SEPA Compliance and Payment Innovation in a Flattening World

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SEPA Compliance and Payment Innovation in a
Flattening World

• Kannan Amaresh
• Head - Banking Domain Competency Group
• Infosys Technologies

23rd October 2007
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Flat World - Changing Rules of the Game!

• Breaking down traditional barriers
• Flattening Hierarchies
• Eliminating information and knowledge asymmetries
• Leveling the competitive playing field

• Banking and Payments industry now have access to
  customers and resources anywhere in the world

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Flat world Forces in Euro Payment Area
Greater integration of EU economies
Rise of non-traditional competition
Flattening World of Payments
Flattening World of Payments
Ubiquity of technology
Regulation and Compliance
Payments business are facing declining revenues
and increasing costs
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Single Euro Payment Area Threat or Opportunity?
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Banks Focus 2008 -2010

• Payment revenues likely to decline by Euro 18-29
  bn (38-62) after 2010
• Banks need to reduce processing costs by gt 50 to
  maintain current profitability

World Payment Report 2007

• Leverage opportunities in newer markets
• Develop innovative products delivering greater
  value
• Become a profit centre from a cost centre

Sources Cap Gemini / Towergroup / EPC
IT Spending on Payment infrastructure is likely
to surge from USD6.5 bn in 2006 to USD10.5 bn in
2008 on account of SEPA
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Develop a Payment Business Model based on
Evolving SEPA guidelines

• Credit Transfers
• SCT Rulebook Version 2.3 in June 2007 (AOS
  Additional Optional Services to address corporate
  concerns)
• Stipulation that CT to reach recipient in one day
  by 2012
• Supplementation by Credit Transfer Priority
  scheme with same day settlement
• Direct Debits
• SDD Version 2.3 in June 2007, update in December
  2007
• Need for clarity on newly introduced features
• Launch date for Euro-wide direct debits from
  11/2009
• Need to find pragmatic solution for changeover
  from old to new mandates
• Card Payment
• Recommendation to setup a new debit card scheme
• Need to reach a consensus on interchange fees
• EPC now has a coordinating role in definition of
  card standards.
• SEPA not an excuse to increase prices
• Cash, e-payment
• m-payment
• SECA Framework in March 2006
• E payment M payment to be developed

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Bank Implementation to Address the Immediate
Concerns

• Urgent need for complete clarity on all direct
  debits features by 12/2007.
• Work on e- and m-payments has hardly progressed
  and SEPA for Cards remains underdeveloped.
• Compliance of Infrastructures with Euro-systems
  SEPA-compliance criteria
• Involvement of all relevant SEPA stakeholders to
  be reinforced
• Security of SEPA payment instruments imperative

• Concrete implementation and migration plans
  should be publicly available and concrete
  communication on SEPA.
• Removal of all barriers to SEPA reporting
  requirements
• Specification of End date for the use of national
  payment instruments to avoid unnecessary
  implementation costs
• Creation of customer friendly and future-oriented
  products to facilitate migration

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and to look beyond Compliance
Legacy System Bottlenecks
SEPA Requirements
New Functionalities UNIFI20022 message formats,
dynamic information requirements, SEPA value
added services, New connections
Poor Responsiveness Low scope for creation of new
functionalities required by the SEPA.
Un-Scalable and obsolete Hardware Slow response
time and expensive to maintain.Architectures are
seldom documented properly.
Impacted Volumes 73 Bn transactions impacted by
2010, EBA 4.5 hours Priority payments scheme.
Need for a quick response time
Integration Requirements Multiple PE-ACHs, Front
end channels, and numerous transaction
enrichment modules. Integration with multiple
back office and status reporting systems.
Integration issues Frequently inflexible
providing data to external systems. Integration
efforts are greatly hampered by the absence of
clean interfaces.
Automated SEPA Electronic processing, enrichment,
routing, settlement and reporting. Foundations
for E-SEPA and M-SEPA in pipeline
Manual Intervention requirements Require manual
fixes and is increasingly difficult and expensive
to find staff who can work on mainframe equipment
that is decades old
High Maintenance Costs Bigger share of IT
spending goes towards maintenance, leaving
little share for growth and transformational
projects
Cost Effectiveness Needs Faster rollout of New
Legal Frameworks, PSDs, message structure
changes.
Banks need to move from a patch work of solutions
to an Enterprise Payment Architecture
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Product and operational innovations leveraging
SEPA

• Enabling full client friendly migration
• Opportunities around e-Commerce / e-invoicing,
  web merchant services etc
• Cost efficiencies pass on to clients
• Centralization and Payment Factories on a Shared
  Services Model
• Potential to Outsource to Near shore Offshore
  Locations

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Provides comprehensive functionality and flexible
architecture
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Payment Solution should be such that it is
Customised to the business strategies pursued by
each Bank
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Thank you
To know more about Infosys SEPA solution and
implementation capabilities Contacts Kannan
Amaresh, Head - Banking Domain Competency
Group Email kannan_amaresh_at_infosys.com Sachin
Arora, SEPA Consultant Mobile [phone]
1636 Email Sachin_Arora03_at_infosys.com
www.infosys.com