SWIFT Business Forum Canada 2017

BUILDING THE FUTURE

SWIFT Business Forum

Canada 2017

Dan Moran

SWIFTLab: A showcase of the latest

innovations, R&D and proof-of-concepts

from SWIFT

3

SWIFTLab around the world and expanding

Focus on showcase, feedback, and

business innovation

Focus on technology

4

Why SWIFTLab

Increase

product

awareness

Gather

feedback

and

insights

Collaborate

with internal

community,

and the

ecosystem

Engage

with end

users to

build better

products

Environment

to develop

ideas into

prototypes

Experiment

with new

technology

and business

models

5

Existing products on display

Integration Portfolio

Sanctions Screening

Alliance Messaging Hub Alliance Access

SWIFTRef

Alliance Lite2

MyStandards 3SKey

KYC Registry

GPI

6

Going forward – engage even more!

Showcase IT Research

Engage with

the ecosystem

Innotribe in

no

va

tio

n

gpi connector

Instructing gpi agent

Routing gpi: determine if a payment can be gpi

(typically implemented in the payment engine)

Intermediary: the use case where the payment

cannot continue as gpi must be planned

Generate UETR (difficult for mainframe)?

Process incoming transaction status (MT199

or API)?

Use the Tracker GUI or automation?

Transparency to my corporate clients?

Instructed gpi agent

Process incoming MT103 credit transfer

Generate transaction status within SLA

(MT199 or API)

Understand and store UETR?

Manage sanction screening workflow

Use the Tracker GUI or automation

Transparency to my corporate clients?

The gpi journey – the integration challenge

8

Alliance Access

Alliance Entry

AMH

Alliance Lite2

Other interface

Middleware

to multiple

payment

systems

How to implement gpi

automated flows ? Bank

payment

application

Corporate to

Bank

Transactions

ePortal

Unique transaction references ?

Confirming payments ?

Tracking of payments ?

Routing decisions ?

Inform corporate clients ?

SWIFT gpi

Payments

Tracker

9

Alliance Access

Alliance Entry

AMH

Alliance Lite2

Other interface

Middleware

to multiple

payment

systems

Implement gpi fast and smooth,

with minimal impact on bank’s

applications Bank

payment

application

Corporate to

Bank

Transactions

ePortal

gpi Connector

Software (*)

Generate transaction reference

Generate gpi confirmations

Access to gpi Tracker (API)

Access to gpi Directory (API)

Determine if a gpi route is possible

Customisable, to speak the language of

your application (*) The listed features are tentative

SWIFT gpi

Payments

Tracker

10

Independent of

the FIN interface

11

Option 1 : gpi Integration – MT199gpi generator

• MT199 can be generated from

either:

1. an instruction from BO (in

proprietary XML)

2. the original MT103 and a

status update from BO

• Available in embedded or

standalone

• Implemented with XML format

• SDK available with MQ/REST

MT 103GPI

MT 199GPI

... <RefNum>ABC123</RefNum> <RelatedReference>DEF123</RelatedReference> <UETR>6e4a46a9-794f-4bfc-bb01-3ce20f2bd27b</UETR> <DateTimeZone>1701211643+0100</DateTimeZone> <StatusCode>ACSC</StatusCode> <SenderBIC>SAAABEBBXXX</SenderBIC> <ReceiverBIC>CUSTGB2LXXX</ReceiverBIC> <CurrencyAmnt>USD1000</CurrencyAmnt> <OriginalCurrency>USD</OriginalCurrency> <TargetCurrency>EUR</TargetCurrency> <ExchangeRate>0.91</ExchangeRate> <Others>:71F:USD10,</Others>...

XMLFull

BO

SWIFT

...:20:ABC123:21:DEF123:79://1701211643+0100 //ACSC//CUSTGB2L//USD1000,//EXCH//USD/EUR/0,91//:71F:USD10,...

... <RelatedReference>DEF123</RelatedReference> <DateTimeZone>1701211643+0100</DateTimeZone> <StatusCode>ACSC</StatusCode> <TargetCurrency>EUR</TargetCurrency> <ExchangeRate>0.91</ExchangeRate>...

...:20:ABC123:23B:CRED:32A:170121USD1000,:33B:USD1010,:50A:SAABBEBB:59A:/8900683465SAACBEBBXXX:71A:SHA:71F:USD10,...

MT 103GPI

XMLLite

SWIFT

BOMT 199GPI...:20:ABC123:21:DEF123:79://1701211643+0100 //ACSC//CUSTGB2L//USD1000,//EXCH//USD/EUR/0,91//:71F:USD10,...

