Clear out the clutter - OpenText Business Networkat simplifying bank transfers made in Euros. All...
Transcript of Clear out the clutter - OpenText Business Networkat simplifying bank transfers made in Euros. All...
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Clear out the clutter: Modernising corporate-to-bank communications
+ Clearing out the clutter
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ Agenda
Introduction
SEPA
PSD II
EBICS
SWIFT CGI and ISO 20022
Clearing out the clutter
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ The dawn of a new era for C2B communication Are you ready?
Developments in the corporate to bank communication space are changing global commerce.
SEPA and PSD2 will directly effect consumers, corporates, and banks.
Competition
Consumer protection and choice
Transparency
Changes in Europe are significant for non-EU corporates and banks too.
… Although European banks and technology providers mitigate these challenges.
SAAS and cloud computing are enabling new operational and service models.
Communication is changing to match the demands of modern payment methods.
Legacy standards appear to be in their last technology cycle.
Numerous initiatives are looking to help banks and corporates bridge the gap to ISO 20022.
Protocols are undergoing similar changes
Large corporates are being courted aggressively by SWIFT
Many corporates also wish to use communication standards such as EBICS
The variety is overwhelming.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Technology drivers Business drivers
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2013 2015 2016 2014 2017
1 November
Ban on cross-border direct debit interchange fees
1 February
Migration end date for credit transfers
Migration end date for direct debits
Mandatory communication of beneficiary’s BIC for domestic transactions (SCT & SDD)
Customer bulk flows & conversion services for free
1 February
Migration end date for niche products (CT & DD products)
Mandatory use of ISO 20022 XML standard for customer bulk transfers and end of transition period for IBAN
1 February / 31 October
Migration deadline for non-Euro countries
SEPA is just a beginning!
1 February
Ban on national direct debit interchange fees
The Single Euro Payments Area (SEPA) is an EU initiative aimed at simplifying bank transfers made in Euros. All CTs and DDs sent within the SEPA area will be treated as domestic transfers.
Migration to SEPA direct debit will be challenging and it will have to occur very rapidly (1 February 2014).
All corporates must use the SEPA standard for Euro-denominated payments and collections throughout Europe.
Major changes to business processes and payment systems will be required to ensure corporates are SEPA compliant.
Some member states are not ready to fulfill requirements.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ Corporates aren’t ready for SEPA Companies without migration projects under way face disruptions
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Of the 736 businesses that responded to ISME’s (Irish Small & Medium Enterprises) survey, 63% were unaware of the compliance date while 71% of businesses had not started the process of becoming SEPA compliant. (May 2013)
0
20
40
60
80
100
SK FI SI LU GR CY BE ES FR AT PT NL MT IT IE DE EE
% o
f tr
ansa
ctio
ns
mig
rate
d
SEPA migration rates by country, 2Q2013
CT DD
Source: ECB
+ Not migrating will disrupt cash flow
27%
19%
3%
16%
6%
16%
0% 10% 20% 30%
≤ 5 days
5-15 days
15-25 days
25-50 days
50-75 days
75 days
46% of companies will have cash flow problems within 2 weeks!
Broadly speaking the technical requirements for corporates will be:
Migrating to an ISO 20022 compatible XML format
BIC / IBAN conversion
Depending on the number of direct debits, some kind of mandate management solution
Business and IT changes to support new workflows
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Imagine that your organisation will not be able to migrate to SEPA direct debit by 1 February 2014. How long could your organisation abstain from using direct debits without risking liquidity problems?
Source: ibi research: SEPA Umsetzung in Deutschland. n=178 – only organisations which use SEPA direct debit or plan to do so.
+ SEPA DD compliance is complex For non-Euro corporates, a strong IT strategy is essential
Conversion and enrichment of existing data from national / legacy format to XML
Support for transaction files in any national / legacy format.
File transfer to the bank (connectivity)
Automatic display of failed direct debits
Mandate collection and conversion for direct debits
Reporting and reconciliation support
Higher transaction costs
Banks offer legacy format conversion but prices are high
Compliance risk
Technically, banks are not allowed to convert files from national format to SEPA. But most are anyway…
Risk is unknown
Assuming that SEPA workflows are the same as national payment workflows
SEPA DD is quite different
Mandate migration takes up to a year
Some can’t be migrated and may need to be re-authorised.<<<<
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Potential pit-falls Technical support required
+ PSD to PSD II: What’s new?
