Tuesday, March 29, 2016
Monday, March 28, 2016
7 EMV BIG DATA POINTS - In US
Visa
More than 212 million Visa cards were issued with EMV chips by Dec. 31, and more than 766,000 merchant locations accept Visa EMV cards. There are now more chip cards in the U.S. than in any other country, Visa says
MasterCard
According to MasterCard, 59% of its U.S.-issued consumer credit cards had EMV chips as of Dec. 31, and more than 800,000 merchant locations can accept EMV MasterCard products. It did not provide an exact number of EMV cards issued.
Consumer Adoption
Seven out of 10 Americans have at least one EMV-chip card in their wallet, according to Visa research, and about 93% of consumers are aware of the EMV migration whether or not they have a chip card.
Global Shift
It's not just the U.S. that's adopting EMV at a rapid pace. According to EMVCo, a third of payments worldwide were made with an EMV card as of mid-2015. In Western Europe, that's a staggering 97% of all card payments; in Latin America, 87% and in Africa and the Middle East it's 84%, according to data published in December.
Chargebacks Rise
The Oct. 1, 2015 liability shift, which moved EMV fraud liability to the company that was unable to handle EMV cards, is starting to take its toll. The Kroger grocery chain reports operating costs rose 23 points during the final quarter of 2015, in part from higher chargeback losses.
Gift Card Consequences
As the EMV shift continues, fraudsters are paying more attention to gift cards. Many scammers are using counterfeit credit or debit cards to buy gift cards at non-EMV merchants, causing some of those merchants to restrict the way they sell gift cards, according to gift card giant Blackhawk Network.
Web Commerce Woes
It has long been expected that the shift to EMV at the point of sale would drive more fraud online — and that the fraud migration would begin even before EMV took hold. According to research from Forter, overall fraud attempts increased 163% in the first three quarters of 2015, with digital goods seeing a spike of 254% in attempted fraud.
Monday, March 21, 2016
Rising of 4 Banks in US
Friday, March 18, 2016
Value of Customer Data
Perhaps the most significant element of any business strategy – digital or otherwise – is understanding the ever changing needs and wants of customers. The landscape is littered with scores of businesses that have lost market share because they were not able to capitalize on changing customer behavior trends. So, having and being able to analyze data that provides insights into customers’ preferences is crucial to the survival of any business.
Big data analytics is the process of collecting, organizing, and analyzing large data sets containing a variety of data types (hence the name big data) to uncover hidden patterns, unknown correlations, market trends, customer preferences, and other useful business information.
This data is then used to determine the appropriate business strategies to meet the customers' current needs, and to anticipate their future needs. The successful players in the digital space not only understand their target customers’ needs, but they are actively engaged in influencing what customers want. Just think about the of customers who are willing to stand in long lines – sometimes for days – just to be the first to get the new Apple iPhones.
Now to apply Digital business concepts to banking, it’s worth noting that Chris Skinner in his book Digital Banking, asserts that "As a digital business, all banking can be broken down into pure bits and bytes, but more than that, a bank can be seen as three digital businesses in one. It is a manufacturer of products, a processor of transactions, and a retailer of services." Based on this premise, banks must begin to understand the shifting expectations of their customers, and develop strategies to meet – and exceed those expectations in an increasingly Digital world.
Another useful concept to consider, as it relates to developing a Digital Strategy, is “Buyology.” Buyology, as defined in Martin Lindstrom's 2008 bestselling book Buyology: The Truth and Lies About Why We Buy, is a term that describes the process of analyzing the factors that influence buyers' decisions in a world cluttered with messages such as advertisements, slogans, jingles, and celebrity endorsements. From a business perspective, this means understanding the core reasons why people buy, and creating opportunities to repeat that buying behavior again and again.
Now we have already seen that banks have been collecting and utilizing digital customer information for decades, so the accumulation of customers’ big data is already occurring.
The next step is analyze this customer data to determine which products are doing well, and which are failing, and why they are doing well or failing.
Are there data points to indicate which customers prefer certain products, and which prefer other products? Keep in mind, one size does not fit all. Big data will also indicate which of the banks’ customers are initiating financial transactions by the banks competitors, which means your customers have purchased products and services from your competitors.
Big data can provide other useful analytics such as:
- Are your customers using the branches? ATMs? Internet? Mobile? If your customers are primarily using mobile devices to make deposits, then you should be communicating to them via their mobile devices to better understand their needs. If they use the Internet via a laptop or computer, then push email messages to them inviting their feedback on the service they receive from your bank.
- Are your customers making loan payments to other lenders from their checking account with your institution? Then you should be offering them the option to convert the loan or consolidate it to your bank at a better rate, because you already know how much they pay each month, and for what type of loan. And since they are your customers, you already know whether they are credit worthy or not.
- Are your customers making payments to other credit card accounts from their checking account with your institution? You should consider offering your customer a credit card with a balance transfer option.
- Are your customers physically depositing payroll checks in the branches rather than using Direct Deposit? Then your tellers should be trained to recognize the opportunity to discuss the benefits of direct deposit with these individuals.
- Are your customers coming into the branch to cash payroll checks that are drawn on your bank? Then someone should be discussing with them the benefits of opening a checking account or obtaining a prepaid payroll card from your bank so they can take advantage of direct deposit, Internet banking, online commerce, and shorter checkout lines at stores.
- Are your customers using convenience checks from other credit card companies to pay down their credit card balances on your credit card? Why didn’t your bank offer these obviously credit-worthy customers the opportunity to pay down balances on your competitors’ credit cards?
Monday, March 14, 2016
Why All of The Interest in Digital Now?
Financial Institutions and their customers have been engaging in Digital Banking for decades, which leads to the obvious question of why all of the interest now in digital banking?
Well, for one thing, until recently, most banks’ attempts at “Digital strategy” have often been reactive and inconsistent.
In the past, banks’ IT departments have generally taken the lead for implementing digital technology to streamline processes, cut costs, gain efficiencies, etc. But these enhancements primarily benefitted the banks’ interests.
And if, along the way, the customer experience was improved, that was considered lagniappe. But it was NOT the banks’ main goal.
