The Global Payments Innovation Initiative

The global payments innovationinitiativeMay, 2016

The global payments innovation initiative - May 20162

Correspondent banking model is under pressureCustomers andregulators push forbetter payments serviceEnd customers increasingly demandingBanks rationalize theircorrespondent bankingnetworksRegulatory intensity and increasing costsDigital innovators offernew disruptivesolutionsDisintermediationDomestic payments going real-timeNetwork rationalizationEnhanced value propositionThe global payments innovation initiative - May 20163

Objective: deliver a better customer payment experience“Before”“After”Traditional correspondent bankingThe global payments innovation initiative1. Slow, can take multiple days1. Fast(er) (start with “same day”)2. Expensive, multiple deducts2. Higher efficiency & less intermediaries3. Secure and compliant3. Secure and compliant4. No transparency and predictability on cost andtime4. Transparent and predictable, with paymentstracking5. Convenient and ubiquitous5. Convenient and ubiquitous6. Open and inclusive (global reach)6. Open and inclusive (global reach)The objective is to first fix these key pain pointsNote regarding prices: it will be at the discretion of each gpiimember to decide the pricing strategy vis-à-vis its customers,including other financial institutionsThe global payments innovation initiative - May 20164

The global payments innovation initiativeDelivering a new standard in cross-border payments̶Proactively respond to evolving customer needs for more speed, transparency and predictability oftime and cost in cross-border payments̶New multilateral rulebook, initially focused on business-to-business payments̶Building on the foundation that banks provide in security, resiliency and compliance̶Delivering real-world innovation: building on existing platform, embrace new technologies along astrategic roadmap̶Global reach, collaborative industry-wide initiative, organised by SWIFT̶Open model, participation based on operational quality Fast Secure Real-world innovation Transparent Resilient Global reach Predictable Compliant Open modelThe global payments innovation initiative - May 20165

The global payments innovation initiative (gpii)Open modelOperational qualityGlobal payments innovationinitiative (gpii)Global reachprovided by banks connectedto domestic payments systemsBank access channelsSWIFT for corporatesSLA rulebookwith customer at centreof value propositionBank access channelsSWIFT for corporatesSmart collaboration(e.g. enhanced compliance practices,optimised intraday liquidity flows)Bank access channelsDomestic payment systemsSWIFTEmbrace innovation(e.g. peer-to-peer messaging,real time settlement mechanism)Accessible byany bankBank access channelsDomestic payment systemsSWIFTReach any bankDifferentiate vsnon-gpii banksThe global payments innovation initiative - May 2016Existing SWIFT messagingStill reachnon-gpii banks6

A gpii payments tracker “in the cloud”101 Originator103 BankhausAntonMT199/API103 Deutsche BankMT199/API910 103 Wells FargoMT199/APITaipei commercialbankBeneficiaryMT199/APITransparency of totalfees and time“One-glance”status overviewUnique, end-endtracking numberTrack path, inreal timeDetails of banksalong the chainCentral payments database,hosted at SWIFTUpdated via MT199 or APIData consumption via GUI,via MT199 (push) or via API(pull)The global payments innovation initiative - May 20167

Value proposition for corporatesThe core principles of gpiiPayments with same day use of fundsBenefits for a corporateGrow international businessTransparency and predictability of feesEnhance supplier relationshipsEnd-to-end tracking of paymentsTransfer of rich payment informationThe global payments innovation initiative - May 2016Increase treasury efficiencies8

Value proposition for banksGrow volumes Offer distinctive payments service Retain and attract new customers Protect and grow transactionvolumes Comply with regulation(Dodd-Frank, PSD2, ) Sell payments services to thirdpartiesThe global payments innovation initiative - May 2016Reduce cost Lower network management cost,avoid proprietary connections innon-strategic countries, accessglobal quality network Enhanced compliance practices Optimised intraday liquidity flows Increased straight throughprocessingLead innovation Reputational benefitLeader in global paymentsinnovation9

Initiative banks1. ABN AMRO2. Alfa bank3. Australia and New ZealandBanking Group*4. Banco Bilbao Vizcaya Argentaria5. Bangkok Bank6. Bank of America Merrill Lynch*7. Bank of China*8. Bank of New York Mellon*9. Bank of the Philippine Islands (BPI)10. Bank of Tokyo-Mitsubishi UFJ*11. Banco Itaù12. Banco Santander13. Banco de Crédito del Peru14. Banco do Brasil15. Barclays*16. BNP Caixa BankCitibank*CommerzbankCredit SuisseCTBC BankDanske Bank*DBS*Deutsche BankEcobankFifth Third BankFirstRand BankHSBCICICI BankIndustrial and CommercialBank of China*31. ING*32. Intesa Sanpaolo*The global payments innovation initiative - May cJPMorgan Chase*KasikornbankKBC BankKEB Hana BankLloyds Banking GroupMashreq BankMaybankMizuho Bank*National Australia BankNatixisNordea*Oversea-Chinese BankingCorporation46. Raiffeisen Bank International47. Royal Bank of Canada*48. Resona 4.Royal Bank of ScotlandSberbankScotiabankSEBSociété GénéraleStandard BankStandard Chartered Bank*Sumitomo Mitsui Banking Corporation*SwedbankTadhamon International Islamic BankTD BankUBSU.S. BankUniCredit*United Overseas BankWells Fargo*(*) Pilot bank10

Organisational set-up Promote gpii Provide feedback into collaborative design Leader in global payments innovationInitiative GroupBroadparticipation,drive promotion Pilot gpii Participate in iterative design and testing Be early adopterPilot/User GroupControlledparticipation,keep practicalEntrycriteriaExitcriteria Craft long term vision correspondent banking Develop strategic roadmapVision GroupBroad inputwhilst e global payments innovation initiative - May 2016ExitcriteriaExitcriteria11

Timeline2015 Identify drivers Define principles Announce initiative2016PromotePilot Show early resultsat Sibos Prepare forgo liveDefine strategic roadmapThe global payments innovation initiative - May 201612

Interested?www.swift.comContact usswiftforbanks@swift.comwww.swift.com/gpiiThe global payments innovation initiative - May 201613

Deutsche Bank. Taipei commercial bank . 101 Originator. 103 103 910 Wells Fargo . Beneficiary. 103 The global payments innovation initiative - May 2016 MT199/API . MT199/API . MT199/API . MT199/API . Updated via MT199 or API . Data consumption via GUI, via MT199 (push) or via API (pull)