1. Moderator: Gilbert Lichter, EBA CLEARING Speakers: Luc Belpaire, SunGard Etienne Castiaux, Clear2Pay Maurice Cleaves, Deutsche Bank Gene Neyer, Fundtech Renzo Vanetti, SIA-SSB The application of new technology for payments

2. Renzo Vanetti – CEO SIA SSB

3. 1.Technology Innovations must first service Clients’ requirements. SEPA forcing Banks to face the reality: payments are becoming more high profile, visible and strategic Consumers, Merchants, SMBs and Corporates are dissatisfied with Banks’ services and do not understand the value of SEPA 2.Demand is changing, quickly supported by the new technologies (i.e. Web 2.0, BPM,..) Banks must be prepared for “unexpected” business models 3.Payment systems innovation is global, business case are local European market under influence from global payment system innovations Non-banking payment providers preparing to enjoy the SEPA Banks’ challenges: Market approach Time to think how to strategically innovate payment systems

4. Disruptive demand patterns and Web 2.0: prepare for the unexpected – Illustration with the US Thousands of unique visitors, U.S., January/February 2008 Source: comScore The impact of these was poorly predicted and is continuously disruptive The impact of these is even more difficult to predict Social Networking Financial Social Networks VIRGINMONEYUS.COM PROSPER.COM KIVA.ORG MICROPLACE YOURSISHERE.COM WIDGET P2P Payment Catalyst 304 278 22 45 67,957 38,917 32,436 338 MYSPACE Blogger FACEBOOK Yahoo! Geocities FLICKR SecondLife 14,990 13,389 Internet Retail Gift cards & aggregation Gift cards and co-branded credit cards Payment Catalyst 77,864 55,172 47,048 eBay Amazon Apple Wal-Mart 27,651

5. 4.An integrated view of payment systems’ innovations From Visible to Invisible innovations: innovation in each payment system can not happen in isolation of the whole payment value chain 5.From Transaction value to Information value Banks must develop new competitive services (i.e. PIVAS), based on contextual and aggregate information, as key differentiator 6.Payment Service Hub (PSH) as the main payment ‘invisible’ innovation for Banks The payment architectural space must evolve to support more complex payment flows and combination of payments instruments and networks PSH is a middle-aware financial IT orchestrator Banks must move gradually towards it Time to think how to strategically innovate payment systems Banks’ challenges: Technological approach

6. 1.Create a strategic payment governing body 2.Partnership 3.Outsourcing Strategic approach

7. The application of new technology for payments Etienne Castiaux Chief Technical Officer, Clear2Pay

8. SOA payments architecture is being rolled out on a wide scale “SOA is a mindset more than a technology, and SOA concepts will outlast technology fads” Big vendors are backing SOA because large banks demand it, e.g. SAP and Microsoft Join Global Banks in a New Association to Help Banks Establish a Service-Oriented Architecture. Bank customers are asking more and more services and banks view an enterprise payment programme as a way to deliver increased service at a cheaper TCO. Vast majority of Tier-1 banks are busy rolling out enterprise payment programs based on SOA. Several standards are there: –Formats: ISO 20022, SWIFT range, … –Transformation and orchestration: XML, BPEL –Middleware: JEE, … Banks want to avoid being locked into proprietary technology. Mature SOA technology –Gluing granular components, written in J2EE and exposed with WSDL interfaces and EJB bindings –Standard J2EE security –Optional usage of BPEL to orchestrate (e.g. IBM BPEL in facts generates J2EE apps using JMS and EJBs) –Large processing sites live on SOA/J2EE (NYSE,...)

9. Benefits of SOA for SEPA SDD and SCT are a greenfield opportunity to roll out a 1 st phase of a new enterprise payment programme replacement. They should not be addressed in isolation. Bring your TCO down. Build on standards: platforms, formats, … Avoid creating another silo when rolling out SDD and SCT. Our customers are building SDD and SCT on an SOA enterprise payment programme and view it as a way to actively win new customers and markets.

10. On the Pitfalls of Converting Legacy Systems to SOA DON’T Using non-mature SOA technologies is dangerous SOA on mainframe is in its infancy Avoid mongrel SOA compliance, pouring some rich SOA cream over the legacy to give a more appetising solution; not safe, not performant Believing that migrating existing mainframe developers and architects up 2 generations to SOA/J2EE is straightforward and transparent Don’t underestimate DO’s Mission critical applications must be designed with performance at their core Pickvendors that have solved technology issues for you and offer a component- based SOA payments kernel that will control the business processes, but leverage existing legacy elements while taking adavantage of SOA’s flexibility and capacity to adapt, a Software Development Kit will give you vital autonomy, and isolate you from technology-based hindrances adopt open industry standards and avoid proprietary solutions like the plague To reap the SOA benefits, put SOA at the core of operations, not as an interface layer to an incumbent legacy system.

11. SEPA and new payments technology – are we ready? Gene Neyer, SVP, Product Management, Fundtech

12. SEPA focus has been on new clearing compliance SEPA compliance does not require investments into new technology or changes to the core operating models blockedComplexity/Uncertainty blocked innovation/strategic investments –Banks focused on internal tactical improvements. Many have: Overspent on Credit Transfers implementations with limited strategic value Feel the burden of having to support existing national ACH infrastructures during the ever extending transition period –Corporate acceptance and uptake have been “measured” These pushed advanced corporate access and improved customer service to the back-burner in bank’s strategic programmes 82% banks surveyed plan to maintain the same staffing levels

13. Yet, many banks wish to leverage new technology Accidental vs. Planned architecture – the power of the platform –Tactical investments layered into a strategic programme –The promise of SOA Efficiency/Agility/Re-Usability Utility followed by new products: –More efficient corporate access –New delivery channels – mobile, smart cards, electronic wallets The concerns are: –Risk with new technology/Time to market/Resource contention/ Revenue loss Back Office Consoli- dation Back Office Consoli- dation 57% banks surveyed felt that it will take at least 5 years (or never) to recover revenues lost to SEPA

