Welcome to Accuity s Corporate Payments Modernisation Opportunities & Challenges Ahead webinar

Transcription

1 Welcome to Accuity s Corporate Payments Modernisation Opportunities & Challenges Ahead webinar Buyung Bachtiar Senior Vice President, Head of Transaction Banking Solutions Sumitomo Mitsui Banking Corporation Indonesia Ryan Lee Business Solution Manager, Payments and FC KYC Accuity 5 November :30 PM SGT 1

2 Corporate Payments Modernisation Webinar (Part I) Trends, Challenges and Opportunities for Banks Ryan Lee Business Solution Manager, Payments and FC KYC Accuity 2

3 Agenda I. Trends in Corporate Payments II. What are the Potential Risks? III. How are Leading Banks Addressing These Issues? IV. Wholesale Payment Modernisation from a Bankers Perspective V. Client Case Study VI. Question and Answer 3

4 I. Trends in Corporate Payments

5 Global Transaction Banking Revenue Potential US$330B In 2014 Total Transaction Banking US$ 1.1 trillion In 2024 Total Transaction Banking US$ 2 trillion Wholesale Retail Source: BCG Global Payments October

6 Global Transaction Banking Revenue Potential US$330B US$? In 2014 Total Transaction Banking US$ 1.1 trillion In 2024 Total Transaction Banking US$ 2 trillion Wholesale Retail Source: BCG Global Payments October

7 Global Transaction Banking (Wholesale) Revenue Potential US$330B Wholesale Transaction Banking Revenue Account and Payment Revenue Other Revenue Source: BCG Global Payments October

8 Global Transaction Banking (Wholesale) Revenue Potential US$330B US$243B Wholesale Transaction Banking Revenue Account and Payment Revenue Other Revenue Source: BCG Global Payments October

9 Global Transaction Banking (Wholesale) Revenue Potential US$330B US$243B US$480B Wholesale Transaction Banking Revenue Account and Payment Revenue Other Revenue Source: BCG Global Payments October

10 Global Transaction Banking Revenue Potential Wholesale (Business and government initiated) payments are projected to post a stronger annual revenue growth, at compounded annual growth rate (CAGR) of 7% compared with 6% for retail payments. Attractiveness of the business has heightened the competition among banks, while Gaps in Bank Services and the rise of multibank platforms have opened the door to nonbank competitors. Source: BCG Global Payments October

11 Poll 1: How important is the wholesale payment business for your bank? (Please click on only 1) Not Important Gaining Importance Moderately Important Very Important 11

12 Challenges Faced by Corporates in Domestic B2B Payment? 12

13 Challenges Faced by Corporates in X-Border B2B Payment? 13

14 Challenges Faced by Corporates in X-Border B2B Payment? Reasons for Delay Complexity of the Payment Procedures Incorrect information on invoice Inefficiencies of the banking system B2B Domestic 28.5% 20% 19.6% B2B X-Border 39.4% 23% 29.2%

15 Challenges Faced by Corporates in X-Border B2B Payment? Reasons for Delay Complexity of the Payment Procedures Incorrect information on invoice Inefficiencies of the banking system B2B Domestic 28.5% 20% 19.6% B2B X-Border 39.4% 23% 29.2% Primary Payment Challenges Banks could aim to address: 1 Simplify existing payment process 2 3 Advocate innovation in the existing banking system Directly assist Corporate Clients bank master data needs or recommend reliable payment reference data partners 15

16 Trend : Corporate Payment Structure DECENTRALISED CENTRALISED AUTOMATED MANUAL o 16

17 Trend : Corporates are Consolidating Number of Bank Accounts 23% 7% 77% 93% > 1000 bank accounts < 1000 bank accounts Source: Sungard 2015 Payment Study 17

18 Trend : Corporates are Consolidating Number of Bank Accounts 23% 7% 77% 93% > 1000 bank accounts < 1000 bank accounts Source: Sungard 2015 Payment Study 18

19 Trend : Corporates are Diversifying their Cash Management Banking Relationships 25% 28% 10 or more cash management banks Source: Sungard 2015 Payment Study 19

20 3 Key Drivers for Payment Centralisation 33% 27% 20% $ Gain Control to Prevent Fraud Reduce Unnecessary Cost Achieve True Cash Visibility Source: Sungard 2015 Payment Study 20

