Tom Durkin Global Head of Digital Channels, Global

AFP OTTAWA

Technology Trends in Treasury...2020 and Beyond

Tom DurkinGlobal Head of Digital Channels, Global Transaction Services

February 12, 2020

The treasurer’s ecosystem is changing

Data, innovative capabilities and digital experience are reshaping how we interact with our clients

Frictionlessdigitaljourney

Globalization

Fintech partnerships

Customer experience

Regulation and governance

Strategic function

AI/machine learning

Big data

Real-time access

2Bank of America Proprietary

Emerging Solutions - Illustrative

Size of the circle indicates level of complexity

Real-timepayments

Early Big Data –Cash

forecasting

Alternative payment channels

Blockchain & DLT

Early AI –Intelligent

Receivables

Advanced Big data

& AI

Early API

AdvancedAPI

Virtual Accounts

Receivables/ e-CommerceSWIFT gpi

Maturity

Uses

FutureTomorrow (2-5 years)Today (0-2 years)


Globalization is driven by digital commerce

30%cross-border

50%+mobilefueled by

$4T+

$2.3T in 2017

$6.7T+

$4.7T in 2017

Alibaba and Accenture: http://www.alizila.com/cross-border-e-commerce-to-reach-1-trillion-in-2020/eMarketer 2016: https://www.emarketer.com/Article/Worldwide-Retail-Digital Commerce-Sales-Will-Reach-1915-Trillion-This-Year/1014369

https://www.emarketer.com/Article/B2B-Ecommerce-Market-Still-Maturing/1014311

$7Tin 2017

$10.7Tin 2020

Global B2C digital commerce:>75% growth by 2020

Global B2B digital commerce:>40% growth by 2020


• Manual processes• Disparate data sources• Timing/availability

• Data lakes, dictionaries and lineage • Visualisation tools• Data science tools/platform

• Digital assistant technology• Seamless API infrastructure• Natural Language (NLP, NLG &

NLU)

• Analysts• Data visualisation builders• Data engineers• Data scientists

• Non-traditional product management

• Agile solution development• Fintech & “Datatech"

partnerships

Infrastructure

Resource needs

Businessinsights

Autonomous systems

Fragmented legacy

reporting

Aggregatedunified

platform

Embeddeddata

science

Data as a service

System output Spreadsheets

Interactiveanalytics

Predictive models

Analytics at scale

“Smarter Products” Cognitive

experiences

ProactiveIntuitiveReactive

Data as a driver of innovationThe evolutionary curve of data


Amplify insights with diverse data assets Data as a service

Relationships

Drives higher value insights for clients

• Operational optimisation• Increased fraud security• Comparative market positioning• Working capital improvements• Strategic market trends

Breadth and depth of data assets

Corporate culture drives a commitment to responsible use of data


Embedded data scienceA reengineered data platform transforms traditional products and services

Real-time adviceand guidance

API-enabled to be always-on

Solutions inherently tailored to clients

Pre-emptivealerts

Optimisedliquidity

Predictiveinsights

Intelligentpayments

Improvedcyber-security

Digitalassistants

API layerData science tools

Data lake


Artificial intelligence: What to expect

Improved processing of information – for example in credit decisions, business

contracts and customer interactions – may create a more efficient financial system.

As emerging technology providers bring capabilities to market, their role within large organizations becomes critical and may give rise to more dependency on third parties.

Testing and training of new AI technologies based on unbiased data and feedback

mechanisms may help ensure applications do what they are intended to do.

Evaluating the uses of AI and machine learning is important to identify risks,

including adherence to rules on data privacy, conduct risks and cybersecurity.

AI is reinventing the client experience for nearly all industries, especially financial services. By 2025, as many as 95% of all customer interactions with banks will be through

channels supported by AI technology. This rapid shift requires financial institutions to refine business practices to deliver a successful client experience.

More efficiency Dependence on third parties

New auditing methods New risk models

Source: Servion Global Solutions 20178Bank of America Proprietary

APIs and Open Banking

Industry forums, such as Afinis and SWIFT, are working to standardize API design and strategy across the industry which will enable Open Banking

Published separate APIs for credit transfers and direct debit collections supporting US ACH only. “Request for Payment” API standards which will incorporate The Clearing House (TCH) guidelines is a priority for 2020.

Open banking work group prioritized three API standards for 2020 which are account balance information, instant payment initiation, and request for pay.

CashPro API offers account balance and instant payment initiation APIs preceding SWIFT standards. Request for Pay is a priority for 2020 roadmap.

Developed APIs that comply with the European Payments Service Directive 2 (PSD2) and other regulations prescribing access to banking data and payments capabilities.


Overview – What is ISO 20022?

Benefits

Standardized file format for

all parties

Straight-Through Processing

(STP)

Industry advancements and strategy

Standardized processing,

communications & formats

Conduct banking business more

efficiently

Maintenance process: built on strict business justifications and review process -leading to new ‘versions’ of the messages

More than 20 submitting organizations, besides SWIFT

ISO 20022 is a methodology for defining financial messages

18 Business Areas – 3 examples:

Published on www.iso20022.org

PAIN PACSSESE

Payment Initiation (corp-to-bank)Payment Clearing and SettlementSecurities settlement

Diverse representation:Corporations, Banks, Vendors, Market Infrastructures


A global shift to ISO 20022

LIVE

By 2022

By 2023+

2025 SWIFT

By 2020

MORE

• Robust payment data• Remittance detail• Adoption of payments

into new countries• Clear identification of

multiple levels of Payer/Beneficiary

LESS

• End-to-end data translation and truncation issues

• Customization –allows for ability to use ERP and AP “out of the box” payment file capabilities

ISO XML 20022 has emerged as the global

Payments standard, enabling global

consistency across payment origination, status updates, and

information reporting.

