Making Low Value Payments Work for You Anthony Danda, HSBC Paul Thomas, Earthport
2Agenda Market trends Regional initiatives and models US regulation – Dodd-Frank Cross-border efficiencies? In summary
Market Trends
4Low Value PaymentsCharacteristics: Value recurring? high volume? non-priority? or...
5Where do Low Value International Payments Fit? ...
6Four Major Categories of Cross-Border Payments
7Downward Shift in Value of PaymentsCorporations making more cross-border purchases of services “The n...
Regional Initiatives and Models
9 Global Low Value CapabilitiesACH by any other name… 74% of global ...
10Low Value Capabilities - Canada Current Landscape – Well established ACH systems for credits and direct debit Market...
11Low Value Capabilities - Europe Current Landscape – Well established local ACH systems for credits and direct debit,...
12Low Value Capabilities - Europe Market Developments: – Focus on Single Euro Payments Area (SEPA) • Harmonizatio...
13Low Value Capabilities – Asia Pacific Current Landscape: – Capabilities defined by clearing systems and threshold amo...
14Low Value Capabilities – Asia Pacific Market Developments: – Singapore G3 Real Time Payments (RTP) – Raising thresh...
15Low Value Capabilities – Middle East Current Landscape: – ACH technical and functional capabilities basic compared to...
16Low Value Capabilities – Middle East Need to Know: – IBAN introduced in Saudi Arabia, Lebanon, UAE, Bahrain with Qata...
17Low Value Capabilities – Latin America Current Landscape – Availability and effectiveness of ACH varies substantially...
18Low Value Capabilities – Latin America Market Development – Government reforms putting programmes in place to drive a...
US Regulation – Dodd-Frank
20US Consumer Payments – Dodd-Frank 1073  Consumer protection for international remittance transfers  Challenges lack of...
21Dodd-Frank 1073 – Key Provisions Full fee disclosure at the point of, and time of, origination Guarantee of amount of ...
22Consumer Payment Considerations “The new Consumer demand an...
Cross-Border Efficiencies?
24 The 6 Stages of a Cross-Border Payment Using Correspondent Banking Payment toNew York ...
25 A Better Way? Payment toNew York FrankfurtCustomer supplier ...
In Summary
27 Options for Reach CharacteristicsTraditional correspondent banking Reach ...
28Low Value Payments Considerations Holistic visibility and predictability Control – Foreign currency exchange rat...
29Low Value Payments ConsiderationsInvestigate domestic capabilities: Account number requirements – BIC, IBAN, Transit ...
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NACHA Payments 2012 - HSBC and Earthport ‘Making Low Value Payments Work for You’

NACHA Payments 2012 - Low value cross-border payments provide an alternative to checks and wires, which could result in increased efficiency, lowered costs, and decreased risks. This session provided an overview of the differences in regional low value payment capabilities, including clearing models, opportunities, limitations, risks and trends in the low value global payments arena.
Published on: Mar 3, 2016
Published in: Economy & Finance      
Source: www.slideshare.net


Transcripts - NACHA Payments 2012 - HSBC and Earthport ‘Making Low Value Payments Work for You’

