Media conference30 March 2017

Slide 30.03.20172

Streamlining systems

and procedures

Payments

Slide

Agenda

● Welcome address by Markus Beck

● Sébastien Kraenzlin: The significance of payment transactions and the role of

the SNB

● Markus Beck: Harmonization of payment traffic – background and challenges

● Christian Kleine: Payment traffic harmonization from an international

perspective

● Johannes Schlotmann: Study into the impact of payment traffic harmonization

in Switzerland

● Nicole Walker: Payment traffic harmonization – changes and benefits

● Questions and answers

30.03.20173

The significance of payment transactions and the

role of the SNB

Sébastien Kraenzlin, Head of Banking Operations Swiss National Bank

Board of Directors, SIX Interbank Clearing Ltd

Zurich, 30 March 2017

Slide 30.03.20175

PayeePayer

Phase 3

Phase 2

Phase 1

CHF 650 billion

Swiss GDP

60 times a year

in SIC

1.8 million transactions/day in SIC

BANKBANKSIC system

Cashless payments: reliable, efficient and future-proof

Harmonization of payment traffic

Background and challenges

Markus Beck, Head of Product Management Payments Corporate Customers, Raiffeisen Switzerland,

Member of the Board of Directors of SIX Interbank Clearing Ltd

Zurich, 30 March 2017

Slide

A driver of digitization

74% of client payments are electronic

The harmonization of payment traffic is helping drive the digitization of Switzerland

Practically all industries

are digitizing

their business models

Web-based applications and

apps are taking over in

standardized financial services

Private and corporate clients

are calling for digital processes

to boost organizational and personal

efficiency

7

• Paper-based payments are in decline

• The most commonly used channel is e-banking

• Mobile banking is gaining in importance in all client segments

30.03.2017

Slide

A driver of regulation

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New requirements

Financial Action Task

Force (FATF)-Recommendations

country evaluations

Anti-Money Laundering Act (AMLA) and

FINMA Anti-Money Laundering

Ordinance (AMLO-FINMA) revision (in

force since 2016)

Growing domestic and

international requirements

8

The challenge of one billion transfers a year and ever-tighter compliance requirements

can only be met if processes are automated end to end.

Slide

Many different systems have evolved over time

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Financial industry’s decision: harmonize payment traffic on the basis of ISO 20022

Challenges cannot be met in the current

complexity

Media breaks create manual work

Inadequate compliance because of a lack

of end-to-end data when payment slips

are used

Slide

Collaboration

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Integrated approach: broad-based planning and changeover

Constant dialog with

corporate and private

client representatives

Bring know-how and

client experience

Set down standards and

procedures

Slide

Roadmap for the harmonization of payment traffic

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Payment traffic harmonization from an

international perspective

Christian Kleine, Managing Director, UBS AG,

Representative of the Swiss banks on the European Payments Council (EPC)

Zurich, 30 March 2017

Slide

Significance of foreign payment traffic for Switzerland

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Statistic 1

Value of cross-border client payments as a percentage of total payments from

Switzerland's perspective (2015)In CHF billion

Source: Deloitte study

Cross-border

Domestic

Slide

Significance of cross-border payment traffic for

Switzerland

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Statistic 2

Development of domestic and cross-border payments(indexed in %, year-on-year)

Source: Deloitte study

0%

1%

2%

3%

4%

5%

6%

7%

2012 2013 2014 2015 2016

Inlandzahlungen AuslandzahlungenDomestic payments Cross-border payments

Slide

ISO 20022 payments: used in a growing number of

countries

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Slide

Benefits in terms of global trade

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End-to-end consistency of information Standardizes customer-bank and interbank communication

End-to-end consistency of data (all the relevant data get to the recipient, even with

cross-border credit transfers)

Complete data and uniform procedures

Automated reconciliation

Icrease transparency

Digitization of payment processes

Benefits for international clients with bank accounts in Switzerland and

abroad International corporate clients with different banking relationships in different countries

have a uniform interface to their banks

More information can be forwarded, and fewer payments will be rejected

High degree of automation will mean that funds are available more quickly

Slide

Longer-term opportunities emerging from migration to

the ISO 20022 standard

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Global trend to ISO 20022 USD clearing in the US: FED/CHIPS