21 What are Corporate Treasurers Expecting from their Banks? Extend their Global Payment Reach to more geographical locations where they have a footprint Provide multiple channels of integration with Corporate Clients for faster, quick integration with their corporate payment process Ensure a simpler and more efficient Payment STP process from Corporate to Bank Improved customer experience & convenience Better bank fees 21

22 Poll 2 : What are Corporate Treasurers Expecting from Banks? (Tick all that applies) Extend Global Payment Reach Provide Multiple Channels Integration Ensure Simpler & Efficient Process Improve Customer Experience Provide Better Fees 22

23 II. What are the Potential Risks?

24 Risk of Payment Margin Erosion Source: BCG Global Payment Database

25 Risk of Payment Margin Erosion Source: BCG Global Payment Database

26 Risk Being Engulfed by an Evolving Ecosystem made up Traditional and New Fintech Players Redesign your payment offering now or new competitor will. 26

27 Possibility of Disintermediation Emergence of 3rd Party Payment Platforms and new form of correspondent relationships are developing e.g. Bank of America, Standard Chartered Bank and Japan Post Bank signed an agreement with Earthport Blockchain technology is potentially going to disrupt the model of traditional correspondent banking and correspondent payments Ripple is partnering with many banks globally. E.g. Fidor from Germany will use Ripple in a number of ways, including inter- and intrabank payments between other financial institutions and its own branches. The Ripple integration will also allow the bank to offer its customers faster and less expensive money transfer options. Fidor Bank, Cross River Bank and CBW Bank have signed up to use Ripple for real-time settlement of cross-border money transfers Bank of England discussion paper released in February 2015 envisioned cryptocurrencies as a new way of undertaking interbank settlement and enabling transactions directly between participants without a financial intermediary. 27

28 Risk Being Irrelevant to Corporate Clients 28

29 III. How are Leading Banks Addressing These Issues?

30 Leading Banks are implementing / exploring one or more of the following options Extend their reach in Cross Border Payments Provide greater range of Payment Offerings Redesign their Payment User experience Lower overall Cost of Processing Boost their payment processing efficiency 30

31 Leading Banks are implementing / exploring one or more of the following options Extend their reach in Cross Border Payments Provide greater range of Payment Offerings Redesign their Payment User experience Lower overall Cost of Processing Boost their payment processing efficiency What is their approach? 31

32 3 Main Areas to Consider TECHNOLOGY BUSINESS MODEL REFERENCE DATA 32

33 Technology Target Segment Build / Buy Domestic and Cross Border Payments Scaleable and Future-proof TECHNOLOGY REFERENCE DATA BUSINESS MODEL 33

34 Business Model Saxo Payments Launch Platform for PSP TECHNOLOGY BUSINESS MODEL Build Citibank offers Citicoin Partner BAML + Earthport / Tieto Japan Post Bank + Earthport REFERENCE DATA Citibank acquired PayQuik Santander invest in RippleLabs Acquire BBVA acquired Simple Invest Many others have incubation programs 34

35 Reference Data Customer Information File Counterparty KYC File Payment Master Data File Others TECHNOLOGY BUSINESS MODEL REFERENCE DATA 35

36 Trend : Banks are looking to customer self service channels $4.25 $2.40 $0.20 Branch Call Center Online Source: Bain Report on Customer Loyalty in Retail Banking

37 Trend : Banks are looking to customer self service channels $4.25 $ x Lower cost of payment processing to improve margins $0.20 Branch Call Center Online Source: Bain Report on Customer Loyalty in Retail Banking

38 Optimised Wholesale Payment Processing 38

39 IV. Wholesale Payment Modernisation - Bankers Perspective

40 Corporate Payments Modernisation Webinar (Part II) Buyung Bachtiar Senior Vice President, Head of Transaction Banking Solutions Sumitomo Mitsui Banking Corporation, Indonesia 40

41 Agenda 1. Corporate Payments Perspective 2. Client s Expectation versus Bank s Challenges 3. Enhance Front and Back Office 4. Idea to Embark 5. Future Look 41

42 1. Corporate Payments Perspective Increase number of Import transactions significantly Speedy and fast payment process by bank Delay will cause penalty and reputational damage Simple and moderate way to construct the payment Prompt feedback of the payment ACK Ability to engage payment with limited information Cost concerns

