What You Need to Know Now

Transcription

1 Faster Payments: What You Need to Know Now RUSSELL ELLSWORTH DIRECTOR TRANSACTION BANKING PRODUCT MANAGEMENT / PAYMENTS APRIL, 2017 A member of MUFG, a global financial group

2 The significance of many innovations often only becomes apparent with time. 2 Tomorrow Happened Yesterday; Vovalink and PWC

3 Topic Outline Changing Technology and Its Influence on Business 04 The Move Towards Real-Time Payments 06 Tipping Point for the United States 08 Comparing Real-Time Payments 09 Real-Time Payment Use Cases 11 Statistics From Across the Pond 12 Federal Reserve Faster Payments Task Force 13 Real-Time Payments Hurdles 17 3

4 Technology Continues to Influence How We Interact and Conduct Business TM Web 1.0 TM Mobile / Social TM TM Internet of Things / AI / BlockChain TM TM ? Collaboration Economy / Messaging TM TM 4 Source: KPMG Analysis

5 Both Digital and Mobile Have Become Essential to Business People 90% Percentage of workers believe their mobile device is critical to their jobs 1 70% Percentage of workers who think they will use their mobile devices more for work in the future Millions of millennials in the workforce; now the largest generation

6 The World is Moving Toward Real-Time Payments Referred to by different names including real-time payments, faster payments, and instant payments 24/7/365 Credit push only Flexible messaging options Immediate availability Payment certainty - cannot be reversed Will be confirmed as either completed or rejected 6

7 Real-Time Payments Adoption Around the World Denmark - NETS Switzerland - SIX Sweden - Swish Finland Poland - Elixir U.S NACHA 2016 and TCH 2017 Mexico - SPEI UK - FPS Netherlands Equens / Worldline 2017 Bahrein - BCSIS China - IBPS Japan - Zengin Korea - HOFINET Thailand Vocalink/ITMX Columbia ACH Colombia Nigeria CNB/NIP India - IMPS Singapore FAST/G3 Chile - TEF Brazil SITRAF/TED South Africa RTC In public consultation/planning Evolving Basic Mature 7 Source: Capgemini Financial Services Analysis 2015; Immediate/ Faster Payments - Innovation is Knocking White Paper, Fundtech (now part of D+H), Swift

8 Tipping Point For The United States What is Driving the Shift Towards Real-Time Payments Technology innovation Global standard payments format (ISO 20022) Need to improve overall efficiency of payment systems New players and business models Merchants expectations Consumers expectations Regulatory pressures Globalization 8

9 Comparing Real-Time Payments in the US with Existing Payment Rails 9 *Source: The Clearing House - TCH Real-Time Payments; December 2015

10 Real-Time Payments Will Drive New Capabilities Improvement in cash flow/working capital management Rich reporting and data analytics capabilities Greater straight through processing opportunities Non-traditional players entering the market New simple addressing benefits Partnership integration ti / product development 10

11 Real-Time Payments Use Cases Based on the Fed s analysis, the RTP system is designed to address unmet customer needs across a number of targeted use cases* 11 *Source: The Clearing House - TCH Real-Time Payments; December 2015

12 Statistics from Across the Pond 2008 The year the UK processed its first faster payment transaction 18% Percentage of total payments clearing as faster payments in Billion Number of Faster Payment transactions processed in 2016; a 14% increase over ,000 Current maximum value of a single faster payment Real-Time Processing The new standard for phone or internet initiated domestic UK payments 12 Source:

13 The Federal Reserve s Faster Payments Task Force 13

14 Mission and Objectives of the Faster Payments Task Force* Identify and evaluate approach(es) for implementing a safe, ubiquitous, faster payments capability in the United States Address Represent views on future needs for a safe, ubiquitous faster payments solution Assess alternative approach(es) for faster payment capabilities other issues deemed important to the successful development of effective approaches 14 * Source: FasterPaymentsTaskForceProgressReport_talkingPoints; February, 2016

15 Federal Reserve Faster Payments Task Force* Effectiveness Criteria Purpose A description of stakeholder needs that can be used by market to guide faster payments innovation Faster Payments Effectiveness Cit Criteriai A framework to be used by the Faster Payments Task Force for identifying effective approaches to faster payments 15 * Source: FasterPaymentsTaskForceProgressReport_talkingPoints; February, 2016

16 Federal Reserve Faster Payments Effectiveness Criteria* Ubiquity U.1 Accessibility U.2 Usability U.3 Predictability U.4 Contextual Data Capability U.5 Cross-Border Functionality U.6 Multiple Use Cases Speed (Fast) F.1 Fast Approval F.2 Fast Clearing F.3 Fast Availability of Good Funds to Payee F.4 Fast Settlement among Depository Institutions and Regulated Non-bank Account Providers F.5 Prompt visibility of payment status Efficiency E.1 Enables Competition E.2 Capability to enable value- added services E.3 Implementation Timeline E.4 Payment Format Standards E.5 Comprehensiveness E.6 Scalability and Adaptability E.7 Exceptions and Investigations Process Governance G.1 Effective governance G.2 Inclusive governance Safety and Security S.1 Risk Management S.2 Payer Authorization S.3 Payment Finality S.4 Settlement Approach S.5 Handling Disputed Payments S.6 Fraud Information Sharing S.7 Security Controls S.8 Resiliency S.9 End-user Data Protection S.10 End-user/Provider Authentication S.11 Participation Requirements Legal L.1 Legal Framework L.4 Data privacy L.2 Payment System Rules L.5 Intellectual privacy L.3 Consumer Protections 16 * Source: FasterPaymentsTaskForceProgressReport_talkingPoints; February, 2016

17 Real-Time Payments Hurdles Several key RTP components will need to be addressed in order to have a fully interoperable and ubiquitous ecosystem. Will likely require an over-arching governing body similar to NACHA to establish rules and standards and enforce accountability. Access to or availability of different RTP solutions could impede adoption and slow the ultimate goal of interoperability. Some form of a standard directory service ERP and accounting systems will need to be enhanced for businesses to leverage the full benefits associated with the RTP ecosystem (e.g. ability to accept and apply a RTP to an invoice/bill in near real-time). 17

18 MUFG Union Bank, N.A. 445 S. Figueroa Street G Los Angeles, CA Unionbank.com 2017 Mitsubishi UFJ Financial Group, Inc. All rights reserved.