BF Manila 2014 -Transformation of payment & settlement systems in ASEAN

Enabling New Payment Frontiers in ASEAN & the Asia Pacific

SWIFT Business Forum, Manila, The Philippines

Chris Flanagan

Head of Markets, Asia Pacific, SWIFT

May 27th 2014

Rapid transformation in payment system development

• Fighting Financial Crime & SWIFT Compliance Services roadmap • CPSS-IOSCO, Sanctions, FinInform, Intraday liquidity

• The trend to real-time payments

• RMB internationalisation

• ASEAN Economic Community (AEC) 2015 • ISO 20022 and market practice

• Reliability of systemically important payment systems

Regulatory Developments

Resiliency

Renminbi

Regionalisation

Real-time innovation

Philippines Business Forum, May 2014

Regionalisation, Real Time & Standards Connecting The Dots..


The Macro Context - ASEAN growth is high and tightly coupled to China

0%

20%

40%

60%

80%

100%

120%

140%

2006 2007 2008 2009 2010 2011 2012 2013

ASEAN

CN

Rest of APAC

SWIFT Total

CARG ASEAN 9.5% China 10.2% Rest of APAC 7.3% SWIFT Total 6.65

Customer Payments: MT 103 sent in volumes (2006 – 2013)


-2%

4%

Volume Value

Within ASEAN Countries Payments Sent YOY Change Customer initiated (MT103) and institutional payments (MT202 excluding cov), excl. central banks

1% 5%

Volume Value

-1% -6%

Volume Value

10% 3%

Volume Value

7%

-3%

Volume Value

3%

-12%

Volume Value

-2% -1%

Volume Value

-16%

29%

Volume Value

37% 27%

Volume Value

132% 12%

Volume Value

Source: Watch growth in 2013 compared to 2012 in volume and in value

Between ASEAN Countries Payments Received YOY Change Customer initiated (MT103) and institutional payments (MT202 excluding cov), excl. central banks

25%

71%

Volume Value

10%

-5%

Volume Value

6%

-9%

Volume Value

11% 12%

Volume Value

3%

-19%

Volume Value

-3% -7%

Volume Value

-16%

5%

Volume Value

21%

84%

Volume Value

4% 7%

Volume Value

6% 6%

Volume Value

Source: Watch growth in 2013 compared to 2012 in volume and in value

Regionalisation - Developments in the Financial Infrastructure will facilitate economic activity

Common Standards

Interoperability

Common Platform

Single system and process

Central system and currency


Towards AEC 2015: the role of standards and a common community

8

AU

Zengin, JP

CNAPS2, CN IN

Low-value

High-value

CIPS, CN

BOJNet, JP

Live

NZ

TH PG

BN

SG

MA

Live

ISO 20022 movers Payment systems

ASEAN: • Thailand • Singapore • Philippines • Brunei (2014) • Malaysia (2015)

These systems use SWIFT today:

Asia Pacific: • Australia • New Zealand • Taiwan • Macao • Hong Kong • Fiji • Sri Lanka • Papua New Guinea • India (end 2014)


Live

Real Time - ASEAN Countries have opportunities to “Leap Frog” their payment infrastructures and work across borders


Deferred Net Settlement (DNS)

Real time Gross Settlement

(RTGS)

ACH (Automated

Clearing House)

Real time Low Value

Batches Single Payments

High Value

Low Value

Time Criticality

Size of

payment Hybrids

Mul

tiple

bat

ches

Renminbi


SWIFT support for financial institutions in RMB?

• STP & automation (e.g. market practice guide)

• CIPS (China International Payment System)

• RA for 20022

• Industry dialogue – onshore/offshore RMB groups

• RMB Tracker

• RMB Market Insights

• Customised insight services

• Watch Value Analyser

• White Papers

Business Intelligence

Standardisation & Automation

Thought leadership & community

• Clearing centres – RMB RTGS on SWIFT (HK, TW, SG)

• Bank reach

• ~10,000 globally

• ~3,000 in Asia-Pac

Connectivity


Resiliency


What do we mean by resiliency?


2011 - RTGS outage of 4 hours

Software bug

2013 - RTGS 9 hours unavailable

Wrong parameterization

In 2011 both main sites of an PMI were nearly

flooded

Natural events

Data Corruption

From which “golden position” can I restart?

Staff unavailability

Diversity with peers and/or 3rd party staff?

Loss of essential services

Service diversification & geography

9/11 could be on an FMI?

Terrorist attack Cyber attack

Who accessed my confidential data base?

Threats are everywhere


2011 - RTGS outage of 4 hours

2013 - RTGS 9 hours unavailable

In 2011 both main sites of an PMI were nearly

flooded

9/11 could be on an FMI?

Data Corruption

Cyber attack

Staff unavailability Software bug Wrong parameterization

Terrorist attack Natural events Loss of essential services

From which “golden position” can I restart?

Which staff will be really available?

Service diversification & geography

Who accessed my confidential data base?

Geographic diversity

Staff diversity

Technical and geographic

diversity

Technical diversity

Technical diversity

Technical diversity

Technical diversity

Geographic diversity

Need for a different approach


Payment transactions

Payment transactions

Payment settlement

system

So , how do we do this? Payment system resiliency only as strong as weakest link

MIRS: Market

Infrastructure Resiliency

Service

Alliance Lifeline

Alliance LifeLine


Regulation


21

Financial Crime Compliance Roadmap

FATF 16 Information quality

Compliance Analytics

Sanctions list Mngt service

Sanctions KYC AML

Processing services

Traffic analysis

Standards

Data repositories KYC registry

AML testing & tuning

Sanctions Screening

Sanctions Testing & tuning (transaction & client systems)

Traffic restriction (RMA)

Live Development Qualification Exploration

Quality Assurance

Client/Name screening

SWIFT_financial_Crime_Compliance_initiatives_v2

The Future and Opportunities for the ASEAN / APAC Financial Infrastructures will Revolve Around These Themes

Regulatory Developments

Resiliency Renminbi

Regionalisation Real-time innovation


Common challenges unique solutions

23 Philippines Business Forum, May 2014

BF Manila 2014 -Transformation of payment & settlement systems in ASEAN

Presentations & Public Speaking

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