Gil Gadot– EVP & CTO, Managing Director APAC 8th April, 2011 Low Value Payments & Payments Hub Session: With the growing volume of low value payments in Asia, the search for interoperability continues Gil Gadot– EVP & CTO, Managing Director APAC 8th April, 2011

Topics Low value payment – traditional definition The “new” low value networks SEPA /FPS/MAMBO Interoperability mobile/Web/EIPP Payment Spider Web Payments HUB topology and benefits

Low Value Payment – Traditional Definition Relatively low denomination payment Delivered and processed in a batch Non-urgent Cleared and settled over 24-72 hours Domestic & Single Currency Revocable Low care – i.e. no repair Rejects are asynchronous Examples: ACH, BUCS, SEPA, GIRO B2B B2C

Low Value - New Networks Not necessarily low denomination payment Delivered and processed as batch or single payment Non-urgent Cleared in 15 seconds and settled over 24-72 hours Domestic & cross border Web & mobile friendly Revocable Low care – i.e. no repair Rejects are asynchronous UK FPS, CNAPS 2, MAMBO… B2B B2C P2P

Europe - TARGET EBA SEPA Simplification of Market Infrastructures NATIONAL MARKETS LOCAL CLEARING SYSTEMS IRIS ELLIPS TOP TBF SPGT RTGSplus BI - REL SLBE CHAPS Euro ARTIS HERMES FRANCE GERMANY BELGIUM SPAIN PORTUGAL ITALY GREECE AUSTRIA IRELAND LUXEMBOURG NETHERLANDS FINLAND ACH RTGS TARGET ‘INTERLINKING NETWORK’ LINKED EU BANKS SINGLE REGIONAL NETWORK (TARGET 2) ACH NETWORK (SEPA) NET SETTLEMENT (EBA EURO1) NET SETTLEMENT (EBA Euro1) Disparate National Infrastructures Single Pan-European Infrastructure PE-ACH CSM NON-PE-ACH CSM INTER-OPERABLE NETWORK by 201x Settlement Dec 31, 2006 E50,000 Governance European is driving now. Regulation change all the time.. You need a system to achieve it.

Faster Payments - UK Originating Credit Institution Bank of England Beneficiary Credit Institution Direct Agency - Receiver Direct Agency - Sender Member –Direct Sender Submitting member Sending FPS institution Originating Credit Institution Central Infrastructure Member –Direct Receiver Submitting member Sending FPS institution Originating Credit Institution Performance SOA Standards – ISO20022 BAM integration Pure Web client Corporate - DCA Third Party Beneficiary – Direct Receiver Members are the 13 UK banks, which agreed to meet scheme’s membership rule Direct Agencies are sponsored by Members, who take full responsibility for them in FPS Corporates are customers of Members or Agencies OCI’s and BCI’s (aka Indirect Agencies) are sponsored by a Member and communicate with FPS via a Member SIP Clears in 15 seconds

MAMBO – My Account , My Bank Online Australia MAMBO intends to support the following functions: Bill Presentment and Payment – allows electronic delivery of bills to a customer’s internet bank, with seamless integration with BPAY payment functionality Payment Request and Payment – similar to above, in summary transaction form. More suitable for repeat or ad-hoc payment arrangements or schedules thereof Person-to-person Payment Request and Payment – enables address holders to request and receive payment in real-time without disclosing BSB and account number Payment With Advice to Address – delivery of remittance information with payment to address Real Time Notification with Payment Non-Value Items Delivery – delivery of documentation or commercial communications Online Payment – initiating and authorising an online payment

New Network Characteristic 24/7/365 Heavy burden on the bank’s infrastructure Also need “parallel account structure” Real time Goal of 15 seconds end-to-end (customer-to-customer) Goal redefined by removing Payment capture and pre-processing: Seconds to hours Beneficiary advising: Approximately 20 min. Posting: 2 hours to next day Tiered processing Bulk & retail periods (00:30 – 04:00 & 04:00 – 00:30) Payment Caps Not currently used Risk controls Different limits for bulk (100K) and individual payments (10K) Different certainty of acceptance (@ the receiving bank)

Low Value Interoperability Mobile/Cash management/EIPP

Existing Architecture – The Problem Payment & Treasury Systems Low Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Cards Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Check Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. High Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Teller Core Systems Channels DDA Call Center Website G/L IVR Reconciliation Mobile Source: Financial Insights

Existing Architecture MNC – The Problem X4 Payment & Treasury Systems Low Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Cards Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Cards Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Cards Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Check Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Cards Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. High Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Check Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. High Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Check Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. High Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Check Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. High Value Pymts Pricing Risk & Fraud Mgmt. Security Monitoring & Rptg. Teller Core Systems Teller Channels DDA Teller DDA Call Center Teller DDA Call Center DDA Call Center Website Call Center G/L Website G/L Website G/L IVR Website G/L IVR IVR Reconciliation Mobile IVR Reconciliation Mobile Reconciliation Mobile Reconciliation Mobile Source: Financial Insights

The “Simple” Version of Payments Landscape In Major Markets The complexity of global payment structure. Banks need to compete in a red ocean and blue ocean to be competitive and to serve its customers. Europe SEPA MEPS in Singapore LVTS in Canada Fedwire in US Swift Rtgs Sic in Switzerland UK Chaps 12

Hubs - Solution In Many Other Industries FedEx Airports Guaranteed delivery to anywhere in the USA overnight Hubs concentrate activity Distributed point –to-point connectivity doesn’t scale, is difficult to manage, prone to operational failures and expensive. www.mequoda.com/glossary/h-k/internet-hub/ Simplify. Reduce costs & risks. Urban Development Web Marketing Hub City Transportation Supply Information networks Internet Hub Free content Community Permission-based email Bookmark, RSS relationships

The Payment Hub Combines Interfaces and Functions & Treasury Systems High Value Pymts Unique Functions Interface with Settlement Network Cards Unique Functions Interface with Settlement Network Low Value Pymts Unique Functions Interface with Settlement Network Central Database Check Unique Functions Interface with Settlement Network Payment Services Hub Pricing Risk & Fraud Mgmt. Security Teller Channels DDA Call Center Website G/L Core Systems IVR Reconciliation Mobile Source: Financial Insights, 2007

Services Hub Can Eventually Replace Your Legacy Systems Payment & Treasury Systems High Value Cards Central Database Low Value Check Payment Services Hub Pricing Risk & Fraud Mgmt. Security Interface with Settlement Net Unique Functions Teller DDA Channels Call Center Website G/L Over to Dana IVR Core Systems Mobile Reconciliation Source: Financial Insights, 2007

Payment Services Hub A Payment Hub Is An Intelligent And Central Engine: Capture and mapping of payment information Enabling workflow, business, and regulatory rules Clearing and settlement routing optimization Risk/liquidity mitigation procedures It Employs Service Orchestration: Reacting to events Orchestrating payment services and other banking systems The Payment Hub Is Not: Just a messaging component Just a simple payment router A discrete technology