And up until the last decade, the only way customers could communicate directly with their bank was through the branch, by mail, through the call center, or the ATM. But recent advances in Digital technology have changed all of that.
In particular, the personal computer, the Internet, high-speed broadband connections, wireless technology, and mobile devices have now enabled customers to dictate to businesses the manner in which they (customers) choose to interact with the businesses (Remember the Lending Tree commercials where banks compete for customers’ business?).
As a result, some visionary entrepreneurs have launched hugely successful “virtual” businesses (no physical storefront or inventory) built on the operating concept of leveraging digital technology as their sole means of engaging in commerce with customers. This has turned the entire merchant/customer relationship on its head. So, in order to compete in a rapidly changing marketplace, traditional brick and mortar companies are now responding at breakneck speeds to catch up with their digital competitors.
Well, for one thing, until recently, most banks’ attempts at “Digital strategy” have often been reactive and inconsistent.
In the past, banks’ IT departments have generally taken the lead for implementing digital technology to streamline processes, cut costs, gain efficiencies, etc. But these enhancements primarily benefitted the banks’ interests.
And if, along the way, the customer experience was improved, that was considered lagniappe. But it was NOT the banks’ main goal.
And up until the last decade, the only way customers could communicate directly with their bank was through the branch, by mail, through the call center, or the ATM. But recent advances in Digital technology have changed all of that.
In particular, the personal computer, the Internet, high-speed broadband connections, wireless technology, and mobile devices have now enabled customers to dictate to businesses the manner in which they (customers) choose to interact with the businesses (Remember the Lending Tree commercials where banks compete for customers’ business?).
As a result, some visionary entrepreneurs have launched hugely successful “virtual” businesses (no physical storefront or inventory) built on the operating concept of leveraging digital technology as their sole means of engaging in commerce with customers. This has turned the entire merchant/customer relationship on its head. So, in order to compete in a rapidly changing marketplace, traditional brick and mortar companies are now responding at breakneck speeds to catch up with their digital competitors.
Thursday, March 10, 2016
Is DIGITAL Banking a new?
DIGITAL Banking is a BUZZ word in the market. I have a doubt whether this is new.
Now with all of the talk these days about Digital Banking, it's important to note that banks have been using Digital technology since the early days of the commercial use of the computer.
Consider that when someone opens a checking account, he/she is provided with an account number. This number, along with the customer's personal information, and the amount of money deposited into the account is stored on the bank’s computer.
Every time a deposit or a withdrawal is made, either a deposit slip or check with MICR encoding (Magnetic Ink Character Recognition) is "read" by a computer to record the transaction and update the customer's account balance.
Banks have long used high-speed Digital check processing equipment that can process tens of thousands of checks per hour to update customers' account balances.
In checking account transactions where a check is deposited into a different bank than where the checking account is housed, the settlement of this item becomes a Digital transaction because no physical cash is actually moved from one bank to the other. Instead, the banks electronically exchange bulk Digital files of all transactions via ACH (automated clearinghouse) to reconcile banks’ customers' account balances.
A similar process happens for loans, lines of credit, and credit cards. There is no physical cash that moves between a seller and a purchaser. Rather, loan balances are maintained on computers that record customers' use of the loan proceeds to make purchases and then reconcile the transactions against the customer's account balances.
In the old days, when customers presented credit cards to make purchases, merchants used paper receipts to imprint the credit card number, and then they had to call the card issuer for approval of the transaction. The paper receipts were then sent to banks to be digitized so the transactions could be recorded against the cardholders’ account balances.
Then when the credit card companies began to use Digital technology that allowed Digital credit card terminals to communicate with over telephone lines (remember the modem) directly with the card issuers’ computers, the payment transaction became even more efficient.
ATM and Debit Card issuers also utilized this Digital communication technology to streamline the access to funds in customers’ checking accounts by allowing merchants to immediately verify whether sufficient funds are available for purchases and then place holds against the balances for the amount of the purchase.
Now with all of the talk these days about Digital Banking, it's important to note that banks have been using Digital technology since the early days of the commercial use of the computer.
Consider that when someone opens a checking account, he/she is provided with an account number. This number, along with the customer's personal information, and the amount of money deposited into the account is stored on the bank’s computer.
Every time a deposit or a withdrawal is made, either a deposit slip or check with MICR encoding (Magnetic Ink Character Recognition) is "read" by a computer to record the transaction and update the customer's account balance.
Banks have long used high-speed Digital check processing equipment that can process tens of thousands of checks per hour to update customers' account balances.
In checking account transactions where a check is deposited into a different bank than where the checking account is housed, the settlement of this item becomes a Digital transaction because no physical cash is actually moved from one bank to the other. Instead, the banks electronically exchange bulk Digital files of all transactions via ACH (automated clearinghouse) to reconcile banks’ customers' account balances.
A similar process happens for loans, lines of credit, and credit cards. There is no physical cash that moves between a seller and a purchaser. Rather, loan balances are maintained on computers that record customers' use of the loan proceeds to make purchases and then reconcile the transactions against the customer's account balances.
In the old days, when customers presented credit cards to make purchases, merchants used paper receipts to imprint the credit card number, and then they had to call the card issuer for approval of the transaction. The paper receipts were then sent to banks to be digitized so the transactions could be recorded against the cardholders’ account balances.
Then when the credit card companies began to use Digital technology that allowed Digital credit card terminals to communicate with over telephone lines (remember the modem) directly with the card issuers’ computers, the payment transaction became even more efficient.
ATM and Debit Card issuers also utilized this Digital communication technology to streamline the access to funds in customers’ checking accounts by allowing merchants to immediately verify whether sufficient funds are available for purchases and then place holds against the balances for the amount of the purchase.
Sunday, March 06, 2016
Thursday, February 25, 2016
Tuesday, February 23, 2016
JPMorgan tests blockchain for dollar transfers; sets out digital progress
JPMorgan Chase is testing the use of distributed ledger technology to move US dollars between London and Tokyo, working with about 2200 clients on the trial ahead of possible live transactions later in the year.
The US banking giant is hoping that using blockchain tech for currency clearing and settlement will speed up the process for clients and reduce its risk, according to the Wall Street Journal.
