Information Security Identification: Confidential Global Payments Best Practices Laura McGortey, CTP Managing Director Multicurrency Services BNY Mellon June 6, 2012

Information Security Identification: Confidential 2 Key Topics What in the World is Going On? Regulatory Considerations Payment Systems and Charging Options Options for Managing Global Payments

Information Security Identification: Confidential What are your international cross-border payment pain points? Cost Beneficiary never receives full value Delivery is often late Multiple global payment providers, inconsistent reporting Other? What in the World is Going on? 3

Information Security Identification: Confidential The theme is transparency; for example: US – Dodd Frank: Payments from consumers’ US-based accounts to any beneficiary outside the US Sweeping requirements for full transparency regarding FX rate, settlement date, local taxes, any fees – prior to transaction initiation Infrastructure challenges Europe: Payment Services Directive (PSD) Provides fee transparency for intra-Euro zone payments, no deductions or lifting fees Regulatory Considerations 4

Information Security Identification: Confidential There are many different Payment Systems—each best suited for certain types of transactions Payment Systems 5 Payment SystemTypically Used ForExamples ACH, IACH or local low value bulk High volume, low value Consumer or commercial payments US – ACH Europe – PeACH, SEPA Debit or Credit (aka EBA Step2) UK – BACS, Faster Payments China – BEPS India - NEFT Wire (RTGS – real time gross settlement) Low volume, high value Consumer, commercial or wholesale US – Fedwire Europe – Target2 UK – CHAPS Hong Kong – CHATS China - CNAPS Wire (RTNS – real time net settlement) Low volume, high value Consumer, commercial or wholesale US – CHIPS Europe – EBA EUR01 or Step1

Information Security Identification: Confidential Payment types: Accounts Payable: Can be ad hoc or recurring, remittance data is very important as is payment in full (limited lifting fees or deductions) Payroll, Pension: Repetitive, pre-planned; therefore real time payment systems not required, limited need for remittance data Intracompany Payments: Time sensitive, high value Consumer Remittances: Often time sensitive, low value Types of Payments 6

Information Security Identification: Confidential Wire (Funds Transfer, RTGS, RTNS, etc) Beneficiary Deductions are common Options for paying in full (Full Pay, OUR) can be expensive Most often used for Accounts Payable, Intracompany Payments, Financial Settlements, Consumer Remittances ACH or IACH Not available to all areas Local low-value bulk clearing systems are not interoperable and do not ‘talk’ with each other Payment services providers may offer solutions for streamlining and accessing these platforms Limited remittance data Most often used for Payroll, Pension, Accounts Payable (where extended remittance data is supported) Often supports “payment in full” schemes with less cost to the remitter than Wire payments Considerations Regarding Payment Systems 7

Information Security Identification: Confidential Important Considerations Regarding Charge Types 8 Charge Indicator (SWIFT field 71 or Fedwire 6100) Utilized for cross border payments outside the US Charge Indicator BENSHAOUR How Charged?Deduct from the principal of the transaction Varies per market – sometimes treated as BEN, sometimes limits to only explicit transaction fees for the sender and receiver The initial sending bank Who Charges?Any bank in the payment ‘chain’ Initial sending bank charges remitter; beneficiary bank charges receiver All banks in the ‘chain’ What is Charged?Various amounts can be flat or percent Amounts can vary however must be disclosed Various amounts can be flat or percent Key ConsiderationsMultiple deductions are possible based on how many Financial Institutions ‘touch’ the payment Typically payments are only treated as SHA in certain regulated markets (e.g., within the EU, within the US, etc). Multiple charges can be received per transaction. Sending bank must cover costs therefore a costly payment option for the remitter

Information Security Identification: Confidential How Many Parties Might be Involved in Your Cross Border Wire Payment? 9 Sending Bank Beneficiary Bank ABC Co. Sending Bank’s Correspondent Bank Central Bank – RTGS clearing – local market XYZ Ltd. Beneficiary Bank’s Correspondent Bank Number of parties expands opportunity for lifting fees and deductions. Be certain to know how your bank or payment services provider is handling charge indicators and lifting fees.

Information Security Identification: Confidential Options for Managing Global Payments Local Accounts Process payments from company owned currency accounts Accounts may be centralized and managed from one location or localized and managed by local staff Payment initiation and data reporting may require access to various electronic banking platforms Can be costly to manage, reconcile Centralized Account Account may be localized or centralized One account, one currency to fund all payments, to all locations, all currencies Streamlines management via one payment portal and consolidated reporting Access to multiple payment types Often there is more flexibility regarding charging options including easier access to “payment in full” type services 10

Information Security Identification: Confidential Example of a Centralized Account Payments Portal 11

Information Security Identification: Confidential 12 This presentation is intended to provide a general overview of our services and is not an offering or commitment to provide any credit facilities or services. ©2012 The Bank of New York Mellon Corporation. All rights reserved.