Financial services interoperability - Experiences in Italy

1. Financial services interoperability - Experiences in Italy Liliana Fratini Passi CEO CBI Consortium Barcelona, September 26th-27th, 2011

2. Agenda • Financial services interoperability - Experiences in Italy • End-to-end document exchange for C2B (Customer-to-Bank): definition of rules and standards • How E-Invoicing supports the integration of financial value chain • CBI as a bridge to foreign E-Invoicing communities

3. CBI Consortium Key Facts & Figures Who we are… …Network infrastructure • Electronic connection via a unique front-end solution • Payment initiation network • End-to-end communication among actors • Members: • Financial Institutions • Poste e IMEL CartaLis • PSP …Extended community 663 • Companies • Public Administrations • Target: >850.000 …Standards • 35 functions, related to: • Payments and collection initiation • Reporting • Document management ~4,4 mld transactions/ year …CBI Entry Point for Public Administrations • CBI Gateway Service between Public Administrations and Banking system 3

4. The CBI Service as a white label for financial institutions • IT platform • Applications • VAS • etc • IT platform • Applications • VAS • etc COMPETITIVE AREA COOPERATIVE AREA • Mandatory Message standards • Service rules • Institutional representation • Communication protocols • Business models • IT platform • Applications • VAS • etc • IT platform • Applications • VAS • etc

5. The CBI network Area 1: Competitive domain Area 2: Payment initiation and document exchange Area 3: Clearing and settlement Receiving Financial Institution Clearing & Settlement Executing Financial Institution Corporates Access Financial Institution ACHs Executing Financial Institution Corporates Access Financial Institution Receiving Financial Institution Executing Financial Institution Corporate  Financial Institution for Instructions Business to Business (E2E) Financial Institution  Corporate for Reporting

6. Main functions Reporting Document Management Payments and collection instructions • Structured statements • Portfolio statements • Advice of incoming payments w/instructions • XML Debit advice (Riba) • XML Statements • “Intraday” account reports • E2E sending/ receiving non-structured documents • E2E sending/receiving structured documents (e-invoice) • Invoice Financing Request • Credit transfer and checks • Pre-authorized collections (RID) • Non preauthorized collections (RiBa, MAV) • Tax Payment (F24) • SEPA credit transfer w/ advice to debtor and creditor • SEPA direct debit (Core/B2B) • Creditor Payment Activation Request • XML cross-border credit transfer Upcoming (2011-12) blue ISO compliant CBI defines for each function: • Service model and governance • Message structure and message types • Message Workflow and Technical rules

7. Synergy between CBI and the ISO 20022 Repository • Submission of • Invoice Financing Request • Creditor Payment Activation Request (CPAR) • CBI services based on ISO standard • Sepa Credit Transfer • Sepa Direct Debit • Invoice Financing Request • CPAR, CAMT messages* ISO 20022 *under development

8. The CBI commitment to support the e-invoicing adoption in Italy The e-invoicing value is confirmed by the relevant benefits resulting from its adoption by the different kind of stakeholders, especially related to the full integration between the commercial and financial chains Politecnico study on e-Invoicing Electronic Invoicing in “a strict sense” The analysis reveals as the process cost reduction could vary from 25 € to 75 € per invoice, depending on the integration and dematerialization level Vertical integration Seller Horizontal integration Home appliances Invoi- cing Delive- ring Ordering Payment Consumer goods Buyer Pharma- ceutics Electronic Invoicing in “a broad sense”: integration and dematerialisation of the entire trade process €/ cycle 0 20 40 60 80 Source: Politecnico di Milano, 2008

9. Adoption in Italy Around 60.000 companies in Italy assume the e-invoicing principles on the Order-Payment chain… ... however the invoice document is involved in only 1 process Number of companies Invoices involved 4.000 companies • 75% invoicing of accounts receivable • 28% invoicing payable Substitutive storage 7.500 companies More than 65%of companies exchange Invoice EDI ~50.000 companies Less than 20%of companies exchange Invoice Extranet Source: Politecnico di Milano, 2011

10. 1 2 CBI e-invoice exchange service: what’s going on? • CBI e-invoice exchange service is the only cooperative banking initiative on e-invoicing in Italy • CBI e-invoice exchange service is based on a four-corner model: each supplier/customer exchanges e-invoices through its access financial institution (or technical operator): • The number of trading parties using CBI e-invoice standard is growing. However many companies exchange e-invoices in “three corner mode”: one financial institution (1) or two financial institutions using the same technical operator (2) Access Financial Institution Access Financial Institution Company Company Technical Operator logical flow real flow