  • 1. Making Low Value Payments Work for You Anthony Danda, HSBC Paul Thomas, Earthport
  • 2. 2Agenda Market trends Regional initiatives and models US regulation – Dodd-Frank Cross-border efficiencies? In summary
  • 3. Market Trends
  • 4. 4Low Value PaymentsCharacteristics: Value recurring? high volume? non-priority? originated in batches electronically? $200 – includes mass credits and collections? $50,000 STP – no repair? lower cost?What is a low value payment to you?
  • 5. 5Where do Low Value International Payments Fit? ‘CorrespondentTransaction Banking is not fitValue for purpose for Transaction and correspondent banking services low value payments’ “What is the best service to enable me to send $300 to Scotland for one of my ‘The clients?” correspondent banking model is still too bank product centric, based on inherently inefficient multiple agreements. The Domestic retail banking services Transaction world has Volume changed around us.’ [SWIFT]
  • 6. 6Four Major Categories of Cross-Border Payments
  • 7. 7Downward Shift in Value of PaymentsCorporations making more cross-border purchases of services “The number of international Global trade growth migrants has – Export volumes grew by 14.5% in 2010 and were forecast to expand doubled in the last by 6.5% in 2011, with a shift to lower average value per transaction quarter of a century, – US exports grew by 15.4% in 2010 to more than 200m” Increasingly mobile workforce 52% of total worldwide transfers – Global migrant remittances create over 2bn individual transactions to India from Indians per annum living abroad were – The U.S. Bureau of Economic Analysis estimates that in 2010, $37.1 made in amounts of billion in cash and in-kind transfers were made from the US to $1,100 and above, foreign households by foreign-born individuals who had spent one or and of that category, more years here 63% exceeded – World Bank US outward remittance flows $48bn in 2009 $2,200 – US emigrants top 10 destinations: Mexico, Canada, Puerto Rico, UK, Germany, Australia, West Bank and Gaza, Japan, France, Philippines Growth in e-commerce – Forecast to be a $900bn category, requiring new forms of low value payment services
  • 8. Regional Initiatives and Models
  • 9. 9 Global Low Value CapabilitiesACH by any other name… 74% of global respondents to the 2011 EDC Global Trends in Payment Systems survey regard ACH as an important or very important payment product in their country.
  • 10. 10Low Value Capabilities - Canada Current Landscape – Well established ACH systems for credits and direct debit Market Development – Vision 2020 • Canadian Payments Association long-term strategy and roadmap for clearing and settlement systems and mechanisms • Support the growth of electronic payments • Increase remittance data standards • Improve STP capabilities • Reduce clearing and settlement costs and increase payment velocity – review international models
  • 11. 11Low Value Capabilities - Europe Current Landscape – Well established local ACH systems for credits and direct debit, but significant changes in development Payment Services Directive (PSD) – Regulatory initiative – Legal framework for payment service providers – Increase pan-European competition – Encourage participation in the payments industry
  • 12. 12Low Value Capabilities - Europe Market Developments: – Focus on Single Euro Payments Area (SEPA) • Harmonization of payment products, infrastructure and technical standards • Increase efficiency of cross-border payments • As of 01 February 2014 banks must offer SEPA payment processes – UK Faster Payments • Real time Need to Know: – Remitter and beneficiary account must be within SEPA – BIC (bank identifier) and IBAN (bank account) – Central bank reporting requirements
  • 13. 13Low Value Capabilities – Asia Pacific Current Landscape: – Capabilities defined by clearing systems and threshold amounts • Majority of countries have separate ACH and RTGS systems • Indonesia, Vietnam, Philippines and Japan: one clearing system – Settlement cycles: • Hong Kong, Malaysia and India same day • Generally three days – Generally ACH systems clear in local currency only
  • 14. 14Low Value Capabilities – Asia Pacific Market Developments: – Singapore G3 Real Time Payments (RTP) – Raising threshold amounts – Regulators and central banks influencing greater use of electronic payments • Regulating prices of ACH • Mandating use of ACH for certain payment types – Direct Debits on the rise Need to Know: – Varied capacity and capabilities – Disparate pricing – Lack of regional standards – Threshold amounts and payment system routing rules
  • 15. 15Low Value Capabilities – Middle East Current Landscape: – ACH technical and functional capabilities basic compared to developed markets – Clearing systems vary by country Market Developments: – Across region, central banks focused on risk mitigation and opportunities of improved efficiencies and industry standards – Direct Debits increasing – Use of SWIFT standards to promote faster and more cost-effective settlement – UAE enhancing in-country clearing system
  • 16. 16Low Value Capabilities – Middle East Need to Know: – IBAN introduced in Saudi Arabia, Lebanon, UAE, Bahrain with Qatar, Oman, Egypt and Pakistan by late 2012 – Qatar, UAE and Egypt mandate a Purpose of Payment for all domestic currency transfers – UAE companies registered under the Ministry of Labour mandated to route salary payments through the Wages Protection System (WPS), a proprietary payment system managed by both the Ministry of Labour and UAE Central Bank – Understand payment limits by clearing system
  • 17. 17Low Value Capabilities – Latin America Current Landscape – Availability and effectiveness of ACH varies substantially by country – Countries are at different stages of economic and technical development, which impacts capabilities – Low use of electronic payment systems in favour of paper – Large unbanked population – Direct Debits heavily used in Argentina and Uruguay and moderately used in Mexico and Panama
  • 18. 18Low Value Capabilities – Latin America Market Development – Government reforms putting programmes in place to drive adoption of electronic payments – Central America: semi-regional clearance for Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica – Mexico: central bank initiated regulations, pricing discounts and functional enhancements to ACH – Brazil: leader in cross-border clearing initiatives (IPFA) – Strong regulations in Brazil and Argentina may impact ACH capabilities for non- resident companies – Panama, Mexico, Uruguay and Chile support clearing capabilities for multiple currencies Need to Know – Cut off times vary greatly by country
  • 19. US Regulation – Dodd-Frank
  • 20. 20US Consumer Payments – Dodd-Frank 1073  Consumer protection for international remittance transfers  Challenges lack of transparency and predictability of open loop models transparency certainty
  • 21. 21Dodd-Frank 1073 – Key Provisions Full fee disclosure at the point of, and time of, origination Guarantee of amount of final funds delivered, to be delivered at time of origination Guarantee on when funds will be received Right to cancel a transaction up to 30 minutes after its submission
  • 22. 22Consumer Payment Considerations “The new Consumer demand and volumes will grow protections will significantly improve the predictability of Legislation in favour of non-banks? remittance transfers and provide consumers with Certain banks will move out of consumer cross-border better information for comparison shopping” Do corporates need to re-evaluate banking relationships? Retain market share by outsourcing to specialist payments service providers
  • 23. Cross-Border Efficiencies?
  • 24. 24 The 6 Stages of a Cross-Border Payment Using Correspondent Banking Payment toNew York FrankfurtCustomer supplier Supplier in Germany FX 103InstructionsIn New York 202 COV 910 € Correspondent TARGET2 € Correspondent 4 messages: 3 SWIFTSettlement 1 TARGET2In Europe
  • 25. 25 A Better Way? Payment toNew York FrankfurtCustomer supplier Supplier in GermanyInstructionsIn New York Validation Operations Processing
  • 26. In Summary
  • 27. 27 Options for Reach CharacteristicsTraditional correspondent banking Reach to any banked beneficiary Expensive for low valueEstablish own accounts in destination Control and reach Costly and resource drainingcountriesA global bank Integrated service including delivery channel capabilities, flexible file formats and local supportGlobal ACH-based PSP Managed service for transparency and reach to any banked beneficiaryClosed loop provider High transparency and certainty Limited reach
  • 28. 28Low Value Payments Considerations Holistic visibility and predictability Control – Foreign currency exchange rate options – Warehousing of payment data – Segregation of duties Cost savings – Bulk payment for foreign exchange conversion – Reduction of processing costs Increased efficiencies – Streamlined payment and account reconciliation Identify a partner with global experience
  • 29. 29Low Value Payments ConsiderationsInvestigate domestic capabilities: Account number requirements – BIC, IBAN, Transit and Routing codes Features and functions Currencies Cut Off Times Settlement Cycles Clearing Rules and Regulations – Value Dates – Direct Debit Mandates – Recourse – Returns and Rejects Reconciliation

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