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Transformation of payment & settlement systems in ASEAN presentation at the SWIFT Business Forum Philippines 2014
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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..
Philippines Business Forum, May 2014
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)
Philippines Business Forum, May 2014
-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
Philippines Business Forum, May 2014
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)
Philippines Business Forum, May 2014
Live
Real Time - ASEAN Countries have opportunities to “Leap Frog” their payment infrastructures and work across borders
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
Resiliency
Philippines Business Forum, May 2014
What do we mean by resiliency?
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
Regulation
Philippines Business Forum, May 2014
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
Philippines Business Forum, May 2014
Common challenges unique solutions
23 Philippines Business Forum, May 2014