Slide 1 Sibos205_Banking_PC_LVACH_v2.ppt Slide 1 SWIFTSolutions for low value payment clearing systems Sibos205_Banking_PC_LVACH_v2.ppt

Slide 2 Sibos205_Banking_PC_LVACH_v2.ppt Low-value payments  Usually low to medium value and / or non-urgent payments and related statement reports –Credit transfers Salaries, pension payments, retail and commercial payments –Direct debits –Cheque clearing and truncation  Formatted in a variety of file structures  Exchanged in electronic files  Cleared through correspondent relationships and/or Automated Clearing Houses (ACHs)

Slide 3 Sibos205_Banking_PC_LVACH_v2.ppt Complementing our position in wholesale segment by extending to low value payment market We started in the wholesale cross- border payments market : high- value messaging but limited volume We entered the retail cross-border payments market: lower-value add messaging but limited volume Cards & cash We extended to the wholesale domestic payments (RTGS) : high-value add messaging with large volumes High-value messaging We are entering the retail domestic payments market: lower value add messaging but large volumes Low value messaging 2005 High-volume messaging Low volume messaging Single and cross-border payments Domestic payments (RTGS) Bulk cross- border payments ACH

Slide 4 Sibos205_Banking_PC_LVACH_v2.ppt SWIFT provides a total solution for payments and settlement systems Automated clearing houses Bulk payments Real-time gross settlement systems Settlement instructions FIN FIN Copy InterAct FileAct Central securities depositories DVP instructions Real-time query/control Reporting Settlement instructions Real-time query/control Reporting Banking correspondents Payments Bulk payments R-t cash reporting Settlement instructions

Slide 5 Sibos205_Banking_PC_LVACH_v2.ppt LVP Business Models Bilateral file exchanges 4 “Hub and spoke” around ACHs ACH acting as accounting centre 3 “Hub and spoke” around ACHs with indirect membership 2 Accounting data Payment data ACH Indirect ACH participant e.g. NL, UKe.g. ES, FR e.g. BE, EBA, ZAe.g. AU, DE, IE 1 Direct ACH participant

Slide 6 Sibos205_Banking_PC_LVACH_v2.ppt Market developments  In Developing Markets: –Central bank led buy off shelf ACH’s in developing markets  In Europe: –ACH operator becoming more commercial –SEPA leading to consolidation –TARGET 2 –Faster Payments (OFT) –Gradual move to XML, encouraged by Regulators  In US: –Increased interest in XML

Slide 7 Sibos205_Banking_PC_LVACH_v2.ppt SWIFT’s solution for low-value payment clearing systems Rationalisation Standardising the communications layers with SWIFTNet FileAct embedding SWIFTNet PKI Harmonisation Standardising the end-to-end transaction chain with Bulk Payments standard for bank-to-bank and bank- to-ACH flows and C2B Payment Initiation standard for customer-to-bank flows

Slide 8 Sibos205_Banking_PC_LVACH_v2.ppt The solution aims to connect all potential players involved in the end-to-end transactions Bank-owned services National ACH Regional ACH Region with an ACH SWIFTNet services International bank-to-bank exchanges and clubs EBA STEP2 Country with an ACH Country without an ACH

Slide 9 Sibos205_Banking_PC_LVACH_v2.ppt SWIFTNet solution for EBA STEP2 - Pan-European ACH  EBA Clearing acting as service provider: –Administers its own SWIFTNet service for the STEP2 community –Uses SWIFTNet FileAct in many-to- one for payments input and output flows –Uses the MT103 and the XML Bulk Credit Transfer messages –Uses SWIFTNet Browse for on-line monitoring services –Uses Reverse Billing in order to let SWIFT invoice input traffic to senders; output traffic to receivers  To-date, 70 direct participants access STEP2 over SWIFTNet. More will join in November 2004 and later  See for more info SWIFTNet FileAct, InterAct and Browse SWIFTNet solution for EBA STEP2 EBA STEP2 Direct Participant

Slide 10 Sibos205_Banking_PC_LVACH_v2.ppt What the first SWIFTNet-based Automated Clearing House says "Combining the strengths of our partners SIA and SWIFT, we have been able to launch our new pan- European retail payment clearing house (STEP2) within a record timescale of 10 months. With STEP2 in place, banks in Europe now have a new platform that enables them to further develop their retail payments business in accordance with customer needs in the Single Euro Payments Area. Using SWIFTNet was an obvious choice to allow for open access by a very large number of banks.” Gilbert Lichter, Secretary General of EBA

Slide 11 Sibos205_Banking_PC_LVACH_v2.ppt Caja Madrid’s implementation of XML Bulk Credit Transfer for EBA STEP2 Caja Madrid has implemented the Bank-to-bank Bulk Credit Transfer message STP Plus variant and originates the STEP2 bulk payments files straight from the internal back-office application SWIFTNet XML Bulk Credit Transfer STP Plus Application EBA STEP2 SWIFTAlliance Gateway FTA

Slide 12 Sibos205_Banking_PC_LVACH_v2.ppt What our customers say… “We have given our preference to the XML bulk payment standard for STEP2 since XML is now our standard internal content management technology. Loading the XML schema into our back-office application enables us to avoid the development costs that a proprietary syntax requires.” Caja Madrid

Slide 13 Sibos205_Banking_PC_LVACH_v2.ppt New By using SWIFTNet, Eurogiro Members can eliminate their Eurogiro proprietary link Eurogiro proprietary network Eurogiro Members can use their SWIFTNet connectivity to exchange Eurogiro payments with other members. The Eurogiro Hub interfaces Eurogiro’s proprietary network with SWIFTNet. Eurogiro Hub Eurogiro Member Eurogiro Member SWIFTNet

Slide 14 Sibos205_Banking_PC_LVACH_v2.ppt What our customers say… “The co-operation agreement with SWIFT fits perfectly with our strategy to lower entry and transaction costs and to expand the Eurogiro offering.” Henrik Parl, Managing Director, Eurogiro A/S

Slide 15 Sibos205_Banking_PC_LVACH_v2.ppt SWIFTStandards XML for end-to-end bulk payments enables end-to-end STP Ordering Customer’s Financial Institution Automated Clearing House Standardised content End-to-end STP Beneficiary Customer’s Financial Institution Ordering Customer Beneficiary Customer 2 4 XML Inter-bank Bulk Payments XML Cash Management 3 XML Cash Management 5 XML Cash Management 1 XML Payment Initiation

Slide 16 Sibos205_Banking_PC_LVACH_v2.ppt SWIFTNet FI’s & RTGS Fed ACH EPN ACH CHIPS Dedicated link(s) Federal Reserve TCH FedWire Single SWIFTNet connection FIN FedWireCHIPSClients InterAct New SWIFT flows (InterAct and FileAct) Existing SWIFT flows (FIN) SWIFTNet solution for FedACH & EPN ACH and US banks Single payments / Messages US Banks EPN ACH Clients Fed ACH FI’s & ACHs FileAct Bulk payments / Files

Slide 17 Sibos205_Banking_PC_LVACH_v2.ppt hardwaresoftwarelines maintenance support release qualification testing backup disaster take-over exercises legal softwaremaintenance project management procurement education documentation Benefits for Automated Clearing Houses Slide 17 Sibos205_Banking_PC_LVACH_v2.ppt