SWIFTNet Workers' Remittances Vendors' Briefing

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SWIFTNetWorkers Remittances

• Presentation to BAFT
• Johannesburg

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

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DEFINITION - What is a remittance?

• An international remittance is a cross-border,
  person-to-person payment of relatively low value.
• CPSS/World Bank Consultative Report on
  Remittances, March 2006

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MARKET - facts stats
Financial flows
Recorded USD 250 billion Unrecorded est. USD
125 billion
International migrants
200 million worldwide
Consumer reach
Directly and indirectly the market touches 650 to
800 million consumers
Transactions
800 million cross-border transactions in 2005,
based on recorded flows only
Revenues
USD 15 billion in transaction related revenues
Market share MTOs (Western Union MoneyGram)
Over 20
Market share banks
20 to 30 collectively
Market share SWIFT
Less than 10
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ISSUES REQUIREMENTS
Issues
Requirements
Customer Service

• Cost transparency
• Time transparency
• Complexity
• After sales (track trace)

• Charges transparency
• Assured timeline
• Easy to use

Interbank Clearing Settlement

• 100s of market practices
• Complex settlement
• Low STP
• High processing costs
• Service scalability

• Clear market practice
• Messaging rules and
• usage guidelines
• Common architecture

Regulatory Environment

• Reputational risk
• Compliance costs
• Lack of level playing field

• Level playing field

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

• Definition
• Market
• Issues Requirements
• the WRAG

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REMITTANCES - background

• SWIFT 2010 initiative
• In 2006 objective to explore
• Ad-hoc working group formed in 2006
• Official Advisory Group composed in early 2007

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WORKERS REMITTANCES ADVISORY GROUP (WRAG)
Banco do Brasil Brazil Bank of New
York United States BBVA Spain Citigroup Un
ited States Deutsche Bank Germany Equitable
PCI Bank Philippines ICICI Bank
Ltd India INTESA SANPAOLO S.P.A. Italy La
Caixa Spain Société Générale France Standar
d Bank of South Africa South Africa Standard
Chartered Singapore Swisspost Switzerland
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WRAG FORUM
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Roles and governance

• Role of the WRAG
• define the messaging services and architecture
• define the messaging standards and market
  practice framework
• implement and drive live usage of the solution if
  commercial and technical feasibility is proven
• Governance
• WRAG Chairperson is SWIFT Board Member
• Arthur Cousins, Standard Bank of South Africa
• WRAG reports to the SWIFT Board via the Banking
  and Payments Committee.

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SWIFT role

• Facilitate definition of standards and usage
  rules
• Facilitate the definition of market practice
• Design the common messaging platform for clearing
  and settlement
• Design enhanced messaging solutions (e.g. message
  copy, reference data ) for the clearing and
  settlement
• Work with IT vendors to facilitate integration
  with back office systems

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SWIFT Board decision December 2007

• 3 phases approach for the service development
  recommended by the WRAG approved by the SWIFT
  Board
• 2008
• Implement and pilot phase 1
• Messaging standards using cover payment with
  bilateral settlement
• Develop architecture for phase 2 and 3
• Phase 2 distributed settlement architecture for
  instant payment
• Phase 3 architecture for cash-pay-out anywhere
• 2009
• Roll-out phase 1 live services
• Implement phase 2 and 3

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

• Vision and Scope
• Service framework
• Market practice and rulebook
• Architecture

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VISION SCOPE
An interbank platform for the authorisation,
clearing and settlement of cross-border, consumer
payments

• that
• accommodates and-to-any retail payment media
• delivers global scale and reach
• delivers high STP rates
• enables high speed end-to-end transactions and
  track and trace.
• but
• remains in the interbank, collaborative space
• doesnt extend to bilateral commercial
  arrangements
• doesnt restrict choice of settlement providers
  or currencies
• enables highly distributed processing.

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Service framework

• Three service-levels
• Standard (non-urgent) value to beneficiary T2
• Urgent value to beneficiary within 4 hours or
  next day
• Instant value to beneficiary within 15 minutes )
• Two product groups
• Credit to beneficiary financial account
• Non-account based disbursement
• Three clearing and settlement topology options
• Bilateral settlement service ( cover payment )
• FileHeader copy to 3rd party SSP
• Cash Payout Anywhere

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Market practices and rulebook
Participation

• Direct Participants
• Indirect Participants
• Settlement Service Providers

Products

• Service levels (instant, urgent, non-urgent)
• Two product groups
• Transaction ID specification (sender defined)

Charging practice

• OUR charges recommended as the exclusive option
• Reject/returns charging practices

Clearing

• Definition of sorting, transmission etc.
• Transmission timing relative to service level

Settlement

• Gross bilateral settlement
• Guidelines for transmission of settlement
  instructions
• Two settlement topologies defined
• No restrictions on provider or currency choice
  in either option