Although CEO Jamie Dimon has poured scorn on Bitcoin, his bank has been enthusiastically exploring the cryptocurrency's underlying technology. The firm is part of the R3 consortium and has invested in Digital Asset Holdings - the startup helmed by its former head of commodities Blythe Masters. The pair are already testing blockchain technology for loan trading operations.
News of the latest experiment comes as JPMorgan affirms its commitment to technology on its annual investor day. During a time of cost cutting, the bank's tech budget for the year is rising from $9.2 billion to $9.4 billion, about a third of which is earmarked for investments.
The company has more than 40,000 technologists on its payroll, including 18,000 developers creating intellectual property, many of them now based at 13 special technology hubs around the world.
In addition, it is touting its engagement with the fintech community, claiming to have worked with more than 300 early stage firms, making around 30 investments over the last two years and piloting over 100 technology solutions in just 12 months.
The bank has made the transition to digital a strategic priority, which appears to be bearing fruit. Mobile user numbers have doubled since 2012 while teller transactions are down by 100 million, a trend likely to continue thanks to the rollout of new ATMs which should be able to carry out 90% of the functions carried out by tellers by the end of 2017.
The switch in consumer behaviour has enabled a 12,000 reduction in transactional staff headcount in the last three years while branch numbers fell by 189 to 5413 in 2015. Another 150 are slated to go in 2016.
On payments, the bank is betting on its partnership with retailer consortium MCX for Chase Pay, its new digital wallet leading the fight back against tech giants Apple, Google and Samsung in the increasingly crowded mobile money arena.
A new deal sees Chase Pay enabled for use at 7500 Starbucks locations across the US. Meanwhile, Chase Pay can also be used to reload a Starbucks card within the coffee giant's own app. Chase recently took on the role of Starbucks' processor from Square, which found its deal a massive loss maker
Although CEO Jamie Dimon has poured scorn on Bitcoin, his bank has been enthusiastically exploring the cryptocurrency's underlying technology. The firm is part of the R3 consortium and has invested in Digital Asset Holdings - the startup helmed by its former head of commodities Blythe Masters. The pair are already testing blockchain technology for loan trading operations.
News of the latest experiment comes as JPMorgan affirms its commitment to technology on its annual investor day. During a time of cost cutting, the bank's tech budget for the year is rising from $9.2 billion to $9.4 billion, about a third of which is earmarked for investments.
The company has more than 40,000 technologists on its payroll, including 18,000 developers creating intellectual property, many of them now based at 13 special technology hubs around the world.
In addition, it is touting its engagement with the fintech community, claiming to have worked with more than 300 early stage firms, making around 30 investments over the last two years and piloting over 100 technology solutions in just 12 months.
The bank has made the transition to digital a strategic priority, which appears to be bearing fruit. Mobile user numbers have doubled since 2012 while teller transactions are down by 100 million, a trend likely to continue thanks to the rollout of new ATMs which should be able to carry out 90% of the functions carried out by tellers by the end of 2017.
The switch in consumer behaviour has enabled a 12,000 reduction in transactional staff headcount in the last three years while branch numbers fell by 189 to 5413 in 2015. Another 150 are slated to go in 2016.
On payments, the bank is betting on its partnership with retailer consortium MCX for Chase Pay, its new digital wallet leading the fight back against tech giants Apple, Google and Samsung in the increasingly crowded mobile money arena.
A new deal sees Chase Pay enabled for use at 7500 Starbucks locations across the US. Meanwhile, Chase Pay can also be used to reload a Starbucks card within the coffee giant's own app. Chase recently took on the role of Starbucks' processor from Square, which found its deal a massive loss maker
Monday, February 22, 2016
3 key actions for banks to learn from FinTechs
In today’s highly digitized and connected world, several lean and nimble organizations are making profound business impact challenging the traditional banking models in domains such as
While traditional banks continue to spend heavily on regulatory requirements and managing a longer running new product / service release cycle, the FinTechs are innovating at rapid scale and delivering capabilities with a delightful experience.
Examples include Lending Club and Zopa in lending, Nutmeg and Weathfront in Wealth Management; WePay and Stripe for Payments.
- Payments,
- Lending and
- Wealth Management.
While traditional banks continue to spend heavily on regulatory requirements and managing a longer running new product / service release cycle, the FinTechs are innovating at rapid scale and delivering capabilities with a delightful experience.
Examples include Lending Club and Zopa in lending, Nutmeg and Weathfront in Wealth Management; WePay and Stripe for Payments.
- Simplify – Established banks, typically have a fairly sizable technology and operations organization to support a huge inventory of applications, infrastructure and processes that limit their agility and flexibility in delivering new services. Simplification of the overall IT and Operations will help banks to not only become more lean and agile but also redirect the cost savings for digital transformation initiatives. Banks with heavy investments in their core banking systems must look at modernizing and selectively replacing domain capabilities with best of breed SaaS solutions only if modernization is not an option. Simplification efforts must be further accelerated by simplifying the business and operational processes aligned with their digital transformation focussed customer experience journeys. This will help maximize the impact and value for both topline growth and bottom-line optimization.
- Integrate – Banks will need to become an active participant both as a consumer and provider of financial services in a sharing economy ecosystem that includes their customers, partners and also FinTech providers. This will be an architecture led transformation to deliver an Open technologies based integration platform focused on driving agility and speed of integration. The core components of the integration architecture will be built leveraging a combination of API, microservices and SOA services based on functional and non-functional requirements. With such an integration platform, banks will be able to externalize its core products and service offerings through API enablement, while also exposing its customers to services from external marketplaces.
- Scale – As banks simplify their applications, processes and infrastructure platforms, they must define a target Hybrid IT architecture with a Cloud first principle. This would require addressing the “how to cloud” first before deciding on alternative target platforms. Migration of the simplified application, processes and infrastructure to the private and public Cloud platforms must be addressed based on economic value and where needed banks must also work with their local regulatory bodies in increasing cloud adoption. A DevOps led continuous delivery framework along with agile development principles is a must across the Hybrid IT footprint to scale the software development lifecycle (SDLC) in to a multi-speed SDLC.
Is MOBILE Everything?