14. How, when and where Architect Rules Driven organisation –Infrastructure based on SOA, Integration Patterns, and ISO standards Progress SEPA from “necessary evil” to the foundation of the rejuvenated customer service strategy –SEPA does not provide any implicit or explicit customer service guidelines – a differentiation opportunity Gradually mesh and evolve legacy and SOA offerings –focus on technology to ease customer access, integration and the enabling of new channels

15. The Application of new technology for Payments Luc Belpaire Product Director Payments, SunGard

16. SEPA Advantages and Disadvantages for Corporate Customers Source: SEPA Benchmark Report, Asymmetric/SunGard, May 2008 Payments Technology should focus on maximising the advantages and minimising the disadvantages – but how? 0%50%100% Less sophisticated payment products Integration and new file formats Modify existing systems Obtain counterparty IBAN/BIC More likeliehood of failed payments Few or no disadvantages Disadvantages for Corporates 0%50%100% Lower cost payments Standardisation of payment types Standardisation of file formats Reduce number of euro accounts Reduce number of eurozone banks Simplify cash management structures Few or no advantages Advantages for Corporates

17. How can Corporates use Payments Technology to maximise the SEPA benefits? Corporates can centralise the payments and cash reporting in a payment factory –Shield the business applications (Treasury Systems, ERP, Payroll, AP, AR,...) from the complexity of SEPA –Build the required changes once instead of in every system –Don’t forget payments outside SEPA, the architecture needs to support multiple formats as well as local instruments Corporates can standardise all layers using the available technology –Bank Connectivity –Business Process & Workflow Approvals and Signatures Bank Reporting –Bank Account Management Corporates can extract business intelligence using the central platform –Management Dashboards –Operational Dashboards

18. Conclusion Build a business case around business benefits –Use SEPA as a catalyst / facilitator for cash management centralisation Simplification and improvement versus pre-SEPA situation –Other elements can add to the business case Improve working capital management Enforce security and best practice processes Reduce costs – Facilitate growth Technology is available today –Payment Factory Software –Standardised Corporate-Bank channel –Business Intelligence Tools –Service Oriented Architectures facilitating integration

19. The Application of New Technology for Payments Maurice Cleaves, Deutsche Bank

20. Formats V2V3 V2V3-Converter Paymul 96.ADirdeb 96.ACSV-Überw.CSV-Lastschr.Paymul 96.A V2V3 V2V3-Converter MT94x Paymul 96.ADirdeb 96.A V3V2V3 CSV-Lastschr. CSV-Überw. Kunden Hostdb-direct 6.xdb-direct internetdb-bankline db-direct MC MT94x Paymul 96.A Dirdeb 96.A W W W DB-E04 (FRA) BCS-FTP (FRA) DBI-Srv. (BCN) EDI-C. (FRA) Merva (FRA) ZSE STA Paymul 96.A (ZSE) Dirdeb 96.A (ZSE) MT94x Paymul 96.A (ESA / XEE) Dirdeb 96.A (ESA) RVS Paymul 96.A (ESA / XEE) Dirdeb 96.A (ESA) Paymul 96.A (ZSE) Dirdeb 96.A (ZSE) V3 (ATZ,ATS,ATL,ATP,ATF,ATQ) V3 (ATZ) V3 (ATU) V3 (ATF) V3 (ATQ) V3 (ATS) V3 (ATL) V3 (ATP) STA x.25 (B canal) ZSE,ATZ,ATS, ATP, ATL,ATQ,ATF, ATU ESA XEE ESA XEE ESA XEE ESA XEE STA ESA, XEE, ATZ, ATU, ATF ATQ, ATS, ATL, ATP ESA, XEE, ATU, ATF, ATQ, ZSE ESA, XEE IBM-Mailbox (VIE) B@FIR (FRA) Ext & Int. MT 101 ATZ, ATS, ATL, ATP Booking files V3 bank clearing MT 940 MT 942 MT 940, MT 942 Tandem/i (FRA) MT 101 MT 103 SWIFT ATZ, ATS, ATL, ATP STA MT94x Connection to Internet Connection to Internet Connection to Internet STA https CAT-EB (FFM) Administration Repl. V3 – client data carrier (IBM is Service RZ / authorisation with DBZ Convert V3 ATZ, ATU, ATF, ATQ, ATS, ATP, ATL, STA ATZ, ATU, ATF, ATQ, ATS, ATP, ATL ATZ AT U ATF AT Q ATS ATL ATP ESA Ext. MT 101 (external) V2/V3 Converter V2/V3 Converter Scanning (VIE) V3 FINPAY FTP Ext. MT 101 FTP ATB, XCF, XAP Retour- INFO Retour- INFO ATB XCF XAP ATB XCF XAP Retour- INFO Retour- INFO PRISMA (FRA) CPH ATB XCF XAP ATB XCF XAP ATB XCF XAP ATB, XCF, XAP V3 Repl. MT 940 MT 942 MT 940 MT 942 STA SWIFT-Service FTP V3 RVS Convert FTP V3 https

21. SEPA infrastructure solutions Bilateral Clearings

22. Keys to survival in the Cash Management Business Revenue Enhancement Managing Cost and Compliance Product Innovation Customer Retention

23. Investment Governance - Decision Making Process – Is cost the only issue? Customer implications Build or buy Insource or outsource Ultimate decision maker ROI Planning and forecasting Performance management Operational impacts Ongoing management –Service Level Agreements –Clear Roles and Responsibilities Political Social TechnologyEconomic Environment