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Phase 1 architecture of the service framework
for clearing and settlement of remittances
Rules Guidelines
IP Indirect Participant DP Direct Participant
CB Correspondent Bank
Architecture
Ref. data
DP
beneficiary
IP
IP
sender
DP
FileAct SF ISO UNIFI 20022
Distribution network sending country
Distribution network Receiving country
MT cover payment
CB
CB
Settlement
Max T2 days
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Phase 2 supports instant availability through
a distributed risk management system
Ref. data
Distribution network
Distribution network
Settlement Agents
Collateral account
Collateral Mgt.
Max T15 mins
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Phase 3 instant cash pay-in/out anywhere
Transaction Mgt.
Upload
Download
Ref. data
Distribution network
Distribution network
Settlement Agents
Collateral account
Collateral Mgt.
Max T15 mins
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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

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SWIFTNet Workers Remittances

• Consumer needs
• Convenient and easy to use
• Reliable and preferably fast
• Low cost

• Benefits
• Brings efficiency and scalability
• Enhanced customer service ( SLA )
• Participants retain control and choice of
• Settlement provider and currencies
• Com. agreements
• Channels products

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Message Standards

• Message standards for SWIFTNet Workers
  Remittances are being developed in consultation
  with a sub-group of the Workers Remittances
  Advisory Group
• Message Usage Guidelines include
• ISO20022 pacs messages
• MT Cat 2 and Cat 9
• FileHeader XML message

New guidelines over existing standards
Mapping rules
New specifications
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Solution Rulebook

• Comprehensive set of rules to support the
  business, technical and operational objectives of
  the solution.
• Product Requirements
• Business Rules
• Service Levels
• Messaging Rules
• Standards Rules
• And more

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Reference Data Directory

• Reference Data Directory includes
• Registered direct and indirect participants
• Participants service capabilities
• List of Point of Service (POS)
• Management of the Directory
• Data collection
• Data management
• Data distribution with access control

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Product Scope and differentiation opportunities

• The product aims at providing a complete solution
  for the inter-bank space.
• But the value chain extends beyond
• Opportunities of differentiation for vendors in
• Payment collection (channels, CRM, )
• Payment processing (AML, KYC, Translation,
  Settlement, Reconciliation)
• Payment tracking (status, EI, )
• Payment distribution (POS, Routing,)

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

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UNIFI ISO 20022 for SWIFTNet Workers Remittances
SWIFTStandards Payments in UNIFI ISO 20022
Subset for WRAG payments
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Some examples of typical Workers Remittances
issues

• Delivery by means other than a financial
  account
• No Creditor Account
• Agree on other means of identification of
  Creditor
• Way of Payment and Notification in case Creditor
  has no account
• Way of Payment
• Cash
• Cheque / Bankers draft
• Notification to Creditor
• Telephone - E-mail
• SMS

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

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Reference Data

• What?
• Means to store, maintain and exchange routing,
  product and processing data between participants
• Why?
• Support STP (esp. non-account based payments)
  between participants
• Support ease of use for end-customer
• Requirements
• No commercial data
• Access restricted to direct participants only
• Content
• Participant routing and settlement data
• Participant product and processing capabilities
• Enabled Point Of Service (POS)

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PARTICIPANT DATA STRUCTURE
processing BIC Of the participating bank
Supported type of product by participant
Supported type of notification
Country Code
Supported SLA By participant
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POS DATA STRUCTURE
One table per bank indexed by bank BIC and
localization attributes of branches
Phone number to call SWIFTRemit In the branch
Address Attributes of branch/agents
Opening hours of the branch
Branch ID

• Standard Bank SBZAZAJJ

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Impact and QA

• Product Releases
• Timeline
• Important Milestones
• Pilot Management

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Product Releases
() subject to SWIFT Board approval
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Project timeline

• Product Definition
• Standards Workgroup
• Reference Data CRS
• Ref. Data Structure
• SWIFTSolutions Pack

• Implementation
• Pilot selection
• Vendors selection

• Test and Pilot
• Pilot preparation
• Pilot testing

May go-live if exit criteria are met
Live services
Oct
Nov
Dec
May
Jun
Jul
Aug
Jan
Feb
Mar
Apr
Sep
Oct
Nov
Dec
Jan
Feb
Mar
2007
2008
2009
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Important Milestones

• March Assessment readiness for Vendors
  pre-qualification
• April Message Usage Guidelines (for comments)
• June Message Usage Guidelines (final)
• Reference Data Structure available
• July Product documentation CD available
• August Deadline to enroll for pilot phase
• September ITB environment available
• Demonstration platform at SIBOS
• October Pilot phase starts

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Agenda

• Introduction
• Advisory Group
• Service Model
• Product Design
• Standards
• Reference Data
• Product Plan
• Questions and Answers