By the year 2020 – just four years from now – about 80 percent of the adult population will own one.
Mobile is also everything because those devices are a natural and essential extension of every aspect of our lives. We all know the anecdotes about
- How many emails are opened via mobile phones (54 percent),
- How many consumers check their phones within 15 minutes of opening their eyes in the morning (80 percent), and
- How many times a day the typical consumer checks their phone for messages or calls or texts (150 times).
Apple controls something like 65 percent of all of the traffic on mobile devices.
And they control everything that happens on their platform – from who gets access, to how much that access costs, to the standards that are used.
Saturday, February 13, 2016
In Fintech - Startups - Game changer in Banking Industry??
Fintech - Startups is a HOT topic in Banking and Financial Industry today.
Here's few banks and FIs fintech startups.
CITIBANK is an interesting case as the banking industry giant had put hands on some very promising ventures through its venture fund.
Here's few banks and FIs fintech startups.
CITIBANK is an interesting case as the banking industry giant had put hands on some very promising ventures through its venture fund.
Citi Ventures’ portfolio has notable FinTech players
such as Ayasdi, Jumio, Square, Betterment, Chain, TradeIt and others.
such as Ayasdi, Jumio, Square, Betterment, Chain, TradeIt and others.
Goldman Sachs went above and beyond with FinTech.
The bank has been extremely generous with investments and is open to collaboration.
The bank has been extremely generous with investments and is open to collaboration.
Morgan Stanley, has been actively investing in various ventures, often overlapping with other banks.
Wednesday, February 10, 2016
10 ways Blockchain can change the Financial Services
- Security – blockchain has the ability to improve edge security and encrypt data during transactions, rather than when the data is moving or at rest.
- Cloud – Blockchain can remove the need for a trusted party in transactions taking place in the cloud.
- Truly digital transactions — The blockchain enables secure microtransactions, still a developing area.
- IoT – Blockchain can improve the security of automated transactions in the Internet of Things.
- Settlement times — Blockchain can vastly improve settlement times of many payments transactions.
- Government — Issuers of currency may leverage the blockchain, and very soon, according to some.
- Health — Health records can be securely stored and shared via the blockchain.
- Manufacturing — Blockchain can connect and automate processes between different factories (nodes).
- Retail – Blockchain can drive down transaction costs at the point-of-sale.
- Energy – Blockchain can change the way electrical use is billed.
Saturday, February 06, 2016
Various Cards - Transaction Flows
| Category | Description |
|---|---|
| On us | Transaction which is coming from own ATM or POS , and never routed outside. |
| Network On us | Transaction originates from a sharing network , such as STAR or Pulse , in which both the bank and the device owning bank are members of the same network. |
| Reciprocal Transaction | Cardholder initiates a Transaction at a device that is owned by bank which is member of different regional networks. |
| National Bridge Transactions | The card holder uses a device at a bank that is not their own, and the two banks belong to different regional networks that do not have any agreement. Both banks must belong to the same national network. The transaction is handed from the ATM or POS regional network to the national network, and finally to the authorizing bank’s regional network. In this case, there are three switches involved. |
Both the regional and national networks are switching systems that, to a fair extent,
resemble the systems that are used within the financial institution. The switching systems
drive transactions from initiation to destination. We use the word "switches" to describe the
hand-off of a transaction from host-to network-to host:
- An ATM or POS transaction is accepted by an acquiring device that can accept cards from
the issuing institution and either processed locally “On Us” or switched to one of the regional networks “Network On Us”.
the issuing institution and either processed locally “On Us” or switched to one of the regional networks “Network On Us”.
- The Networks either switch the transaction to another institution host for processing
“Network On Us” or switch the transaction to a national network “National Bridge or Reciprocal".
“Network On Us” or switch the transaction to a national network “National Bridge or Reciprocal".
- Responses are switched from the owning host of the device, “On Us”, to the device or switched to a network “Network On Us”.
- The network either switches a Host Response to the Transaction to the Host of member bank
"Network on us" or switches the response to another network "National Bridge" or "Reciprocal".
"Network on us" or switches the response to another network "National Bridge" or "Reciprocal".
- The network switches the response to another network for later switches to the issuer Host.
Thursday, February 04, 2016
Wednesday, February 03, 2016
ACI's Product - ICE-XS
ICE-XS stands for Internet Communications for the Enterprise Cross System.
• It is a multi-protocol, multi-platform communications gateway with embedded message transformation capabilities, security services, and SOA technology.
• Allows dissimilar and heterogeneous networks, devices and applications to communicate.
• Designed for high-speed, high-volume, switching oftransactions in real-time.
• Provides four layered architecture:
– Communications protocols support, e.g. TCPIP, SNA, WMQ
– Device protocol support, e.g. HTTP, VISAII, MDS
– Message switching, e.g. TCPIP to SNA
– Message transformation, e.g. SOAP to ISO, Binary to XML
Typically ICE-XS is used to facilitate communications between networks, devices and applications, such as
– ATM’s
– POS devices
– Hardware Security Modules (HSM’s), such as Atalla, Thales etc
– Hosts, for CICS/IMS/MQ applications
– Switches/Interchanges, such as VISA, Mastercard
– Networks, such as French Interbank network e-RSB
• ICE-XS is typically deployed
– As a front end to ACI applications such as BASE24-eps, PRM, BASE24 (NSK), OCM24 (z/OS), but can be deployed standalone as a protocol/message switch or ESB SOA provider.
Supported Platforms
• Solaris, SunOS version 5.8 (Solaris 8) or greater, Sparc CPU
– Websphere MQ version 5.3
– TIBCO Rendezvous 7.5.3
• AIX version 5 or greater
– Websphere MQ version 5.3
– TIBCO Rendezvous 7.5.3
• zOS version 1.9 or greater
– Websphere MQ version 6.0
• HP Nonstop S-series G06.13 or greater
– Websphere MQ version 5.1
• HP Nonstop Integrity (Itanium) H06.03 or greater
– Websphere MQ version 5.3.1.2
Communication Protocols
Provides low-level connectivity to devices and applications.
• Connections established, managed and maintained by ICE-XS
and used as transports for higher layer protocols.