Operator

1

2

12

Option 2 : access the Tracker via API gpi connector mandatory

• gpi connector ensures end to end security calling APIs to SWIFT

• gpi connector is mandatory component to use the APIs (not required to process MT199)

• gpi connector is a SWIFT interface product: one-time and yearly recurring fee

Available now

• gpi connector product (8 April)

• API pdf documentation

• WIP: JSON and XML schemas

In development

• With additional fee: MQ interface to Tracker API (Q3)

• via Consulting: install and configure gpi connector

• via Consulting: training on Tracker API programming

For API

clients

Why use APIs instead of MT199

MT199 confirmations require processing

before status of payment can be assessed,

ie building an internal payment database

MT199 flows and subsequent processing

are not synchronous

APIs can be crafted to provide a precise

answer to a question in real-time

Business needs can be directly translated

into APIs to provide the right functionality

APIs are standardised and therefore

homogeneous in their use case

APIs extend the capabilities of the

Corporate to Bank channel

MT199 feeds require

interim data storage,

matching and processing

MT199 contains blocks of

information… APIs can ask

the right question

APIs are not limited only to

core banking systems and

channels

13 13

14

gpi Integration – Safety Net

Business Day N Business Day N+1

gpi cut-off Safety Net time gpi cut-off Safety Net time

• Multiple cut-offs (depending on currency)

• Cut-off < Safety Net time < EOD

• Non-business days retrieved from Calendar (IPLA only)

• Cut-offs and Safety Net time configurable

Legend:

= Moment of receipt of MT103gpi

= Unconfirmed MT103gpi

= Time covered in one Safety Net cycle

= Available time to confirm MT103gpi

15

gpi Connector – a solution for any interface

Alliance

Access

Payment

Systems Alliance Access

Alliance

Gateway

HSM/ SNL

gpi connector

embedded REST

over https

Query/Response

API

client

SWIFT gpi

Payments

Tracker

Built by the bank

SWIFT

product

Alliance

Messaging

Hub

Payment

Systems

AMH

Alliance

Gateway

HSM/ SNL

gpi connector

standalone

REST

over https

Query/Response

API

client

Payment

Systems

Other interface

Alliance

Gateway

HSM/ SNL

gpi connector

standalone API

Other

SWIFT

interface

REST

over https

Query/Response

gpi connector

release date: April

gpi connector

standalone

16

gpi connector – Alliance Access

Alliance

Access

API to

Tracker

March 2017

Payment

Systems Alliance Access

Alliance

Gateway

HSM/ SNL

gpi connector

REST

over https

Query/Response

with Tracker

API

client

SWIFT gpi

Payments

Tracker

Payment

Systems

Alliance Access

Alliance

Gateway

HSM/ SNL

gpi connector MQ

intf

Payment

Systems Alliance Access

Alliance

Gateway

HSM/ SNL

MQ

intf

Alliance

Access

MT199

Immediately MQ interface

FIN/ gpi MT199

Payment

Systems

Alliance Access

Alliance

Gateway

HSM/ SNL

SafetyNet MQ

intf

Bespoke

solution

Immediately MQ interface

Std FIN

Integration components based on specific

customer requirements for gpi

- Based on scoping analysis by SWIFT

- Predictable effort and costs

- Developed by SWIFT consulting

- Testing and go-live by the bank

Payment Systems

manages the gpi format

requirements

Option:

MQ interface

XML Query/Response

with Tracker

(release date TBC)

Built by the bank

SWIFT

product

gpi connector

standalone

Bond Coupon Payment

Blockchain/DLT PoC

Technology Eris/Tendermint

platform.

Smart Contract

written in Solidity

Why Thought

leadership

Towards a

product

What Bond

ISO20022

Value-added

features

Area Securities and

Standards

Bond Lifecycle – Proof of Concept

18

19

What is a bond ?

An “interest-bearing debt

instrument” whereby an issuer

wants to raise capital for a long

period and is obligated to pay

periodic interests to investors and

redeem the principal on a

specified date.

Key Information for a bond:

- Total Amount borrowed ? -> Principal Amount

- In which currency ? -> Denomination Currency

- What minimum amount can be bought ? –> Denomination Amount

- For how long ? –> Issue Date & Maturity Date (Redemption Date)

- At what interest ? -> Interest Rate

- With which Interest Payment frequency ? (Usually Annual)

- When is the interest paid ? -> Coupon Dates

Bond Old Physical Form

20

What is a bond ?

