Slide 1 WorldBank_Workers'_ Remittances_0507_v2 Michael Whyte Payments Market Group Banking Industry Division, SWIFT Retail cross-border infrastructure to support international remittances – the role of SWIFT WorldBank, Washington, 30 May 2007

Slide 2 WorldBank_Workers'_ Remittances_0507_v2 REMITTANCES - background  SWIFT2010 initiative  In 2006 objective to “explore”  Ad-hoc working group formed –Two meetings held – April and September 2006 –Outlined business case and industry requirements: “Multilateral Framework Approach” –Two papers presented to December Board: – IR 427: Workers’ remittances research and consultation report – ER 1010: Workers’ Remittances Advisory Group: Terms of Reference  Advisory Group composed in 1Q 2007  First meeting held on 30 March 2007

Slide 3 WorldBank_Workers'_ Remittances_0507_v2 ISSUES & REQUIREMENTS - SWIFT based P-to-P payments IssuesProposed Solutions For Consumers: Lack of price transparency Uncertainty of value date Too Complex For Banks: Hundreds of market practices Low STP High processing costs Settlement uncertainty Low levels of scalability Expected Results For Consumers: Price-transparency Value date certainty Ease of use For Banks: Clear market practice High scalability Settlement guarantees High STP rates = Lover costs MUTILATERAL FRAMEWORK APPROACH Comprising 1.Market practices 2.Messaging standards 3.Technical architecture For Authorisation, clearing & settlement of cross border, consumer-to consumer payments

Slide 4 WorldBank_Workers'_ Remittances_0507_v2 SWIFT ROLE  Facilitate definition of standards and usage rules  Facilitate the definition of clearing and settlement market practice  Design the common messaging platform for clearing and settlement  Design enhanced messaging solutions (e.g. message copy) for the clearing and settlement

Slide 5 WorldBank_Workers'_ Remittances_0507_v2 PRODUCT APPROACH Main product group CPA (Cash-payout anywhere) Payment is not addressed to specific disbursing institution Product variants Urgent Pmt ADDRESSED Payment is addressed to specific disbursing institution Urgent Pmt Non-urgent High value- added options Normal Non-urgent High value- added options Normal PremiumCommodity Model MTO Money Transfer Operators BILATERAL Correspondent Banking Two generic product groups identified. Both required, but are separate services from a technical and business model perspective.

Slide 6 WorldBank_Workers'_ Remittances_0507_v2 TRANSACTION FLOWS-“Addressed” Pre- transaction Authorisation/ Initiation Clearing & Settlement – Disbursement Post- settlement Ordering customer Beneficiary customer Sending Banks Disbursing Banks Settlement Banks Product sets + processing capability Quote Handling Charges + FX rate info Issue UTIC Authorize Private message + UTIC + time available File Header Y-copy batch pmts UTIC + Pay Cash Credit A/c product Processing Status Reports Rejects / Returns UTIC Status report Where’s the money?

Slide 7 WorldBank_Workers'_ Remittances_0507_v2 TRANSACTION FLOWS -“Cash Payout Anywhere” Pre- transaction Authorisation/ Initiation Clearing & Settlement – Disbursement Post- settlement Ordering customer Beneficiary customer Sending Banks Disbursing Banks Settlement Banks Product sets + processing capability Quote Handling Charges + FX rate info Issue UTIC Authorize Private message + UTIC + time available UTIC + Pay Cash Processing Status Reports? Returns UTIC Status report Txn upload Txn Search Txn download Where’s the money?