• Primary communication flavors available:
Communication (IPC) using Unix-domain sockets,Publish/Subscribe using TIBCO Rendezvous messaging busand X.25 over TCPIP (XOT).
Device Protocols
• Provides higher-level connectivity to devices and applications.
• Device Protocol connections operate over Communication Protocol connections established, managed and maintained by ICE-XS.
• Primary device protocol flavors:
– HTTP – client and server
– GENERICx/CUSTOM
• simple messaging for streamed protocols (TCP/IP)
– GENERIC
• simple messaging for non-streamed protocols (WMQ)
– VISAII/ACISTD
• POS protocols
– MDS
• Message delivery for BASE24-eps
• Other specialized device protocols supported include:
– ATALLA (HSM access)
– VIPUSMG (Visa IP US Message Gateway)
– IMSCONNECT (IMS comms over TCP/IP)
– CBCOM (French interbank network eRSB comms)
– PIP (ACI PRM Interface Process)
– TPAD (Transaction Pad over TCPIP or XOT)
– EQUENS
– WSAPI (ACI Web Services API)
– PATHSEND (HP Nonstop TP Monitor API)
– CIFO (French ISO messaging over TIBCO)
ROUTING SERVICES
• Messages received on an ENDPOINT are routed to a destination ENDPOINT based upon selection of a route rulethat specifies where particular messages should be sent.
• Route rules are defined by the user and specify five main
things:
– The attributes used to match the message to this route
rule, eg. source ENDPOINT, client IP address, message
content.
– Any intermediate message processing that should be
applied before forwarding the message.
– The destination ENDPOINT for the message.
– The weight of the route rule.
– The Message Exchange Pattern (MEP) to apply to thismessage, eg. REQUESTONLY, REQUESTRESPONSE.
• These routing services allow for flexible routing of messages between ENDPOINTs.
Intermediate Message Processing
• Messages routed between ENDPOINTs can be modified (transformed) by Intermediate Message Processors (IMPs) within ICE-XS.
• Two IMPs are currently supported:
– Simple Object Access Protocol (SOAP)
– Data Transformation Engine (DTE)
• The SOAP IMP provides transformation between SOAP XML messages and binary message formats such as ISO8583. This allows host applications to present an SOA interface to clients
without change to their underlying message formats.
• The DTE IMP provides more general purpose message transformation services for transformation between different binary formats, or binary and XML formats.
• Both IMPs employ user-defined Data Sync Repository (DSR) files to describe the message formats and required transformation. These files are cached in memory and can be
reloaded by operator command at runtime.
• It is a multi-protocol, multi-platform communications gateway with embedded message transformation capabilities, security services, and SOA technology.
• Allows dissimilar and heterogeneous networks, devices and applications to communicate.
• Designed for high-speed, high-volume, switching oftransactions in real-time.
• Provides four layered architecture:
– Communications protocols support, e.g. TCPIP, SNA, WMQ
– Device protocol support, e.g. HTTP, VISAII, MDS
– Message switching, e.g. TCPIP to SNA
– Message transformation, e.g. SOAP to ISO, Binary to XML
Typically ICE-XS is used to facilitate communications between networks, devices and applications, such as
– ATM’s
– POS devices
– Hardware Security Modules (HSM’s), such as Atalla, Thales etc
– Hosts, for CICS/IMS/MQ applications
– Switches/Interchanges, such as VISA, Mastercard
– Networks, such as French Interbank network e-RSB
• ICE-XS is typically deployed
– As a front end to ACI applications such as BASE24-eps, PRM, BASE24 (NSK), OCM24 (z/OS), but can be deployed standalone as a protocol/message switch or ESB SOA provider.
Supported Platforms
• Solaris, SunOS version 5.8 (Solaris 8) or greater, Sparc CPU
– Websphere MQ version 5.3
– TIBCO Rendezvous 7.5.3
• AIX version 5 or greater
– Websphere MQ version 5.3
– TIBCO Rendezvous 7.5.3
• zOS version 1.9 or greater
– Websphere MQ version 6.0
• HP Nonstop S-series G06.13 or greater
– Websphere MQ version 5.1
• HP Nonstop Integrity (Itanium) H06.03 or greater
– Websphere MQ version 5.3.1.2
Communication Protocols
Provides low-level connectivity to devices and applications.
• Connections established, managed and maintained by ICE-XS
and used as transports for higher layer protocols.
• Primary communication flavors available:
– TCP/IP
– SNA
– Websphere MQ (WMQ)
• Other more specialized communications options include InterprocessCommunication (IPC) using Unix-domain sockets,Publish/Subscribe using TIBCO Rendezvous messaging busand X.25 over TCPIP (XOT).
Device Protocols
• Provides higher-level connectivity to devices and applications.
• Device Protocol connections operate over Communication Protocol connections established, managed and maintained by ICE-XS.
• Primary device protocol flavors:
– HTTP – client and server
– GENERICx/CUSTOM
• simple messaging for streamed protocols (TCP/IP)
– GENERIC
• simple messaging for non-streamed protocols (WMQ)
– VISAII/ACISTD
• POS protocols
– MDS
• Message delivery for BASE24-eps
• Other specialized device protocols supported include:
– ATALLA (HSM access)
– VIPUSMG (Visa IP US Message Gateway)
– IMSCONNECT (IMS comms over TCP/IP)
– CBCOM (French interbank network eRSB comms)
– PIP (ACI PRM Interface Process)
– TPAD (Transaction Pad over TCPIP or XOT)
– EQUENS
– WSAPI (ACI Web Services API)
– PATHSEND (HP Nonstop TP Monitor API)
– CIFO (French ISO messaging over TIBCO)
ROUTING SERVICES
• Messages received on an ENDPOINT are routed to a destination ENDPOINT based upon selection of a route rulethat specifies where particular messages should be sent.
• Route rules are defined by the user and specify five main
things:
– The attributes used to match the message to this route
rule, eg. source ENDPOINT, client IP address, message
content.
– Any intermediate message processing that should be
applied before forwarding the message.
– The destination ENDPOINT for the message.
– The weight of the route rule.
