Clear out the clutter: Modernizing corporate-to-bank communications

Transcription

1 + Clear out the clutter: Modernizing corporate-to-bank communications

2 + Clearing out the clutter 2

3 + Agenda 3 Introduction SEPA PSD II EBICS SWIFT CGI and ISO Clearing out the clutter

4 + The dawn of a new era for C2B communication 4 Are you ready? Developments in the corporate to bank communication space are changing global commerce. SEPA and PSD2 will directly effect consumers, corporates, and banks. Competition Consumer protection and choice Transparency Business drivers Changes in Europe are significant for non-eu corporates and banks too. Although European banks and technology providers mitigate these challenges. SAAS and cloud computing are enabling new operational and service models. Technology drivers Communication is changing to match the demands of modern payment methods. Legacy standards appear to be in their last technology cycle. Numerous initiatives are looking to help banks and corporates bridge the gap to ISO Protocols are undergoing similar changes Large corporates are being courted aggressively by SWIFT Many corporates also wish to use communication standards such as EBICS The variety is overwhelming.

5 + SEPA is just a beginning! 5 The Single Euro Payments Area (SEPA) is an EU initiative aimed at simplifying bank transfers made in Euros. All CTs and DDs sent within the SEPA area will be treated as domestic transfers. Migration to SEPA direct debit will be challenging and it will have to occur very rapidly (1 February 2014). All corporates must use the SEPA standard for Eurodenominated payments and collections throughout Europe. Major changes to business processes and payment systems will be required to ensure corporates are SEPA compliant. Some member states are not ready to fulfill requirements. 1 November 1 February 1 February 1 February Ban on cross-border direct debit interchange fees Migration end date for credit transfers Migration end date for direct debits Mandatory communication of beneficiary s BIC for domestic transactions (SCT & SDD) Customer bulk flows & conversion services for free Migration end date for niche products (CT & DD products) Mandatory use of ISO XML standard for customer bulk transfers and end of transition period for IBAN 1 February / 31 October Migration deadline for non- Euro countries Ban on national direct debit interchange fees

6 % of transactions migrated + Corporates aren t ready for SEPA Companies without migration projects under way face disruptions 6 SEPA migration rates by country, 2Q CT DD 0 Source: ECB SK FI SI LU GR CY BE ES FR AT PT NL MT IT IE DE EE Of the 736 businesses that responded to ISME s (Irish Small & Medium Enterprises) survey, 63% were unaware of the compliance date while 71% of businesses had not started the process of becoming SEPA compliant. (May 2013)

7 + Not migrating will disrupt cash flow 7 Imagine that your organization will not be able to migrate to SEPA direct debit by 1 February How long could your organization abstain from using direct debits without risking liquidity problems? 75 days 16% 46% of companies will have cash flow problems within 2 weeks! days 6% Broadly speaking the technical requirements for corporates will be: days 16% Migrating to an ISO compatible XML format days 5-15 days 3% 19% BIC / IBAN conversion Depending on the number of direct debits, some kind of mandate management solution 5 days 27% Business and IT changes to support new workflows 0% 10% 20% 30% Source: ibi research: SEPA Umsetzung in Deutschland. n=178 only organizations which use SEPA direct debit or plan to do so.

8 + SEPA DD compliance is complex For non-euro corporates, a strong IT strategy is essential 8 Technical support required Conversion and enrichment of existing data from national / legacy format to XML Support for transaction files in any national / legacy format. File transfer to the bank (connectivity) Automatic display of failed direct debits Mandate collection and conversion for direct debits Reporting and reconciliation support Higher transaction costs Banks offer legacy format conversion but prices are high Compliance risk Potential pit-falls Technically, banks are not allowed to convert files from national format to SEPA. But most are anyway Risk is unknown Assuming that SEPA workflows are the same as national payment workflows SEPA DD is quite different Mandate migration takes up to a year Some can t be migrated and may need to be re-authorized.<<<<