The European Commissions’ Payment Services Directive is a regulatory initiative that regulates payment services and services providers throughout the EU and European Economic Area (EEA).
The original purpose of the PSD:
Facilitate SEPA development
Regulate payment institutions (including non banks)
Ban interchange fees
Ban surcharges for consumer cards
Increase transparency, consumer protection
Increase competition
The PSD II covers new services (and service providers) enabling access to consumer accounts.
The legislation requires third party payment initiation services to be regulated and supervised as payment institutions.
The expanded scope targets developments in mobile payment applications and B2B transfers (like Dutch iDEAL) to bring them under the legislative umbrella of the PSD.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Original PSD PSD II
+ PSD 2 covers “one leg out” transactions Money being sent into or out of the EU will now fall under PSD rules
Rules regarding transparency of fees and information provision will now apply to “one-leg-out” transactions and any transaction made in Euros or other EEA currencies.
The original PSD only covered transactions where both PSPs were located in the EU.
New rule will allow consumers to compare services among PSPs and will provide more protection to transactions coming into or out of the EU (for example remittances).
Banks doing business in Europe will have to provide more detailed information to consumers and will face competition on fees and charges due to the added transparency.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ PSD II regulates PSPs that use innovative channels Regulating third party processors will bring new service options
TPPs are defined as services that debit one party’s account and credit another party’s, and where the processor does not maintain either account.
TPPs are currently unregulated under the initial PSD
This raises questions about security, liability, and data protection
Under PSD 2, TPPs will have to be licensed and supervised as payment institutions
This will allow TPPs to have direct access to consumer accounts
An effort to keep up with developments in m-payment applications and B2B transfers
Corporates will have more options when it comes to choosing payment institutions
Could open up new channels for corporate payments, as banks have been slow to offer mobile payment solutions for customers
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Effect on payment industry
Effect on corporates
+ EBICS supports multi-national corporates The need for a common protocol is necessary as banks follow corporates into new geographies
The 'Electronic Banking Internet Communication Standard' (EBICS), is a communication framework adopted by the French and German banking sectors.
All major French and German banks support the protocol.
Adoption rates are high, due to low cost, improved functionality, and industry coercion.
Treasurers can also connect via SWIFTNet or web-based portals provided by the bank itself.
For the French and German communities, EBICS provides reliability and SEPA interoperability and is becoming the default C2B standard.
EBICS was designed to function as a secure communication channel to initiate SEPA Direct Debits and SEPA Credit Transfers using the Internet.
EBICS is an open standard which supports standard or customised software to initiate payments.
EBICS is being promoted for adoption on a pan-European scale
Cheaper than SWIFTNet
Interoperable with most data standards.
EBICS may emerge as the single C2B standard for exchanging ISO 20022 messages securely.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ SWIFT CGI leads ISO 20022 corporate initiatives
SWIFT’s Common Global Implementation (CGI) allows corporates to use one message structure to interact with banks using ISO 20022 based file formats.
CGI reduces costs and simplifies implementation processes for corporates managing multiple bank relationships
60+ countries use CGI standards
SCORE (Standardised Corporate Environment) is a SWIFT based cash management C2B tool that supports multiple data formats.
Of the total Q1 2013 figures for SCORE, 27% of all payment files use ISO 20022 and the percentage is increasing.
300 corporates using SCORE initiate payments with ISO 20022 and 34 received ISO based reporting messages.
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
+ Examples of ISO based C2B initiatives globally
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
The Italian CBI connects corporates of all sizes to their banks. CBI supports ISO
20022 for domestic and cross-border payments. ISO makes up 53% of their CT traffic and pending SEPA DD migration,
only 3% of direct debits.
The Russian initiative CMPG ISO 20022 is in the testing phase to support
corporate financial messaging in cooperation with SWIFT CGI and the Central Bank of Russia.
Over 18 banks will support the service once
implemented.
Denmark’s largest corporates have moved to ISO 20022. Under the umbrella of the Danish
Banking Association, XML message implementation has been harmonised
amongst banks and vendors.
Finland’s SEPA migration required full migration to ISO 20022 for corporate to bank payment initiation and messaging. All legacy formats were replaced. Banks
must be fully migrated for customer reporting in ISO 20022 by Q1 2014.
SUSA (SWIFT users of South Africa) is an initiative that supports ISO based message communication
between a small number of South African corporates and the four major SA banks.