– The Message Exchange Pattern (MEP) to apply to thismessage, eg. REQUESTONLY, REQUESTRESPONSE.
• These routing services allow for flexible routing of messages between ENDPOINTs.
Intermediate Message Processing
• Messages routed between ENDPOINTs can be modified (transformed) by Intermediate Message Processors (IMPs) within ICE-XS.
• Two IMPs are currently supported:
– Simple Object Access Protocol (SOAP)
– Data Transformation Engine (DTE)
• The SOAP IMP provides transformation between SOAP XML messages and binary message formats such as ISO8583. This allows host applications to present an SOA interface to clients
without change to their underlying message formats.
• The DTE IMP provides more general purpose message transformation services for transformation between different binary formats, or binary and XML formats.
• Both IMPs employ user-defined Data Sync Repository (DSR) files to describe the message formats and required transformation. These files are cached in memory and can be
reloaded by operator command at runtime.
CSM(Clearing and Settlement Mechanism) - Part II and Final
There are also national initiatives that not only take the domestic interbank traffic but also have aspirations to go global or at least regional. One of these is in Brazil and demonstrates the innovation that exists in developing countries. The country's interbank funds transfer system, Camara Interbancaira de Pagamentos (CIP, translates as Interbank Payment Clearing House), has been around since 2001 and is an integral part of the payment infrastructure. It is a non-profit entity which comprises 42 shareholder banks. It is also a board member of the International Payments Framework Association (IPFA).
'Brazilian banks position themselves as service providers to industries, not just lenders and borrowers of money,' said Joaquim Kiyoshi Kavakama, CIP's CEO. 'So our interbank payments industry is very strong.' A unique payment instrument for commercial collections was introduced in Brazil a few years ago and is still the only one of its kind in the world today. 'It looks like an invoice but it is an instruction for payment. And we were able to make that the standard for the entire country. Its distinct feature is that it can be paid at any bank in the country. In this arrangement, there is a clear need for interbank settlement, and this is where CIP comes in.
We actually manage the money between a bank that issues a payment and a bank that receives it.' In
2009, there were around two billion invoices issued through the system.In October 2009, CIP introduced Debito Directo Autorizado (DDA), a country-wide electronic system for billing and invoicing. Around the same time it joined Swift, taking Alliance Lite. The technology behind DDA is provided by Sterling Commerce, now part of IBM. On the first day alone, DDA had 1.2 million customers.
A notable feature of the set-up is that it covers both business to business (B2B) and business to consumer (B2C), the latter, for example, being around insurance and e-commerce. CIP is now bringing utility bills payment onto the solution and is collaborating with the Brazilian Banking Association on working out the details.
Kavakama believes that the DDA concept can be applied in other countries across the world, so too the wider payments system set-up created in Brazil. 'We are the only country that has integrated the whole payment industry, including central counterparty clearing and central bank.' The country's financial crisis in the 1990s, he noted, resulted in establishing 'a sound payment system, with strong risk practices in place, which is more crisis-proof than its counterparts in other countries'. DDA has the potential of becoming a global solution, 'for any invoice anywhere in the world', he believes.
More generally, in terms of threats to Swift, the lower-cost alternative bank-to-bank and bank-to-corporate messaging protocol, Ebics (Electronic Banking Internet Communication Standard), is gaining ground. It is based on an exchange of keys between counterparties and was defined by the German banking community.
Adoption is now under way in France and there has been activity elsewhere, particularly from German-speaking Europe and French-speaking North Africa.
In Germany, banks were contractually obliged to support the old protocol until the end of 2010. Some banks, particularly government-owned ones, including Ebics advocate, Deutsche Bundesbank, decided that support would end on 1st January.
However, others showed more flexibility, with continued support for both. For bank-to-bank messaging, Ebics is heavily used in Germany. In France, CFONB, the standardisation office in the banking sector, designated Ebics as the follow-up standard for the discontinued Etebac protocols. A number of vendors have worked with the protocol in Germany and France. In the latter
country, Clear2Pay, for instance, has worked with five or six clients, including several Japanese banks and La Banque Postale.
The most secure form of the Etebac protocol (Etebac5, as opposed to Etebac3), using electronic signatures, is due to be discontinued in mid-2011.
Ebics is less expensive than Swift and banks are tending to offer both. At present, given the limited geographical coverage, Swift remains prevalent for cross-border messaging. Vendors have reported interest from beyond Germany and France. This includes Austria, particularly among banks that do a lot of business with German corporates, and Switzerland. Frédérique Saint-Denis, sales and marketing director for Clear2Pay France, said in September 2010 that some banks in France had been considering Ebics for other countries, as it is an easy and secure protocol which does not involve a major project or cost. One UK-based client was evaluating it for European adoption, so too one Japanese client, for its UK operation.
Clear2Pay had also received one request from Spain. An Algerian bank, an existing Clear2Pay client, had signed and there had also been requests from Morocco.
One reaction by Swift to the pressure has been its Lean programme, with a big push to improve efficiency and reduce headcount, combined with its 2015 Strategy. Lean was a two-year McKinsey driven project to cut 17 per cent from Swift's cost base. When Swift was able to announce in October 2010 at Sibos a 15 per cent rebate for 2010, following on from a recent average 20 per cent price cut for FIN messaging, it was a 'reflection that Lean is kicking in', said Swift's head of marketing,
Gottfried Leibbrandt.
Swift has also made a big push for new participants, having gone after the securities sector for a number of years and more recently turning to corporates, after some of the bank-imposed shackles came off. There were 700+ on board by Sibos 2010 and Swift had ambitions to push this number to 5000 by 2015. To a degree, the corporates' reignited enthusiasm for multi-bank relationships plays into Swift's hands. Corporate-derived FIN traffic is increasing 50 per cent, year on year, with FileAct
volumes doubling.
In Swift's next SwiftNet release, R7 (the first for a few years and due to be implemented in June 2011), corporates will be able to directly send FileAct messages. This is perhaps a bit worrying for those banks that still fear a loosening of the traditional ties to their corporate customers but most have concluded that connectivity is not an area of differentiation.
The diversification of Swift, part of the 2015 roadmap, was seen most clearly in its afore-mentioned acquisition of Sungard's Ambit Messaging Hub in mid-2010. The resultant subsidiary competes directly with some long-established suppliers.
