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Trade offs in Payment Systems Henrik Parl Washington, 29 May 2007

Trade offs in Payment Systems Henrik Parl Washington, 29 May 2007. Cooperation versus competition. Key message. It is virtually impossible to provide a global bank and remittance payment solution without a cooperative approach. Co-competition is the key to success

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Trade offs in Payment Systems Henrik Parl Washington, 29 May 2007

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  1. Trade offs in Payment SystemsHenrik ParlWashington, 29 May 2007 Cooperation versus competition World Bank payment system conference, Washington, 29 May 2007

  2. Key message • It is virtually impossible to provide a global bank and remittance payment solution without a cooperative approach. • Co-competition is the key to success • Commercial interest must be the key driver for system interoperability, not technology. Key ingredients: • Commercial framework • Products & standards • Reach World Bank payment system conference, Washington, 29 May 2007

  3. AL Posta Shqiptare sh.a. AT * BAWAG P.S.K. AU ANZ Bank BA Nova Banka BE * Financial Post BG Bulgarian Posts BG Finance Engineering BR Empresa Brasileira de Correios e Telégrafos - ECT CA National Bank of Canada CA Canada Post Corporation CH * PostFinance/Swiss Post CV Cape Verde Post CN China Post CZ CSOB DE * Deutsche Postbank DK Sydbank EG CIB (Egypt) S.A.E. ES BBVA ES Correos y Telegrafos FI ING/Postbank (EUR transfers) FR * La Banque Postale GB * Alliance & Leicester Commercial Bank plc GB Visa GR Hellenic Post GR EFG Eurobank Ergasias HR Croatia Post HU Magyar Posta IE * An Post IL Israel Postal Company IS * Póstgíró IT * Poste Italiane IT Banca Popolare di Sondrio JP Japan Post, Postal Savings Business Headquarters KR Korea Post LU * EPT Luxembourg LV Latvia Post MA Banque Centrale Populaire MA Barid Al Maghrib MN XacBank NL * ING/Postbank NO ING/Postbank (EUR & NOK transfers) NZ ANZ National Bank PH Philippine Postal Corporation PL ING/Bank Sląski PL Polish Post PT * CTT Correios de Portugal RO Banc Post RO Posta Romana RS Postal Savings Bank SE ING/Postbank (EUR & SEK transfers) SI Postna Banka Slovenije SK Postova Banka SN Postefinances TG Societe des Postes du Togo TH Thailand Post Co TR Turkish Post TN La Poste Tunisienne US American Express Bank US Deutsche Bank US Federal Reserve Bank 60 connections in 49 countries * Shareholder World Bank payment system conference, Washington, 29 May 2007

  4. Monthly transactions World Bank payment system conference, Washington, 29 May 2007

  5. Products Connectivity Credit transfers Money Orders SWIFTCUG Eurogiro Direct debits Card Payments Dedicated links Regions Alliances & Members Postal Banks Non- Fin.Inst. Alliances The new Eurogiro mission Eurogiro is a commercial company that actively promotes and catalyzes bilateral and multilateral business opportunities among its customers in retail financial services and wholesale banking worldwide with the aim to constantly add business value to the whole Eurogiro community World Bank payment system conference, Washington, 29 May 2007

  6. Eurogiro – providing interoperability Gateway of business opportunities for Eurogiro members: The Eurogiro SWIFTNet Closed User Group • Exchange transactions in FileAct format with any SWIFTNet member and any Eurogiro member on the same system; • Access from SWIFT system to (postal) members with ELS systems and access from ELS system to (banking) members with SWIFT system Eurogiro Select solution • Access for non-banks through dedicated network The Eurogiro/Visa solution • Receive payments from Visa card holders; additional volume and revenue to the Eurogiro members WSBI (Savingsbanks) co-operation on remittances World Bank payment system conference, Washington, 29 May 2007

  7. Eurogiro – providing connectivity (cont.) The FED-Eurogiro Partnership • Incoming traffic (from potentially any US bank) with fee and foreign exchange income • Live in pilot phase. Eurogiro/Postal org. – The Eurogiro Cash International (ECI) • New revised two-day cash product mixing Track & Trace techniques and Eurogiro bulking principles • Can be exchanged electronically between the UPU/IFS network and the Eurogiro network Eurogiro/Western Union – Urgent Cash • Support from Eurogiro of the Urgent Cash product of Western Union • Option to connect to Western Union through the Eurogiro ELS interface • Nearly 30 Eurogiro members as Western Union agents and strong volume growth Multilateral settlement: ESSP and USSP World Bank payment system conference, Washington, 29 May 2007

  8. ELS Ver. x.x Example 1: Low cost connectivity of non-banks Eurogiro delivery Member’s network ELS Application Installations CD Test system Cisco 1721 VPN encryption Host system Hub Modem Prod. system PC terminals Multitech Modem for remote configuration Eurogiro network Printer Normally disconnected! World Bank payment system conference, Washington, 29 May 2007

  9. Eurogiro SWIFT Gateway Eurogiro Network Eurogiro CUG SWIFTNet Example 2: linking postal and banking world Eurogiro is approved as a CUG administrator on SWIFTNet allowing SWIFT members to connect to Eurogiro using their SWIFTNet connection World Bank payment system conference, Washington, 29 May 2007

  10. network 103-10 103-10 Example 3: Dedicated link to US ACH FED Settlement Eurogiro Member Valicert ELS Nacha Nacha Forward advices for reconciliation. The EFI will reconcile with the received Nacha files and send MT910 ELS returns MT011. ELS part of EFI will reconcile with sent MT103-10 Nacha Nacha There is a 1-to-1 relation between Nacha file and MT103-10 Nacha Store Nacha files and transaction numbers Nacha World Bank payment system conference, Washington, 29 May 2007

  11. 1 7 MT103-20 UK Sender Visa Direct Auth 2 3 6 CFT 8 AFT+CFT MT103-20 4 AFT VisaNet UK Bank GermanBank 10 5 MT910 CFT DE-EUR FR-EUR GB-GBP GermanBeneficiary Visa Direct Settlement Bank EG Settlement Bank - ESSP 9 MT202 Example 4: Links between card and bank world World Bank payment system conference, Washington, 29 May 2007

  12. Internet PO PO PO PO CSC PO PO PO    Eurogiro interface Example 5: Links to remittance organisation e-banking Host customer ELS Eurogiro Local screens ELS screens Domestic WU database World Bank payment system conference, Washington, 29 May 2007

  13. Member A Member B EUR/USD payment instructions [Eurogiro Envelope, MT103] 1 Cover Message MT202 2 ESSP/USSP Debit advice MT900 Credit advice MT910 3 3 4 4 A/C A A/C B Statements of account MT950 D EUR/USD 1000 C EUR/USD 1000 Statements of account MT950 Example 6: Settlement interoperability World Bank payment system conference, Washington, 29 May 2007

  14. Examples of key interoperability projects • SEPA • Cards & ATM’s • Credit transfers • Direct debits • Global Payment Framework (linking banks and ACH’s) • Asian regional ACH • SWIFT remittance standards project • BIS/WB remittance standards World Bank payment system conference, Washington, 29 May 2007

  15. ‘Co-competition’ could be solution • Co-operative space • Infrastructure & connectivity • Reach • Products & standards (WB/BIS) • Lobbying & compliance • Competitive space • Customers and fees • Added value services • Branding No single organisation can cover first, intermediary and last mile for payments. With Co-competition can work together at the infrastructure level while still competing for the customer World Bank payment system conference, Washington, 29 May 2007

  16. ? Any Questions World Bank payment system conference, Washington, 29 May 2007

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