“80% of global high value payments volumes will adopt ISO 20022 by 2025”, SWIFT


SWIFT gpi for Corporates (g4C) – Pay and Traceg4C is available to SWIFT-connected Corporates subscribed to the gpi for Corporates service

SWIFT gpi Tracker

Bank of America Intermediary Bank Beneficiary Bank

1

MT 103

Pay and Trace enables SWIFT-connected corporates to initiate and track SWIFT gpi payments through their ERP or TMS system, increasing the transparency and end-to-end visibility of cross-border payments.

SWIFT sends BofA a gpi confirmation

Client transmits a payment initiation message (MT101) with a Client-generated UETR

Benefits:

BofA transmits a real-time status update with the Client-generated UETR.Status updates include:• Debit confirmation• Credit confirmation• Transaction rejection notice

Status update is sent to Tracker

How Pay and Trace Works 2 3

MT 103

Cross-Border Wire Payment Flow

Status update is sent to Tracker

Easily reconcile payments with gpi status updates using a proprietary reference

Track outgoing payment flows, including FX rates and lifting fees

Reduce manual investigation queries Gain settlement transparency – including timing, credited amount and banks in payment chain

Corporate


Bank of America Proprietary 13

Cybercrime is today’s biggest threat to Digital Transformation.

1 https://www.securitymagazine.com/articles/89866-percent-of-us-businesses-expect-a-critical-breach-in-20192 https://www.irishtimes.com/business/technology/majority-of-businesses-across-the-world-unprepared-for-cyberattacks-1.37564633 https://www.securitymagazine.com/articles/87787-hackers-attack-every-39-seconds4 2018 Data Breach Quick View Report, RiskBased Security5 https://www.businesswire.com/news/home/20181115005665/en/Opus-Ponemon-Institute-Announce-Results-2018-Third-Party6 https://securityintelligence.com/news/report-banking-trojans-accounted-for-more-than-half-of-all-malicious-payloads-in-q4-2018/7 https://cybersecurityventures.com/cybersecurity-ceo-the-world-will-need-to-cyber-protect-100x-more-cloud-data-by-2021/

Personal records exposed in 2018 due to cyber security

breaches4, costing corporations an average of

$154/record

Threats released by cyber criminals

every minute3

Percentage of U.S. businesses that expect a critical breach or successful cyber attack

in the coming year1

Percentage of global companies that feel prepared for a cyber attack

today2

Percentage ofcompanies that have

experienced a data breach caused by a vendor or third

party5

Percentage of malicious email that contained a banking

Trojan, making it the most popular type of malicious

payload today6

How much more data will

be stored in the cloudby 20217

48080% 5 Billion39%

59% 56% 100x

Cybercrime: Trends & Threat Landscape

Cybercrime: Business email compromise

14

Business email compromise emails are customized by industry

Industry Top Schemes Top Targets

Energy & Utilities Vendor email spoofing Website impersonation Utility payment scams Consumer data harvesting Emergency relief programs

Accounts payable Consumer billing

Manufacturing

Vendor email compromise Ransomware “Deep Fake” CEO voice Payroll account change Benefits available scams Payment processing jobs Tax & payment refund

Politically exposed persons Attorneys Tax service fee payers

Healthcare Vendor email spoofing Data breaches Credential compromise Ransomware

Human resources Professional employees

Public Sector Vendor email compromise Login harvesting “Deep Fake” CEO voice Ransomware

Accounts payable Professional employees

Professional Services

Vendor email compromise Website impersonation Employment opportunities New business opportunities

Sales and client teams Attorneys Accounts payable

Universities Benefits enrollment scam Payroll account change Credential compromise Alumni donation

Alumni Students: grants & tuition University administration

CommonSchemes

Bank of America Proprietary

Cybercrime: Internet of things (IoT)

15

IoT connects machines and devices to each other. IoT and the associated risks are growing exponentially. By 2020 there may be as many as 50

billion IoT devices1

Addressing IoT Risks

Network Segmentation

Change manufacturer default settings (as defaults are often published on Internet)

Turn off Internet-enabled features when not in use

Check privacy settings

Avoid storing sensitive information on IoT devices

Update software/firmware

Be aware of sensitive business or personal conversations near smart assistant devices

1 CRN Interview with Marc Goodman - https://www.crn.com/news/security/300078161/security-expert-cybercrime-dangers-multiplying-with-rise-of-iot-automation.htm


Data visualization

Trade

Security• Fraud alerts and actions• Behavioral capabilities

Payments• QR codes for quick

payments• Status monitoring

16

Markets features• Money market• Commercial paper• Research

Personalization

Education materials• Podcasts• Guided videos and

demonstrations• Best practices

Smart device and virtual assistants

Merchant services

Credit• Credit Advances• Pay-downs• Approvals

Check issuance

Convenience• Contact my banker button• In-app Help Desk messaging• Find nearest branch

Other?

Session history log

Commercial cards

• Access• Administration

Bill-pay

The future of mobile for treasury


Q&A

Disclaimer

18

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Tom Durkin Global Head of Digital Channels, Global