Leibbrandt pointed out that Swift had always competed with its interface devices, but the arrival of a solution intended for more complex banks clearly extends the overlap with partners.
Swift's consulting arm is also moving into new sectors, bringing it into competition with existing consultants. And Swift's noises about offering outsourcing have become clearer. It will focus on taking over the Swift infrastructure of high-end customers, a move that was touted as a direct response to customer requests, with the claim at Sibos 2010 that a number were close to
signing.
Swift is seeking to emphasise that this complements the existing third-party service bureaux and that partners are an integral part of the overall 2015 plan. Nevertheless, Swift's decentralisation, within which it is seeking to move closer to its customers, has seen the abrupt termination of a number of long-term partnerships of late.
The ever heightened challenge of meeting and staying in line with regulatory requirements would look to add weight to the argument to outsource. Clearly some banks do delegate but it is surprising in some ways the extent to which so many banks still do everything themselves. To a degree, the fragmentation and 'spaghetti interfaces' described above are reasons for this. It is difficult to outsource in such an instance because there will still need to be interfaces from the outsourcer back into the customer and there are unlikely to be efficiency gains if the internal processes and architecture are not streamlined.
The likes of Equens, Vocalink and SIA in Italy (the latter also has software) have set out their outsourcing stalls, so too individual banks (Deutsche Bank has made a big play of its SDD service, for instance). However, announcements of deals have been few so this looks to be another area where there is a gap between theory and reality.
'Brazilian banks position themselves as service providers to industries, not just lenders and borrowers of money,' said Joaquim Kiyoshi Kavakama, CIP's CEO. 'So our interbank payments industry is very strong.' A unique payment instrument for commercial collections was introduced in Brazil a few years ago and is still the only one of its kind in the world today. 'It looks like an invoice but it is an instruction for payment. And we were able to make that the standard for the entire country. Its distinct feature is that it can be paid at any bank in the country. In this arrangement, there is a clear need for interbank settlement, and this is where CIP comes in.
We actually manage the money between a bank that issues a payment and a bank that receives it.' In
2009, there were around two billion invoices issued through the system.In October 2009, CIP introduced Debito Directo Autorizado (DDA), a country-wide electronic system for billing and invoicing. Around the same time it joined Swift, taking Alliance Lite. The technology behind DDA is provided by Sterling Commerce, now part of IBM. On the first day alone, DDA had 1.2 million customers.
A notable feature of the set-up is that it covers both business to business (B2B) and business to consumer (B2C), the latter, for example, being around insurance and e-commerce. CIP is now bringing utility bills payment onto the solution and is collaborating with the Brazilian Banking Association on working out the details.
Kavakama believes that the DDA concept can be applied in other countries across the world, so too the wider payments system set-up created in Brazil. 'We are the only country that has integrated the whole payment industry, including central counterparty clearing and central bank.' The country's financial crisis in the 1990s, he noted, resulted in establishing 'a sound payment system, with strong risk practices in place, which is more crisis-proof than its counterparts in other countries'. DDA has the potential of becoming a global solution, 'for any invoice anywhere in the world', he believes.
More generally, in terms of threats to Swift, the lower-cost alternative bank-to-bank and bank-to-corporate messaging protocol, Ebics (Electronic Banking Internet Communication Standard), is gaining ground. It is based on an exchange of keys between counterparties and was defined by the German banking community.
Adoption is now under way in France and there has been activity elsewhere, particularly from German-speaking Europe and French-speaking North Africa.
In Germany, banks were contractually obliged to support the old protocol until the end of 2010. Some banks, particularly government-owned ones, including Ebics advocate, Deutsche Bundesbank, decided that support would end on 1st January.
However, others showed more flexibility, with continued support for both. For bank-to-bank messaging, Ebics is heavily used in Germany. In France, CFONB, the standardisation office in the banking sector, designated Ebics as the follow-up standard for the discontinued Etebac protocols. A number of vendors have worked with the protocol in Germany and France. In the latter
country, Clear2Pay, for instance, has worked with five or six clients, including several Japanese banks and La Banque Postale.
The most secure form of the Etebac protocol (Etebac5, as opposed to Etebac3), using electronic signatures, is due to be discontinued in mid-2011.
Ebics is less expensive than Swift and banks are tending to offer both. At present, given the limited geographical coverage, Swift remains prevalent for cross-border messaging. Vendors have reported interest from beyond Germany and France. This includes Austria, particularly among banks that do a lot of business with German corporates, and Switzerland. Frédérique Saint-Denis, sales and marketing director for Clear2Pay France, said in September 2010 that some banks in France had been considering Ebics for other countries, as it is an easy and secure protocol which does not involve a major project or cost. One UK-based client was evaluating it for European adoption, so too one Japanese client, for its UK operation.
Clear2Pay had also received one request from Spain. An Algerian bank, an existing Clear2Pay client, had signed and there had also been requests from Morocco.
One reaction by Swift to the pressure has been its Lean programme, with a big push to improve efficiency and reduce headcount, combined with its 2015 Strategy. Lean was a two-year McKinsey driven project to cut 17 per cent from Swift's cost base. When Swift was able to announce in October 2010 at Sibos a 15 per cent rebate for 2010, following on from a recent average 20 per cent price cut for FIN messaging, it was a 'reflection that Lean is kicking in', said Swift's head of marketing,
Gottfried Leibbrandt.
Swift has also made a big push for new participants, having gone after the securities sector for a number of years and more recently turning to corporates, after some of the bank-imposed shackles came off. There were 700+ on board by Sibos 2010 and Swift had ambitions to push this number to 5000 by 2015. To a degree, the corporates' reignited enthusiasm for multi-bank relationships plays into Swift's hands. Corporate-derived FIN traffic is increasing 50 per cent, year on year, with FileAct
volumes doubling.
In Swift's next SwiftNet release, R7 (the first for a few years and due to be implemented in June 2011), corporates will be able to directly send FileAct messages. This is perhaps a bit worrying for those banks that still fear a loosening of the traditional ties to their corporate customers but most have concluded that connectivity is not an area of differentiation.
