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SWIFTSolutions for low value
payment clearing systems
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 1
Low-value payments

Usually low to medium value and / or non-urgent
payments and related statement reports
– Credit transfers Salaries, pension payments,
retail and commercial payments
– Direct debits
– Cheque clearing and truncation

Formatted in a variety of file structures

Exchanged in electronic files

Cleared through correspondent relationships
and/or Automated Clearing Houses (ACHs)
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 2
Complementing our position in wholesale segment
by extending to low value payment market
High-value
messaging
1973
We started in the wholesale crossborder payments market : highvalue messaging but limited volume
1995
We extended to the wholesale domestic
payments (RTGS) : high-value add
messaging with large volumes
2003
We entered the retail cross-border
payments market: lower-value add
messaging but limited volume
2005
We are entering the retail domestic
payments market: lower value add
messaging but large volumes
Single and cross-border
payments
Domestic payments
(RTGS)
Bulk crossborder payments
ACH
Cards &
cash
Low value
messaging
Sibos205_Banking_PC_LVACH_v2.ppt
Low volume
messaging
High-volume
messaging
Slide 3
SWIFT provides a total solution for payments
and settlement systems
Banking
Automated clearing Real-time gross
correspondents
houses
settlement systems
Settlement
instructions
Payments
R-t cash reporting
Bulk payments
Real-time query/control
Bulk payments
Settlement
instructions
Settlement instructions
DVP instructions
Real-time query/control
Reporting
Real-time query/control
Reporting
FIN FIN Copy
Sibos205_Banking_PC_LVACH_v2.ppt
Central securities
depositories
InterAct
FileAct
Slide 4
LVP Business Models
1
3
“Hub and spoke”
around ACHs
e.g. NL, UK
e.g. ES, FR
2
4
“Hub and spoke”
around ACHs
with indirect
membership
e.g. BE, EBA, ZA
Bilateral file
exchanges
e.g. AU, DE, IE
ACH
Sibos205_Banking_PC_LVACH_v2.ppt
ACH acting as
accounting
centre
Direct ACH participant
Payment data
Indirect ACH participant
Accounting data
Slide 5
Market developments

In Developing Markets:
– Central bank led buy off shelf ACH’s in developing
markets

In Europe:
– ACH operator becoming more commercial
– SEPA leading to consolidation
– TARGET 2
– Faster Payments (OFT)
– Gradual move to XML, encouraged by Regulators

In US:
– Increased interest in XML
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 6
SWIFT’s solution for low-value payment
clearing systems
Rationalisation
Standardising the communications layers with
SWIFTNet FileAct embedding SWIFTNet PKI
Harmonisation
Standardising the end-to-end transaction chain with
Bulk Payments standard for bank-to-bank and bankto-ACH flows and C2B Payment Initiation standard
for customer-to-bank flows
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 7
The solution aims to connect all potential
players involved in the end-to-end transactions
Region with an ACH
Regional
ACH
National
ACH
Bank-owned
services
Country
with an ACH
SWIFTNet services
Sibos205_Banking_PC_LVACH_v2.ppt
Country
without an ACH
International bank-to-bank
exchanges and clubs
Slide 8
SWIFTNet solution for EBA STEP2 Pan-European ACH

EBA Clearing acting as service provider:
– Administers its own SWIFTNet
service for the STEP2 community
– Uses SWIFTNet FileAct in many-toone for payments input and output
flows
– Uses the MT103 and the XML Bulk
Credit Transfer messages
– Uses SWIFTNet Browse for on-line
monitoring services
EBA
STEP2
– Uses Reverse Billing in order to let
SWIFT invoice input traffic to
senders; output traffic to receivers
Direct Participant
SWIFTNet solution
for EBA STEP2
SWIFTNet FileAct,
InterAct and Browse
Sibos205_Banking_PC_LVACH_v2.ppt

To-date, 70 direct participants access
STEP2 over SWIFTNet. More will join in
November 2004 and later

See http://www.abe.org for more info
Slide 9
What the first SWIFTNet-based
Automated Clearing House says
"Combining the strengths of our partners SIA and SWIFT,
we have been able to launch our new pan-European
retail payment clearing house (STEP2) within a record
timescale of 10 months. With STEP2 in place, banks in
Europe now have a new platform that enables them to
further develop their retail payments business in
accordance with customer needs in the Single Euro
Payments Area. Using SWIFTNet was an obvious choice
to allow for open access by a very large number of
banks.”
Gilbert Lichter, Secretary General of EBA
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 10
Caja Madrid’s implementation of XML
Bulk Credit Transfer for EBA STEP2
XML Bulk Credit Transfer STP Plus
Application
FTA
SWIFTAlliance
Gateway
SWIFTNet
EBA
STEP2
Caja Madrid has implemented the Bank-to-bank Bulk Credit
Transfer message STP Plus variant and originates the STEP2 bulk
payments files straight from the internal back-office application
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 11
What our customers say…
“We have given our preference to the XML bulk
payment standard for STEP2 since XML is now
our standard internal content management
technology. Loading the XML schema into our
back-office application enables us to avoid the
development costs that a proprietary syntax
requires.”
Caja Madrid
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 12
By using SWIFTNet, Eurogiro Members can
eliminate their Eurogiro proprietary link
Eurogiro
Hub
Eurogiro
proprietary
network
Eurogiro
Member
SWIFTNet
Eurogiro
Member
Eurogiro Members can use their SWIFTNet connectivity to
exchange Eurogiro payments with other members. The Eurogiro
Hub interfaces Eurogiro’s proprietary network with SWIFTNet.
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 13
What our customers say…
“The co-operation agreement with SWIFT fits
perfectly with our strategy to lower entry and
transaction costs and to expand the Eurogiro
offering.”
Henrik Parl, Managing Director, Eurogiro A/S
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 14
SWIFTStandards XML for end-to-end bulk
payments enables end-to-end STP
Automated
Clearing
House
Ordering
Customer’s
Financial
Institution
XML Inter-bank Bulk Payments
2
XML Cash Management
4
5
3
Ordering
Customer
Sibos205_Banking_PC_LVACH_v2.ppt

Standardised content

End-to-end STP
XML Cash
Management
XML Cash
Management
XML Payment
Initiation
1
Beneficiary
Customer’s
Financial
Institution
Beneficiary
Customer
Slide 15
SWIFTNet solution for FedACH & EPN ACH
and US banks
Single payments / Messages
FedWire
CHIPS
Clients
Federal Reserve
FI’s &
RTGS
FedWire
Fed
ACH
TCH
CHIPS
EPN
ACH
FIN
InterAct
Dedicated
link(s)
Bulk payments / Files
Dedicated
link(s)
FileAct
SWIFTNet
Fed
ACH
EPN
ACH
Clients
FI’s &
ACHs
Single
SWIFTNet
connection
Existing SWIFT flows (FIN)
New SWIFT flows (InterAct and FileAct)
Sibos205_Banking_PC_LVACH_v2.ppt
US
Banks
Slide 16
Benefits for Automated Clearing Houses
hardware
testing
software
lines maintenance
support
project management
legal
procurement
release qualification
backup
software
maintenance
disaster take-over
education exercises
documentation
Sibos205_Banking_PC_LVACH_v2.ppt
Slide 17