Avi Ghosh

1
From Standards to market infrastructure The
essentials of SWIFT

• Avi Ghosh
• Manager, India and the Indian Sub-continent,
  SWIFT

2
Introducing SWIFT
3
Introducing SWIFT
4
SWIFT history

• Established in 1973 by 239 banks in 15 countries
• 1973-1977 Automating the telex
• 1978-1985 Growing and expanding
• 1986-1996 Extending our reach
• 1997-2003 Strengthening the core
• 2004-Now Harnessing the potential of SWIFTNet
  and SWIFTSolutions

5
SWIFT governance
Oversight Governance
National Bank of Belgiumand G-10 Central
Banks Board Board Committees National Member
Groups User Groups SWIFT Members SWIFT
Community
6
SWIFT governance
Board of Directors
Banking Payments Committee
Standards Committee
Securities Committee
Community Input
Audit Finance Committee
Compensation Committee
7
The SWIFT community
Banks (Founding 1973)
Corporates (2001)
Paymentsystems (1987)
Insurance companies (2001)
Clearing settlementsystems (1987)
Government institutions (2001)
Broker-dealers (1987)
Securities MIs(2000)
Stock exchanges (1987)
Payments MIs(1998)
Depositories (1987)
Investmentmanagers (1992)
Trustees(1990)
8
Sibos forum for industry dialogue

• Financial industrys premier event
• Global forum to debate strategic issues
• Conference, exhibition, networking
• 5,500 executives and technology managers
• 2005 Copenhagen, Denmark, 6-10 September,
  Transformation

9
SWIFT figures (June 2005)
2.3 billion messages per year 7,887
customers 204 countries Average daily traffic
9.9 million messages Peak day of 11.5 million
messages, 30 June 2005
10
SWIFT messages by market (June 2005)
Payments 701 million mgs
57
7
Treasury 79 million mgs
34
2
Tradeservices 23 million mgs
Securities 412 million mgs
11
Pricing and traffic harnessing economies of
scale
Price (EURcent/msg)
Traffic (Millions of messages)
50
2500
45
Traffic
2000
40
35
1500
30
25
1000
20
Price
15
500
10
5
0
(Return)
12
SWIFT pricing challenge
80 reduction
2005, 2006 based on projections, net of 2005 FIN
price reduction
13
2005 strategic pricing initiatives

• 8 average reduction on FIN traffic benefits all
  users - accelerates delivery of the SWIFT price
  challenge
• Revised Traffic Growth Incentive Programme
  new, more transparent, more economically
  attractive commitment discounts for large users
• License fee waived for SWIFTAlliance Starter
  Setsmaller users gain quicker access to
  InterAct/FileAct and SWIFTSolutions - enabled for
  SWIFTNet Phase 2

14
Extending reach over the years
Users
Countries
Messages (millions)
92
91
2299
403
202
2048
200
198
196
192
189
178
1817
164
151
1534
137
126
1299
106
1059
937
812
688
603
518
457
'93 '94 '95 '96 '97 '98 '99 '00 '01
'02 '03 '04
'93 '94 '95 '96 '97 '98 '99 '00 '01
'02 '03 '04
'93 '94 '95 '96 '97 '98 '99 '00 '01 '02
'03 '04
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Extending your reach our goal
Institutional
Geographical
Corporate
CIO/COO
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Increasing resilience Four Pillars II

• SecurityStronger defense againstphysical
  threats and cyber attacks
• PeopleBetter security practices
• Crisis managementIncreased readiness to support
  customers in a crisis
• Service continuityNew levels of operational
  resilience

17
Working together with SWIFT Partners
4 Network Partners
40 Service Partners
20 Business Partners
300 Solution Partners
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SWIFT Partners

• Solution Partners Application providers and
  business / integration consultants
• Service Partners Installation, integration and
  consultancy services
• Business Partners Marketing and selling SWIFT
  interface products
• Network Partners ATT, Colt, Equant, Infonet

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Introducing SWIFT
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Standards working with the community
Convergence UNIFI (ISO 20022)
SWIFT Standards
Development and market practices across all
markets
Implementationof standards
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SWIFTStandards development a business centric
approach
Business process modelling
SWIFTNet
MarketPractice
Applications
Integration
Standards
Partners
SWIFT
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A multitude of standards-setting organisations
Treasury
Payments
EPC/ECBS
EACT
CHIPS
IGTA
TCH
RosettaNet/PMP
IFSA
TWIST
NACHA
OAGi
FpML
IFSA
ISTH
W3C
X12
OMG
Fedwire
ISDA
TC68/SC67 CEFACT/ TBG5
TC68/SC47
IFX
ISO/TC68
UNIFI - ISO 20022
UN/CEFACT
FIX
TC68/SC4 WG8 WG11
Bolero
CEFACT/ TBG15
BMA
OASIS
SMPG
e-bMoU
FISD/MDDL
IIBLP
IFSA
SIA
EAN/UCC
G30
ISSA
Acord
ISITC-IOA
ICC
Insurance
Giovannini
UNCITRAL
Securities
Trade Finance
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Introducing SWIFT
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Quality of service the SWIFT product stack
SWIFTSolutions Payments ? Treasury ? Trade ?
Securities
Messaging Services
Secure IP Network (SIPN)
Interfaces
Directories Information Services
25
SWIFTSolutions
Structured standards SWIFT or others
Standards
SWIFTNet in a SWIFT managed CUG
Mandatory
SWIFTNet
Industry agreed market practice and RL, with SLAs
Rules
26
SWIFTSolutions
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InterAct Cash Reporting
SWIFTSolutions
Alex Bagin Regional Account Manager
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Introduction Cash Reporting today FIN
Proprietary systems