The diversification of Swift, part of the 2015 roadmap, was seen most clearly in its afore-mentioned acquisition of Sungard's Ambit Messaging Hub in mid-2010. The resultant subsidiary competes directly with some long-established suppliers.
Leibbrandt pointed out that Swift had always competed with its interface devices, but the arrival of a solution intended for more complex banks clearly extends the overlap with partners.
Swift's consulting arm is also moving into new sectors, bringing it into competition with existing consultants. And Swift's noises about offering outsourcing have become clearer. It will focus on taking over the Swift infrastructure of high-end customers, a move that was touted as a direct response to customer requests, with the claim at Sibos 2010 that a number were close to
signing.
Swift is seeking to emphasise that this complements the existing third-party service bureaux and that partners are an integral part of the overall 2015 plan. Nevertheless, Swift's decentralisation, within which it is seeking to move closer to its customers, has seen the abrupt termination of a number of long-term partnerships of late.
The ever heightened challenge of meeting and staying in line with regulatory requirements would look to add weight to the argument to outsource. Clearly some banks do delegate but it is surprising in some ways the extent to which so many banks still do everything themselves. To a degree, the fragmentation and 'spaghetti interfaces' described above are reasons for this. It is difficult to outsource in such an instance because there will still need to be interfaces from the outsourcer back into the customer and there are unlikely to be efficiency gains if the internal processes and architecture are not streamlined.
The likes of Equens, Vocalink and SIA in Italy (the latter also has software) have set out their outsourcing stalls, so too individual banks (Deutsche Bank has made a big play of its SDD service, for instance). However, announcements of deals have been few so this looks to be another area where there is a gap between theory and reality.
Tuesday, February 02, 2016
CSM(Clearing and Settlement Mechanism) - Part 1
There has been a blurring of definitions within the ACH and payment card landscape. Among the ACHs are the likes of Vocalink, SESP, STET, GSIT and RPS. Among the card processors are the likes of Visa and MasterCard themselves, plus American Express, Atos Worldwide, Experian, First Data, Sermepa, Sinsys and TSYS. Spanning both areas are entities such as Equens, NETS in the Nordic region, PBS, SIA-SSB in Italy and Telekurs Multipay.
There has been consolidation as national entities have sought to expand their geographical presence, take advantage of economies of scale and broaden their services. Tying much of the payments market together on the cross-border front has been Swift. Bank-owned and highly influential in the standards-making process, it has been highly successful over several decades but times are changing. A fall in 2009 of 2.4 percent in FIN traffic, largely stemming from the financial crisis, came as a shock to Swift.
The Society already looked to be in a rather more precarious position than in the past, with an increasing number of alternatives to its own network. The likes of BT Radianz and Travelex are gunning for Swift.
BT Radianz is an 'additional service specifically for the financial services sector that sits on top of BT's global physical platform', in the words of Chris Pickles, head of marketing, financial markets and wholesale banking at BT. 170 countries are covered by the BT network, while BT Radianz is available in about 64 of those. It competes head to head with Swift. Both provide secure messaging to Euroclear users, for instance. Out of 1700 member-firms of Euroclear, 1600 use BT, according to
Pickles. At the same time, Swift is also a client of BT. While the core part of the network in Belgium and America is managed by Swift, all the connections between Swift customers and that Swift network are managed by four different communications companies, one of which is BT. Over 1000 Swift users have BT to connect to Swift.
Swift's core business has traditionally been in servicing the cross-border payments industry. UK banks, for example, use Vocalink, not Swift, for their domestic payments. 'About 90 per cent of transactions, as a rule of thumb, are domestic,' so the market segment addressed by Swift is 'very, very small and is not sizeable in business terms', observed Pickles. Swift can point to some uptake for domestic traffic and intends to increase this, in part reflected in the decentralisation and 'go local' aspects of its current strategy.
Travelex is less established in this domain but has announced a service called Geo for Financial Institutions, which uses its existing payments network, with its links to local clearing houses around the world. Travelex's first taker is Rakuten, an online marketplace in Japan and one of the largest e-commerce companies in the world. It is using Geo to provide an international payments platform for its bank customers in Japan, integrating its online system with Geo on a white label basis.
There has been consolidation as national entities have sought to expand their geographical presence, take advantage of economies of scale and broaden their services. Tying much of the payments market together on the cross-border front has been Swift. Bank-owned and highly influential in the standards-making process, it has been highly successful over several decades but times are changing. A fall in 2009 of 2.4 percent in FIN traffic, largely stemming from the financial crisis, came as a shock to Swift.
The Society already looked to be in a rather more precarious position than in the past, with an increasing number of alternatives to its own network. The likes of BT Radianz and Travelex are gunning for Swift.
BT Radianz is an 'additional service specifically for the financial services sector that sits on top of BT's global physical platform', in the words of Chris Pickles, head of marketing, financial markets and wholesale banking at BT. 170 countries are covered by the BT network, while BT Radianz is available in about 64 of those. It competes head to head with Swift. Both provide secure messaging to Euroclear users, for instance. Out of 1700 member-firms of Euroclear, 1600 use BT, according to
Pickles. At the same time, Swift is also a client of BT. While the core part of the network in Belgium and America is managed by Swift, all the connections between Swift customers and that Swift network are managed by four different communications companies, one of which is BT. Over 1000 Swift users have BT to connect to Swift.
Swift's core business has traditionally been in servicing the cross-border payments industry. UK banks, for example, use Vocalink, not Swift, for their domestic payments. 'About 90 per cent of transactions, as a rule of thumb, are domestic,' so the market segment addressed by Swift is 'very, very small and is not sizeable in business terms', observed Pickles. Swift can point to some uptake for domestic traffic and intends to increase this, in part reflected in the decentralisation and 'go local' aspects of its current strategy.
Travelex is less established in this domain but has announced a service called Geo for Financial Institutions, which uses its existing payments network, with its links to local clearing houses around the world. Travelex's first taker is Rakuten, an online marketplace in Japan and one of the largest e-commerce companies in the world. It is using Geo to provide an international payments platform for its bank customers in Japan, integrating its online system with Geo on a white label basis.
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