43 2. Clients Expectation versus Bank s Challenges Corporates Expectations Prompt and fast process Simple and moderate way in processing the payment Feedback on payment acknowledgement No delay in payment process Lower cost Bank s Issues Manual process and verification Limited remittance information Manual process of retrieving payment acknowledgement Compliance risk High operational and overhead cost - Excellent payment process - Efficiency and Efficacy - Avoid Reputational Damage - Enhance Bank s competitiveness - Streamlining Process - Reduce Operational Cost and Risk

44 3. Enhance Front and Back Office Complete data within EB Channel Enhancement in Bank s System : Intelligent Dictionary Automated SSI Process H2H / Interface Solutions Auto Payment Acknowledgment Front-End System Enhancement is expected to be as user-friendly as possible without additional steps done by clients. Two-Payment Method Enhance KYC/AML Flow Automated Specific Code Back-End System Enhancement towards the end-toend process to avoid manual intervention

45 4. Idea to Embark Main reason of the delay process mainly triggered by : Incomplete data / payment information Screening process Equip payment instruction with complete information of: BIC Code IBAN for EUR FRONT END BACK OFFICE Implement automate KYC/AML screening process Automated SSI Process Automated Specific Code (ABA, BSB, CNAPS) Intelligent Dictionary

46 5. Future Look AML Screening is going to be more strict and complicated Demand to have swift and quick process will be higher Competition among banks is getting tough due to pursuing operating bank mandate More type of currencies capabilities

47 V. Client Case Study

48 Payment STP Process Origination Routing Decision Message Formatting Clearing & Settlement Mission Critical Receipt of Instructions 1. Beneficiary Bank Acct 2. Beneficiary Bank Name 3. Beneficiary Bank Code 4. Beneficiary Branch Name 5. Beneficiary Bank Address Routing Decision 1. Domestic vs International payment 2. Currency 3. Value Date Message Format 1. Domestic Format vs Cross Border Format 2. Direct vs Correspondent Payment 3. Serial / Cover Payment Apply payment rules according to Clearing and Settlement mechanisms assigned to each routing code. Simply payment instructions creation UX Cost versus Timeliness Messaging Formatting and SSI Matching Codes with appropriate Clearing & Settlement Mechanisms Repair Facilitating Fixing and Putting Back into Queue 48

49 Case 1

50 Background Case 1 Business Challenges: Spending too much time performing manual validation of Payment instructions Intend to grow the volume of business without increasing overhead Duplication of bank branch records 50

51 Background Case 1 Business Challenges: Spending too much time performing manual validation of Payment instructions Intend to grow the volume of business without increasing overhead Duplication of bank branch records Solutions Benefits: Reduced the amount of manual validation by 70% Integrate data file into Core Banking Agency table to facilitate systems level validation Allow for single point of truth for bank branch level data 51

52 Case 2

53 Background Case 2 Business Challenges: Manually collected payment files and individually entered into systems Thousands of man hours spent each year loading data from separate sources and performing ad hoc fixes for failed transactions Costs from charge backs and required overhead from rejected payments totaled 53

54 Background Case 2 Business Challenges: Manually collected payment files and individually entered into systems Thousands of man hours spent each year loading data from separate sources and performing ad hoc fixes for failed transactions Costs from charge backs and required overhead from rejected payments totaled Solutions Benefits: Access to most up-to-date global payment information from a single source on a daily basis Improvement of bank s overall STP rate, dramatically in some regions such as Asia Significantly reduced time and effort spent on payment data maintenance by thousands of man hours per year Consolidated set of payments data available to all locations 54

55 The payment services and operations group of a bank is divided (generally) into three macro areas Front End Back End Direct Feed Transaction Platforms Bank-Controlled Front Ends Cash Management Phone Banking Data Hub Cheque ACH Retail Online Banking ATM Mobile Remote Check Capture Branch Investigations Wire X-Border Card Repairs Exceptions Fin Crime Credit Risk 55

56 VI. Question and Answer

57 Contacts Buyung Bachtiar Senior Vice President, Head of Transaction Banking Solutions Sumitomo Mitsui Banking Corporation Indonesia E: Ryan Lee Business Solution Manager, Payments and FC KYC Accuity E: Offices in Abu Dhabi, Boston, Chennai, Chicago, Frankfurt, Hong Kong, London, Luxembourg, Moscow, Mumbai, New York, Paris, Pretoria, San Diego, Sao Paulo, Shanghai, Singapore, Sydney and Zurich

58 Thank you for attending the webinar. 5 November pm, SGT