• Over SWIFT FIN

- SF- Content- Usability

• Over banks proprietary systems

- Standards- Integration- Lines,- Security ...
Internet
LL
Account owner
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Business drivers changes in the operational
environment

• Increase of time critical payments
• CLS
• DVP
• RTGS
• Increased regulatory pressure
• Sarbanes/Oxley
• Basle II
• Reputational risk

• Need for real time information and processing

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Why real-time Nostro account information? Sources
of value
Value for Service Provider
Combined Value
Customer offering
Value for Service User
Risk management
Process improvement
Exception handling
Liquidity management
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Improve liquidity management through timely
detection of unexpected events
Liquidity management
FORECASTED END OF DAY BALANCE
TODAYS WORLD
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Fileact
SWIFTSolutions
Alex Bagin Regional Account Manager
33
Using SWIFTNet FileAct for receivinglow value
payments files automatically
Bank B sends a file to its correspondent Bank A.
The file contains a multitude of low value
payment instructions which were bundled by Bank
Bs payments application into a file.
Microsoft
Bank B
The file is transmitted using SWIFTNet FileAct
Bank A stores the payment file in a directory.
34
Using SWIFTNet FileAct for sendinglow value
payments automatically
Bank A sends a file to Bank B containing a
multitude of low-value payment instructions.
The file is transmitted using SWIFTNet FileAct
Microsoft
Bank B
Bank B receives the file and transmits it to its
payments application where it is de-bulked.
35
Cheque clearing
SWIFTSolutions
Alex Bagin Regional Account Manager
36
International cash letter models
US cheque deposit
US cheque transmission
US cheque clearing
clearing
US cheque capture bank

• Status quo paper check transportation
• Image exchange with only one US correspondent
  bank
• Image exchange with any US correspondent bank or
  any US clearing institution

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Overview
This presentation shows you that for Check21
SWIFTNet provides much higher security than
internet
You save money by re-using your existing
SWIFTNet infrastructure
High
SWIFTNet
secured VPNs
Level ofsecurity
SWIFTNet gives the reliability levels you need,
which internet doesnt
securedInternet
VPNs
Internet
Low
Level of reliability
Low
High
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Using FileAct for Check21 (1/2)
SWIFTNet is a highly secure and reliable network
FileAct is the ideal solution for your Check21
transfers
- proofs delivery- provides timestamp - avoids
duplicates
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Check 21 processing
Scan checks
Transmit via SWIFTNet
Create X3.97 files
Handle file to SWIFT Interface
SWIFTNet
image
File
FileAct
US Host Bank
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Corporate connectivity

SWIFTSolutions
Alex Bagin Regional Account Manager
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Banking messaging current limitations
Lack of efficiency

• Heavy technical and administrative processes
• Non-optimisation of IT resources

Tedious expansion process

• Hinders the growth of payments factory approach
• New links are heavy to difficult to implement

Little flexibility with international banks

• Disparity between statement formats
• No STP for intra-day reporting
• Considerable contractual constraints (eg
  tri-party contracts for MT101)
• Different banking holidays

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Adopting SWIFTNetPhase I cash management pilot
SWIFTNet (MA-CUG)
MT101
MT940
Corporate
Foreign bank
Local bank
Access a first bank via SWIFTNet through a Member
Administered Closed User Group
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Provide true end-to-end real-time information to
customers
Customer Offering
Real-time today
nostro EUR
nostro USD
Corporate or FI customer
nostro JPY
End to end with real-time nostro
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SWIFTSolutions for CorporatesTwo legal frameworks
SWIFTAlliance interfaces
Connectivity
Browse
InterAct
FileAct
FIN S/F
Vendor solutions
Messaging
Other
SWIFT XML
FIN
Standards
Treasury Counterparty
MA-CUG
Legal framework
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Banks can help by offering access over a secure
standardised channel
Corporate client
Accounts payable
Accounts receivable
Treasury
SWIFTNet interface
Other

• One platform
• Full STP
• Highest level of security and resiliency

• Lower costs
• Reduced risk
• Improved control

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