9 + PSD to PSD II: What s new? 9 Original PSD The European Commissions Payment Services Directive is a regulatory initiative that regulates payment services and services providers throughout the EU and European Economic Area (EEA). The original purpose of the PSD: Facilitate SEPA development Regulate payment institutions (including non banks) Ban interchange fees Ban surcharges for consumer cards Increase transparency, consumer protection Increase competition PSD II The PSD II covers new services (and service providers) enabling access to consumer accounts. The legislation requires third party payment initiation services to be regulated and supervised as payment institutions. The expanded scope targets developments in mobile payment applications and B2B transfers (like Dutch ideal) to bring them under the legislative umbrella of the PSD.

10 + PSD 2 covers one leg out transactions Money being sent into or out of the EU will now fall under PSD rules 10 Rules regarding transparency of fees and information provision will now apply to one-leg-out transactions and any transaction made in Euros or other EEA currencies. The original PSD only covered transactions where both PSPs were located in the EU. New rule will allow consumers to compare services among PSPs and will provide more protection to transactions coming into or out of the EU (for example remittances). Banks doing business in Europe will have to provide more detailed information to consumers and will face competition on fees and charges due to the added transparency.

11 + PSD II regulates PSPs that use innovative channels Regulating third party processors will bring new service options 11 Effect on payment industry TPPs are defined as services that debit one party s account and credit another party s, and where the processor does not maintain either account. TPPs are currently unregulated under the initial PSD This raises questions about security, liability, and data protection Under PSD 2, TPPs will have to be licensed and supervised as payment institutions This will allow TPPs to have direct access to consumer accounts An effort to keep up with developments in m-payment applications and B2B transfers Effect on corporates Corporates will have more options when it comes to choosing payment institutions Could open up new channels for corporate payments, as banks have been slow to offer mobile payment solutions for customers

12 + EBICS supports multi-national corporates The need for a common protocol is necessary as banks follow corporates into new geographies 12 The 'Electronic Banking Internet Communication Standard' (EBICS), is a communication framework adopted by the French and German banking sectors. All major French and German banks support the protocol. Adoption rates are high, due to low cost, improved functionality, and industry coercion. Treasurers can also connect via SWIFTNet or web-based portals provided by the bank itself. For the French and German communities, EBICS provides reliability and SEPA interoperability and is becoming the default C2B standard. EBICS was designed to function as a secure communication channel to initiate SEPA Direct Debits and SEPA Credit Transfers using the Internet. EBICS is an open standard which supports standard or customized software to initiate payments. EBICS is being promoted for adoption on a pan-european scale Cheaper than SWIFTNet Interoperable with most data standards. EBICS may emerge as the single C2B standard for exchanging ISO messages securely.

13 + SWIFT CGI leads ISO corporate initiatives 13 SWIFT s Common Global Implementation (CGI) allows corporates to use one message structure to interact with banks using ISO based file formats. CGI reduces costs and simplifies implementation processes for corporates managing multiple bank relationships 60+ countries use CGI standards SCORE (Standardized Corporate Environment) is a SWIFT based cash management C2B tool that supports multiple data formats. Of the total Q figures for SCORE, 27% of all payment files use ISO and the percentage is increasing. 300 corporates using SCORE initiate payments with ISO and 34 received ISO based reporting messages.

14 + Examples of ISO based C2B initiatives globally 14 Denmark s largest corporates have moved to ISO Under the umbrella of the Danish Banking Association, XML message implementation has been harmonized amongst banks and vendors. The Italian CBI connects corporates of all sizes to their banks. CBI supports ISO for domestic and cross-border payments. ISO makes up 53% of their CT traffic and pending SEPA DD migration, only 3% of direct debits. SUSA (SWIFT users of South Africa) is an initiative that supports ISO based message communication between a small number of South African corporates and the four major SA banks. The Russian initiative CMPG ISO is in the testing phase to support corporate financial messaging in cooperation with SWIFT CGI and the Central Bank of Russia. Over 18 banks will support the service once implemented. Finland s SEPA migration required full migration to ISO for corporate to bank payment initiation and messaging. All legacy formats were replaced. Banks must be fully migrated for customer reporting in ISO by Q Note: SEPA solely implements the ISO data format. All 28 EU member countries use IS for payment initiation and messaging.