TARGET2/EBA

Implementation of new products and initiatives SEPA Instant Payments

SWIFT gpi (Global Payments Innovation)

Automation of inquiries

Thanks to a very high degree of automation, efforts will increasingly shift to processes for

handling exceptions and inquiries, most of which are currently done manually on an

unstructured basis

Easier implementation of future regulatory requirements

Obligatory requirement for structured addresses for initiating parties and beneficiaries from

November 2020 for credit transfers via SWIFT and other market infrastructures

Any future requirements in relation to additional data fields or more data in payment transfers

(e.g. legal entity identifier)

Payment traffic harmonization

Changes and benefits

Nicole Walker, Head of Product Management Payment Solutions, PostFinance Ltd

Member of the Swiss Payments Council

Zurich, 30 March 2017

Slide 19

ISO 20022: digital payment processes

• Banks align their credit transfer schemes to

ISO 20022

• Banks use ISO 20022 for direct debits

• IBAN replaces all bank and postal account

numbers

• QR code replaces 7 payment slips

30.03.2017

Slide

Harmonization makes things simpler

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Credit

transfers

Direct debits

Notification &

reporting

Payment slips

One standard for all credit

transfer schemes

Standardized, end-to-end direct debit

procedure throughout Switzerland

Automated intraday account statements

and standardized day-end statements

End-to-end IBAN format for CHF

and EUR billing

Individuel submission and delivery

formats at banks

Banks and PostFinance work with

different direct debit procedures

Complicated reconciliation of account

and booking information

Transactions processing only semi-

automated

Account numbers with different

structures and IBAN

7 different payment slips

for CHF and EUR

Coded payment slips

(manual or reader device)

IBAN consistently replaces all account

numbers

Automated transactions processing

virtually end to end

Integration of QR code with structured

payment information

Before After

Slide

The benefits of ISO 20022

Business customers

Seamlessly integrated and

therefore efficient payment

and control processes

Unambiguous identification

automated end to end

(initiating party/recipient)

Better

data quality,

less prone

to error

Simplified

cash management

and lower

costs of capital

Development &

maintenance costs

minimized

(security of investment)

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Slide

The QR-bill

22

Free choice of paper, no payment slips in

color

Can be printed out on any standard label,

inkjet, or laser printer

Placement prescribed: bottom right

(on the bill or on a neutral subsequent

page), in A6 format

More flexible, easy to use

All information relevant to the payment can be

read by eye and entered manually

Payments still possible at the post office counter

or by mail

Slide

The QR invoice

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The new QR-bill can only be implemented after the complete changeover to ISO 20022.

1

2

3

Technological requirement: ISO 20022

Slide

Financial institutions

Test environments, training, advice, information

e-banking, smartphone apps

Payment traffic harmonization

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Situational need for adaptation

Bill recipients only

• Use IBAN

• Pay by QR code

No software for financial and operational processes

• Use IBAN, client information

• Implement the QR-bill

Low degree of integration with financial and operational processes

• Update standard software (comparable with Windows update)

• Cloud solution: no local adaptation

High degree of integration (standard software or own IT environment)

• Work involved depends on how complex and current software is

Organizations:

initiate project

Slide

The benefits of digital transformation

More cost-efficient processes,

easier cash management

and billing, and lower

costs of capital

Simplifies implementation of due

diligence and compliance

requirements

Time-saving credit transfers

with any smartphone

and reader device

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Slide

Questions and answers

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Slide

Payment traffic harmonization

More cost-efficient processes,

easier cash management

and lower costs of capital

Easier implementation of

due diligence and compliance

requirements

Time-saving credit transfers

with any smartphone

and reader device

30.03.201727

Initiate project now,

assess requirements,

and plan changeover

Contributes to entire

economy and helps boost

attractiveness for business

Many thanks!