Payments Systems Presented By

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Payments Systems Presented By
Wayne Shah
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Trends 2009
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• A payment system is a system used for the
  transfer of money
• What makes it a "system" is that it employs
  cash-substitutes
• Payment systems are used in lieu of tendering
  cash in domestic and international transactions
• Payment systems are require processing, cut off
  times and currency specifications

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• Cash Substitute
• Checks
• Drafts
• Credit Card Visa, MasterCard, Discover American
  Express,
• Diners Club
• Debit Card
• Stored Value card
• International ACH
• E commerce Payments

• SWIFT
• ATMs
• On Line Banking
• Internet Payment Paypal, Amazon, Face Book
• Mobile Phone Payment
• Wire transfer
• Book transfer
• Domestic ACH
• Letters of credit
• Hawala

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CSM
CAD
RUB


CSM
FI
CSM
FI
MXN

INR
CSM
CSM
AED
BRL
ARS
FI
ZAR
CSM

CSM

• FX
• Markets
• Language
• Regulation
• Time Zones
• Local Banking Practices

AUD
FI
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• USA
• Japan
• China
• India
• Europe
• Latin America and Caribbean
• Brazil, Chile, Mexico
• Panama, Guatemala

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Credit Card Payment Clearing Process
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• There are 4 major clearing systems for settling
  inter-bank payments in Japan
• Three are private and one is operated by the BOJ
• The 3 private systems are
• Zengin System retail credit transfers
• FXYCS Yen legs of FX transactions
• BCCS Bills and Checks collected at regional
  Clearing houses
• BOJ Net settles inter-bank transactions
• Net positions calculated by these clearing
  systems are settled through current accounts at
  the Bank of Japan

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• 4 Large State-Owned Commercial Banks dominate
  banking system
• Bank of China (120) (11,608)
• Industrial and Commercial Bank of China (134)
  (24,129)
• Agricultural Bank of China (110) (48,163)
• China Construction Bank (131) (16,472)
• 4 banks control 55 of the banking assets and 60
  of the market share
• Extensive nationwide branch network w/ as many as
  5 tiers or layers in some cases

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Chinese Banking System
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City Name Similarities
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New Image Geared for International Commerce
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Indian Banking Structure
68,300 branches
Can have FX acctounts
FX and Rupee.
No positions in FX rupees only
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The Pre Euro Landscape

• Large differences in payment practices and price
  levels
• Every country has its own clearing systems
• Difference in local data formats and contents
  (e.g. account number)
• Substantial differences in tax, legal and central
  bank reporting requirements
• Fragmented

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Retail Clearing Systems in Euro Area

• CEC - Belgium
• CHS -Brussels
• PMJ - Finland
• SIT - France
• RPS -Germany
• ACO - Greece
• DIAS - Greece
• IRECC - Ireland
• IPCC - Ireland
• BI-COMP - Italy
• LIPS-Net - Luxembourg
• CSS - Netherlands
• SICOI - Portugal
• SNCE - Spain
• STEP 2 - European Banking Association

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Euro (EUR) Payment Systems

• TARGET RTGS (being replaced by TARGET2)
• EURO 1 - Netting System
• STEP 1 A sub-system of Euro 1
• STEP 2 European ACH system (SEPA)
• Domestic Schemes RTGS/Net/ACH Phased out

Revenue Loss as a Consequence ?
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Where is the Caribbean headed

• Government and regulation
• Policy
• Technology
• Foreign Banks
• Globalization

Are we a geography or a financial region?
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Major Challenges
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REGULATION AND COMPLIANCE

• Compliance and regulation have dominated the
  banking sector.
• Several banks have been levied heavy fines by
  regulatory authorities in the past 5 years for
  failure to comply with regulations
• As regulatory bodies are highly reactive to world
  events, compliance and regulations will remain a
  top priority for banks to survive.

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Managing Risk

• Regulatory Environment

• FIU
• SEC
• CATF
• CRA
• BASEL
• FDIC
• BIS
• ISO
• BSA

• PAC
• KYC
• KYCC
• AML
• EDD
• FATF
• FINCEN
• OFAC
• PEP

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This is a real fear and is the cause of a lot of
compliance and regulation
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AML Sensitivity
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PAYMENTS - TRENDS
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PAYMENTS - TRENDS

• North America
• Debit card use continues to grow rapidly
• Demand for more detailed remittance data

• Europe
• Credit cards have not been embraced
• Significant margin pressure across region due to
  SEPA

• Asia Pacific
• Fast growth in domestic non-cash payments
• Significant payments innovation
• Mobile Phones

• Middle East and Africa
• Individuals more likely to have a relationship
  with a mobile network operator (MNO) than a bank

• Latin America
• Credit cards are growing rapidly

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Source BCG, KPMG, and McKinsey reports, and EPS
analysis
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Selecting A Payments System
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• Type of bank in food chain
• Retail, Corporate, Private/Wealth
• Footprint, Scale, Reach
• Tactics and Strategy - direction
• Target Market level of sophistication,
  technology adoption of customers
• Spend and Budget
• Human capital

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• Ease of expansion and upgrades
• Product deployment - modular
• Product development - Business
• Independence from vendor
• Trainability
• Open Architecture Hardware Independence
• Standards and best practices SWIFT, IACH
• References that are relevant right sizing

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• Reporting and Metrics
• TRX Tracking and research
• Workflow
• Compliance interface AML, OFAC
• Enhanced data capture and transfer e.g. Travel
  Rule and Bene Information
• FX and Multicurrency
• Customer Pricing and Flexibility - IQ

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