Note: SEPA solely implements the ISO 20022 data format. All 28 EU member countries use IS0 20022 for payment initiation and messaging.
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Solution
Examine payment flows and how best to manage banking relationships
Re-consider connectivity options SWIFT – direct or via bureau Direct to each bank Web-based Third party
Unify communications formats and channels across many relationships EBICS only covers part of Europe,
but can cover all of SEPA Update payment software Consider managed services to reduce
complexity.
Clearing out the clutter for EU treasurers
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Problem
Complexity is bewildering and overwhelming. Legacy formats and protocols are deeply
rooted. Different size corporates will deal with this in
different ways Large go to SWIFT Mediums go to EBICS or other national /
regional solutions Small stay with bank-centric solutions
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Solution
Simplify the process for clients and hide the complexity.
Consider this a compliance exercise. Support all three basic connectivity
strategies for corporates Non-EU banks should re-evaluate
relationships for sending and receiving payments in the EU Identify payment flows to SEPA
countries Relationships with national
clearing systems and some correspondents
Clearing out the clutter for financial institutions
© 2013, Lipis & Lipis GmbH. All rights reserved. Proprietary and confidential.
Problem
European FIs are dealing with most of these issues as matters of compliance.
All EU FIs are SEPA ready., PSD compliant, and offering modern connectivity options.. If you do not modernise, your clients
will look elsewhere. Non-EU banks need to address these issues
as if they were MNCs A few may view Europe strategically,
and may be more like EU banks. The pace of change will not slow. The key
issue is not just how to comply, but in a flexible, future-proof manner.
Modernising Corporate-to-Bank Communications Case Studies
Multi-National Manufacturing Company SWIFT Service Bureau Case Study
Business Challenge • Implementing new Treasury Management
System
• Seeking flexibility to connect to banks via
SWIFT or directly
• Electronic distribution of payroll, A/P, wire
transfers, international payments
• Intra-day and end-of-day account
statements to understand cash positions
• Approximately 200 accounts at 16
different banks worldwide
Solution • 7 Direct connections to banks via
Managed Services
• Connectivity to 16 banks via SWIFT
Service Bureau
• On-boarding of banks worldwide
• Mapping of data to/from SAP A/P and A/R
applications
• Centralised tracking of all files
Treasury
Management
System
ERP System
Accounts Payable
Accounts Receivable
SWIFT
Service Bureau
Direct Internet
Connection
Managed Services
US Regional Bank SWIFT Service Bureau Case Study
Business Challenge
• Meeting SWIFTNet delivery and SWIFT
format requirements of multi-national
corporate clients for wire payments and
balance reporting
• Bank applications unable to consume
SWIFT formats
• Imminent go-live deadline
Solution
• Managed Services translation
− MT101 – EDI 820
− BAI2 – MT940 / MT942
• Connectivity via SWIFT Service Bureau
• Corporate on-boarding
• Enables additional large corporate
business
Corporate Clients
SWIFT
Service Bureau
MT101
Managed Services
MT940
MT942
820 BAI2
Managed Services
Case Study: Global Transaction Bank Connectivity Options For Your Global Client Base
Business Challenge
• Client was experiencing increased corporate
adoption of EBICS as a preferred
communications protocol for bank connectivity
• Client’s existing French-specific EBICS solution
was not strategic and not scalable to meet pan-
European needs
Solution
• Added EBICS as a communications protocol to
the existing Managed Services host-to-host file
channel already in place for the bank
• Implemented file splitting to route SEPA Direct
Debits to Mandate Management vendor
Business Benefits
• The bank was able to leverage their existing file
channel to meet their customers’ demands
without the need to invest in an additional
communications infrastructure
Corporate Clients
EBICS-as-a- Service
Managed Services
Payment & Direct Debit
Files (BAU)
Reporting & Control Files
(BANSTA, FINSTA,
CONTROL)
H2H
SAP FSN
SEPA DD
Mandate
Management
EUR Direct
Debits (only) Payment &
SDD Files
SEPA
Payments
Engine
For More Information
Patricia Hines, CTP Director, Financial Services
Industry Marketing
GXS
+1 704 969 0763
www.gxs.eu
Leo Lipis Managing Director
Lipis & Lipis GmbH
+49 30 8892 2049
www.lipis.net
www.corporatetobank.com