarily low denomination payment Delivered and processed as batch or single payment Non-urgent Cleared in 15 seconds and settled over 24-72 hours Domestic & cross border Web & mobile friendly Revocable Low care – i.e. no repair Rejects are asynchronous UK FPS, CNAPS 2, MAMBO… B2B B2C P2P

Low Value - New Networks

NATIONAL MARKETS

LOCAL CLEARING SYSTEMS

IRIS

ELLIPS

TOP

TBF

SPGT

RTGSplus

BI-REL

SLBE

CHAPS Euro

ARTIS

HERMES

FRANCE

GERMANY

BELGIUM

SPAIN

PORTUGAL

ITALY

-GREECE

AUSTRIA

IRELAND

LUXEMBOURG

NETHERLANDS

FINLAND

ACH

RTGS

RTGS

ACH

ACH

RTGS

RTGS

ACH

ACH

RTGS

RTGS

ACH

ACH

RTGS

RTGS

ACH

ACH

RTGS

RTGS

ACH

ACH

RTGS

RTGS

ACH

TAR

GE

T ‘

INT

ER

LIN

KIN

G N

ET

WO

RK

’

LINKEDRTGS

EU

B

AN

KS

SINGLE REGIONAL NETWORK

RTGS(TARGET 2)

EU

B

AN

KS

ACH NETWORK(SEPA)

NET SETTLEMENT(EBA EURO1)

NET SETTLEMENT (EBA Euro1)

Disparate National Infrastructures Single Pan-European Infrastructure

PE-ACH CSM

PE-ACH CSM

NON-PE-ACH CSM

NON-PE-ACH CSM

INTER-OPERABLE NETWORK

by 201x

Europe - TARGET EBA SEPA Simplification of Market Infrastructures


Faster Payments - UK

Central Infrastructure

Central Infrastructure

Member –Direct SenderSubmitting member

Sending FPS institutionOriginating Credit Institution

Member –Direct SenderSubmitting member


Member –Direct ReceiverSubmitting member


Member –Direct ReceiverSubmitting member


Bank of England

Corporate - DCACorporate - DCA

Direct Agency - SenderDirect Agency - Sender Direct Agency - ReceiverDirect Agency - Receiver

Originating Credit Institution

Originating Credit Institution

Beneficiary Credit Institution

Beneficiary Credit Institution

Third Party Beneficiary –Direct Receiver

Third Party Beneficiary –Direct Receiver

Members are the 13 UK banks, which agreed to meet scheme’s membership ruleDirect Agencies are sponsored by Members, who take full responsibility for them in FPS Corporates are customers of Members or AgenciesOCI’s and BCI’s (aka Indirect Agencies) are sponsored by a Member and communicate with FPS via a MemberSIP Clears in 15 seconds


1. Bill Presentment and Payment – allows electronic delivery of bills to a customer’s internet bank, with seamless integration with BPAY payment functionality

2. Payment Request and Payment – similar to above, in summary transaction form. More suitable for repeat or ad-hoc payment arrangements or schedules thereof

3. Person-to-person Payment Request and Payment – enables address holders to request and receive payment in real-time without disclosing BSB and account number

4. Payment With Advice to Address – delivery of remittance information with payment to address

5. Real Time Notification with Payment

6. Non-Value Items Delivery – delivery of documentation or commercial communications

7. Online Payment – initiating and authorising an online payment

MAMBO – My Account , My Bank OnlineAustralia

MAMBO intends to support the following functions:


24/7/365– Heavy burden on the bank’s infrastructure

Also need “parallel account structure”

Real time– Goal of 15 seconds end-to-end (customer-to-customer)– Goal redefined by removing

Payment capture and pre-processing: Seconds to hours

Beneficiary advising: Approximately 20 min.

Posting: 2 hours to next day

Tiered processing– Bulk & retail periods (00:30 – 04:00 & 04:00 – 00:30)

Payment Caps– Not currently used

Risk controls– Different limits for bulk (100K) and individual payments (10K)

Different certainty of acceptance (@ the receiving bank)

New Network Characteristic


Low Value Interoperability Mobile/Cash management/EIPP

© Copyright 2011, Fundtech Ltd. All Rights Reserved.Source: Financial Insights

Teller

Call Center

Website

IVR

Mobile

Channels

Check•Pricing•Risk & Fraud Mgmt.•Security•Monitoring & Rptg.

Low Value Pymts• Pricing• Risk & Fraud Mgmt.• Security• Monitoring & Rptg.

Cards• Pricing• Risk & Fraud Mgmt.• Security• Monitoring & Rptg.

High Value Pymts• Pricing• Risk & Fraud Mgmt.• Security• Monitoring & Rptg.

Payment & Treasury Systems

DDA

G/L

Reconciliation

Core

Syste

ms

Existing Architecture – The Problem

© Copyright 2011, Fundtech Ltd. All Rights Reserved.Source: Financial Insights

Teller

Call Center

Website

IVR

Mobile

Channels


Low Value Pymts• Pricing• Risk & Fraud Mgmt.• Security• Monitoring & Rptg.



Payment & Treasury Systems

DDA

G/L

Reconciliation

Core

Syste

ms

Teller

Call Center

Website

IVR

Mobile




DDA

G/L

Reconciliation

Teller

Call Center

Website

IVR

Mobile




DDA

G/L

Reconciliation

Teller

Call Center

Website

IVR

Mobile




DDA

G/L

Reconciliation

Existing Architecture MNC – The Problem X4


The “Simple” Version of Payments Landscape In Major Markets


Hubs - Solution In Many Other Industries

Web Marketing

Internet Hub• Free content • Community • Permission-based email• Bookmark, RSS

relationships

www.mequoda.com/glossary/h-k/internet-hub/

Airports

Hubs concentrate activity

Distributed point –to-point connectivity doesn’t scale, is difficult to manage, prone to operational failures and expensive.

Urban Developmen

t

FedEx

Hub City • Transportation• Supply • Information networks

Simplify.Reduce costs

& risks.

Guaranteed delivery to anywhere in the USA overnight


The Payment HubCombines Interfaces and Functions

Source: Financial Insights, 2007

Teller

Call Center

Website

IVR

Mobile

Channels

Check•Unique Functions• Interface withSettlement Network

Low Value Pymts• Unique Functions• Interface with

Settlement Network

Cards• Unique Functions• Interface with

Settlement Network

High Value Pymts• Unique Functions• Interface with

Settlement Network

Payment& Treasury Systems

DDA

G/L

Reconciliation

Core

Syste

ms

CentralDatabase

PaymentServicesHub• Pricing• Risk & Fraud Mgmt.• Security


Services Hub Can Eventually ReplaceYour Legacy Systems

Source: Financial Insights, 2007

Teller

Call Center

Website

IVR

Mobile

Channels

Check

Low Value

High Value

CardsPayment & Treasury Systems

DDA

G/L

Reconciliation

Core

Syste

ms

CentralDatabase

PaymentServices Hub

• Pricing• Risk & Fraud Mgmt.• Security• Interface with Settlement Net • Unique Functions


Payment Services Hub

A Payment Hub Is An Intelligent And Central Engine: • Capture and mapping of payment information• Enabling workflow, business, and regulatory rules• Clearing and settlement routing optimization• Risk/liquidity mitigation procedures

It Employs Service Orchestration:• Reacting to events • Orchestrating payment services and other

banking systems

The Payment Hub Is Not: • Just a messaging component• Just a simple payment router• A discrete technology


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Documents

© Copyright 2011, Fundtech Ltd. All Rights Reserved. Low Value Payments & Payments Hub Session: With the growing volume of low value payments in Asia,