15 + Clearing out the clutter for EU treasurers 15 Problem Complexity is bewildering and overwhelming. Legacy formats and protocols are deeply rooted. Different size corporates will deal with this in different ways Large go to SWIFT Mediums go to EBICS or other national / regional solutions Small stay with bank-centric solutions Solution Examine payment flows and how best to manage banking relationships Re-consider connectivity options SWIFT direct or via bureau Direct to each bank Web-based Third party Unify communications formats and channels across many relationships EBICS only covers part of Europe, but can cover all of SEPA Update payment software Consider managed services to reduce complexity.

16 + Clearing out the clutter for financial institutions 16 Problem European FIs are dealing with most of these issues as matters of compliance. All EU FIs are SEPA ready., PSD compliant, and offering modern connectivity options.. If you do not modernize, your clients will look elsewhere. Non-EU banks need to address these issues as if they were MNCs A few may view Europe strategically, and may be more like EU banks. The pace of change will not slow. The key issue is not just how to comply, but in a flexible, future-proof manner. Solution Simplify the process for clients and hide the complexity. Consider this a compliance exercise. Support all three basic connectivity strategies for corporates Non-EU banks should re-evaluate relationships for sending and receiving payments in the EU Identify payment flows to SEPA countries Relationships with national clearing systems and some correspondents

17 Modernizing Corporate-to-Bank Communications Case Studies Slide 17

18 Multi-National Manufacturing Company SWIFT Service Bureau Case Study Treasury Management System SWIFT Service Bureau Managed Services Direct Internet Connection ERP System Accounts Payable Accounts Receivable Business Challenge Implementing new Treasury Management System Seeking flexibility to connect to banks via SWIFT or directly Electronic distribution of payroll, A/P, wire transfers, international payments Intra-day and end-of-day account statements to understand cash positions Approximately 200 accounts at 16 different banks worldwide Solution 7 Direct connections to banks via Managed Services Connectivity to 16 banks via SWIFT Service Bureau On-boarding of banks worldwide Mapping of data to/from SAP A/P and A/R applications Centralized tracking of all files Slide 18

19 US Regional Bank SWIFT Service Bureau Case Study MT101 Corporate Clients MT940 MT942 Business Challenge Meeting SWIFTNet delivery and SWIFT format requirements of multi-national corporate clients for wire payments and balance reporting Bank applications unable to consume SWIFT formats Imminent go-live deadline SWIFT Service Bureau Managed Services Services 820 BAI2 Solution Managed Services translation MT101 EDI 820 BAI2 MT940 / MT942 Connectivity via SWIFT Service Bureau Corporate on-boarding Enables additional large corporate business Slide 19

20 Case Study: Global Transaction Bank Connectivity Options For Your Global Client Base EUR Direct Debits (only) Payment & Direct Debit Files (BAU) SEPA DD Mandate Management Corporate Clients H2H SAP FSN EBICS-as-a- Service Managed Services Reporting & Control Files (BANSTA, FINSTA, CONTROL) Payment & SDD Files SEPA Payments Engine Business Challenge Client was experiencing increased corporate adoption of EBICS as a preferred communications protocol for bank connectivity Client s existing French-specific EBICS solution was not strategic and not scalable to meet pan- European needs Solution Added EBICS as a communications protocol to the existing Managed Services host-to-host file channel already in place for the bank Implemented file splitting to route SEPA Direct Debits to Mandate Management vendor Business Benefits The bank was able to leverage their existing file channel to meet their customers demands without the need to invest in an additional communications infrastructure Slide 20

21 For More Information Leo Lipis Managing Director Lipis & Lipis GmbH Patricia Hines, CTP Director, Financial Services Industry Marketing GXS Slide 21