11. The (very) long road to B2G e-invoicing adoption in Italy • December 2007:The Italian Governmentapproves the law “Finanziaria 2008”: it will be mandatory to adopt electronic invoices in the relationship with National Public Entities (NPEs) through a “Public Interchange Sytem” • April 2008: Italian Tax Agency is appointed to manage Public Interchange System and to define B2G e-invoice standard • First half 2009: Italian Tax Agency setting up an “ad hoc” working group (involving CBI) in order to map NPEs requirements into national and international e-invoice standards • So far:…still waiting for the technical specifications (standard, message types, etc…), to be used to send e-invoices to National Public Entities through Public Interchange System

12. B2G e-invoicing adoption in Italy: what do we expect now? • The technical rules to be used to send e-invoices to National Public Entities, will be released by Italian Tax Agency within the end of 2011 • Italian B2G e-invoice standard will be proprietary, “tailor made” in order to satisfy specific NPEs requirements. Digital signature will be mandatory at a first stage • CBI will adopt Tax Agency e-invoice standard to allow B2G invoices to be exchanged over CBI network • The CBI network infrastructure will be one of the channels enabled to send e-invoices to NPEs. More than 850000 companies will be then connected to NPEs through CBI network Public Interchange System Internet National Public Entities Supplier Other channels

13. Main CBI collaborations to support the standardization in the C2B and e-invoicing area Participation in RMG ISO20022 & SEGs (Trade, Payments) Participation in ISO TC68 Financial Institutions Supply Chain PDA Payments/Finance dom.* Corporates International Payments Framework Association • Compliance to international best practices • Active support to international Working Groups Public Entities E-Invoicing Expert Group SEPA Schemes in C2B Area Italian Business Communities European e-Invoicing Framework * coordination

14. Integration 1 5 4 3 2 3 2 1 4 5 CBI Service value proposition The value of process integration Seller Reconci- liation Order Deliver Payment CPAR Invoicing Financing Data alignment Buyer Coherent message structure. Use of a common data dictionary assures that the same information (e.g. account) is structured in the same way in all the messages CBI functions E2E e-invoice exchange Invoice Financing Request Creditor Payment Activation Request XML SEPA Payments Payment Status and Account Reporting

15. Invoice Financing Request (IFR) November 2007: registered into ISO 20022 Repository Invoice financing request presentation Invoice financing request presentation 1 1 2 3 3 Access Financial Instutition Executing Financial Institution Debtor Invoice financing request confirmation Invoice financing request confirmation Benefits for the corporates • the process to require a financing on the invoices issued is simpler • the working capital grows up

16. Creditor Payment Activation Request (CPAR) September 2010: Registered into ISO 20022 Repository CPAR send-out: pre-filled ISO Credit Transfer CPAR evaluation 1 1 1 2 3 3 3 Debtor Supplier Debtor Financial Institution Supplier Financial Institution Acceptance/ refusal* of precompiled Credit Transfer CPAR workflow is based on 3 steps: • Sending of the payment proposal by the Supplier (Creditor Sending Party - CSP) • Acceptance of the payment proposal by the Debtor (Receiving Party) • Acceptance notice (CPAR proposal accepted/refused)* to CSP * payment initiation is out of scope: the acceptance message will have different meanings on the basis of cross-community application rules (e.g.: committment to pay in the following phase)

17. CBI functions integration: an example The CBI enables the activation of document exchange, invoice financial request and payment orders, and supports automatic reconciliation between commercial and financial data Service model E-Invoice Debtor Access Bank Debtor Executing Bank Payments Status report Statement Invoice and payment reconciliation Invoice Financing Request Buyer/ Debtor Clearing & Settlement Invoice and payment reconciliation Supplier/ Creditor Creditor Access Bank Creditor Executing Bank

18. The CBI Entry Point as a gateway between Public Administration and Banking system CBI Entry Point domain Corporate/ Public entities (Local Public Administrations) Bank CBI Entry Point Central Public Administration CBI Entry Point enables already several CentralPublic Administrations to receive information from the entire banking system and toinstruct payments to executing banks

19. Cross-border interoperability based on ISO standards CBI could support the development of extended business communities acting as a gateway enabling the connection with international players CBI Entry Point Proprietary Infrastructure CBI community Shared Infrastructure • The CBI role as a standardization competence center will support: • Interoperability of payment services • Creation of international extended business communities via ISO messages

20. Thank you www.cbi-org.eu l.fratinipassi@abi.it www.linkedin.com/in/lilianafratinipassi