Some Other Names for Bonds:

• Treasury Bills

• Corporate Bonds

• Municipal Bonds

• Notes

Different Types of Bonds:

• Fixed rate

• Variable rate (Floating Rate Notes, Inflation Indexed)

• Amortised

• Zero Coupon

• Convertible

• Exchangeable

• Callable (Lottery Bonds, …)

• Puttable

• …

Bond Dematerialized Form

“Book Entry Form”

Bond - Complete E2E Lifecycle

1. Bond

Issuance

3. Asset

Management

Process

Initiation

Assign Lead Underwriter

Find investors (IBs)

Syndication

Get Regulatory approval

Get Credit Rating

Fix Terms / Pricing

Create Prospectus

Bond Deposit

(Bond

Instantiation)

Get Security Identification

Book Entry Creation

Allotment

Distribution to Syndicates

Settlement (DvP)

Information Distribution to Intermediaries

2. Bond Transaction

(Transfer of

ownership)

CA on Bonds

- Coupon Payment - Partial / Full Redemption

- Conversion

- Put / Call

- …

Settlement

Bond Trading

Asset Servicing

/ Corporate

Actions (CA)

Bond Coupon Payment Business Roles / Parties and Information Flows

Asset Servicing

(Corporate Action)

Issuer

Data

Vendors

Issuer Agent CSD Custodian Global

Custodian

Broker

Dealer

Investment

Manager

Today Corporate Action Processing Chain

Account

Owner

Account

Servicer

Eligible Balance

CA Event Announcement

(Election)

Final Entitlements

Payment Confirmation

23

Bond Coupon Payment Event Life Cycle

Account

Servicer

Account

Owner

Eligible Balance

CA Event Announcement

(Election)

Final Entitlements

Payment Confirmation

CA Process

Statuses

Final Entitlement

Announced

Eligibility

Payment

Confirmation

CA Event Life Cycle Statuses

“State Transition Diagram”

ACME

Corporation

(US2959370369)

Announced

(Issuer)

Announcement

Date

Record

Date

Eligibility

Pay

Date (Pay Date – 2 days)

Final Entitlement Confirmed Time

(Pay Date - 3 days) (Pay Date - 4 days) (Pay Date + 2 days)

Event Lifecycle

Statuses

Event Key Dates

Fictitious states

starting dates

States Definitions

Announced: The corporate action event is officially announced by the Issuer.

Eligibility: The eligible balance is confirmed by the account servicer to its account owners.

Final Entitlement: the total Interest amount to be paid is communicated to the account owners.

Confirmed: The payment of the Interest Amount has been confirmed to the account owners.

11 Jan 2018 9 Jan 2018 8 Jan 2018 7 Jan 2018 13 Jan 2018

Corporate Action Event Life Cycle

Use case for the PoC

Demo

26

DLT @ SWIFT - Vision

SWIFT’s focus is on building technical, operational

and business capabilities with a view to evolving

our platform such that DLT-based services could

be offered to our 11,000+ members, when the

technology matures and firm business use

cases emerge

SWIFT can complement the DLT technology

benefits by leveraging its assets and skills to

deliver a distinctive DLT platform offer for the

benefit of its community.

Industry requirements SWIFT Vision

Strong governance

Data controls

Compliance with regulatory requirements

Standardisation

Identity framework

Security & cyber defence

Reliability

Scalability

DLT – 2016 activities

A number of DLT-related PoC have been developed in

SWIFT labs covering the following topics:

• Plug SWIFT PKI and access control mechanisms to

build a SWIFT permissioned ledger

• Build a SSI database for OTC markets

• Apply SWIFT standards expertise and ISO 20022

methodology to DLT context

• The SWIFT Institute has published

• One academic research papers on DLTs in 2016

focusing on: “The Impact

• and Potential of Blockchain on the Securities

Transaction Lifecycle”.

• An industry challenge was organized in April 2016 to

assess impact of a DLT solution on issuance and

asset servicing with FinTech starts up and SWIFT

members.

• SWIFT is both a Founding Member & Board

Member of this open source project aimed at

advancing DLTs.

• SWIFT is engaging with its community to explore

potential business use cases in payments (e.g. gpii

vision group), Securities (e.g. ISSA blockchain

working group) and Trade finance

• The SWIFT Standards team is investigating DLTs to

understand how existing messaging and reference

data standards can be re-used in a DLT context.

• SWIFT is also engaged in a number of PoCs with

other customers including a KYC PoC with

Euroclear and KBC through Eggsplore.

27

Q & A

SWIFT Business Forum Canada 2017

BUILDING THE FUTURE

SWIFT Business Forum

Canada 2017