Slide 8 WorldBank_Workers'_ Remittances_0507_v2 ARCHITECTURE REQUIREMENTS - gap analysis Pre- transaction Authorization Clearing & Settlement Post- settlement Product Reference Data: means to communicate products handled, handling charges, and processing time capability Foreign Exchange Rate Data: means to communicate guaranteed execution rate for given time period Unique Transaction Identifier Code: standard to generate UTIC at Point of Service. Needs to be “user-friendly”: customers will need this for authorization and track and trace purposes. Messaging Standards: ISO XML Credit Transfer Messaging Services: FileAct Store & Forward Enhanced FileHeader: FileHeader Y-copy: multiple central settlement agents CPA capability: transaction management application Track and trace: processing status reports Reject/returns: file copied to settlement agent To develop Usage rules Available In development To develop Usage rules Lifecycle Requirements Gap analysis

Slide 9 WorldBank_Workers'_ Remittances_0507_v2 WHERE ARE WE? PHASE Market research Market validation Concept development Concept validation Solution design Solution design validation Solution build Pilot Commercial roll-out Here “Explore” Board approval WRAG set-up Detailed definition of market practice & architecture Bank/Vendor/Regulatory + pilot agreements

Slide 10 WorldBank_Workers'_ Remittances_0507_v2 QUESTIONS?

Slide 11 WorldBank_Workers'_ Remittances_0507_v2 MARKET - facts & stats Financial flows International migrants Consumer reach Transactions Revenues Market share MTO’s Market share banks Market share SWIFT Recorded:USD 250 billion Unrecorded:USD 125 billion 200 million worldwide Directly and indirectly the market touches 650 to 800 million consumers 800 million cross-border transactions in 2005, based on recorded flows only USD 15 billion in transaction related revenues Over 20% 20% to 30% collectively Less than 10%

Slide 12 WorldBank_Workers'_ Remittances_0507_v2 CUSTOMER VALUE PROPOSITION-service implications Price Transparency Guranteed Execution Timeline Ease of use -“If I pay you $100, how many Rupees will be delivered?” - End-to-end price transparency is essential - Banks want choice to offer fixed or floating rate services. - To offer fixed rate, sending bank needs to know disbursing banks handling charges and FX conversion rate before txn initiation -“When will the money be available?” - Reliable value date to beneficiary is essential - Sending Banks need to know Receiving Banks processing capability/ SLA’s before txn initiation - Payment initiation: data required from client needs to be minimal - Track and Trace required: Disbursing Bank needs to keep Sending Bank informed of processing status

Slide 13 WorldBank_Workers'_ Remittances_0507_v2 WRAG OBJECTIVES -IR 427 fully supported  Customer value proposition: fully supported –Price transparency –Guaranteed execution timeframes –Ease of use  “Multilateral framework approach”: fully supported –Very tightly defined market practices –Technical architecture to exchange authorisation, clearing and settlement information  Business ambition: realistic and achievable –10% share increase

Slide 14 WorldBank_Workers'_ Remittances_0507_v2 MARKET PRACTICES & ARCHITECTURE -WRAG key agreements Market practice Product rules Charging practices Settlement practices - Single message standard - Tight, unambiguous rules - Unique Transaction Identifier Code (UTIC) - Means to communicate processing capabilities, SLA’s - OUR charge convention only - No lifting fee’s - Means to communicate handling charges and FX rates - Competitive settlement space - Limited no. of settlement currencies (USD, EUR priority, maybe GBP) - Gross settlement of payments + charges Architecture Addressed Products Cash Payout Anywhere - Syntax: ISO XML Credit Transfer + related messages - Messaging service: SWIFTNet FileAct + Header + Copy - Implementation: Remittances Closed User Group - Refine customer requirement specifications - Develop functional specifications - Business case (build, buy or partner analysis)

Slide 15 WorldBank_Workers'_ Remittances_0507_v WORKING GROUP PARTICIPANTS ABN AmroNetherlands BBVA/Bancomer Transfer ServicesUnited States CitibankUnited States Crédit AgricoleFrance DZ BankGermany Equitable PCI BankPhilippines HBOSUnited Kingdom ICICI BankIndia ING PostbankNetherlands SIAItaly Standard Bank of South AfricaSouth Africa Turkiye Garanti BankasiTurkey

Slide 16 WorldBank_Workers'_ Remittances_0507_v2 WORKERS’ REMITTANCES ADVISORY GROUP Banco do BrasilBrazil Bank of New YorkUnited States BBVASpain CitigroupUnited States Deutsche BankUnited States Equitable PCI BankPhilippines ICICI Bank LtdIndia Intesa San Paolo SpaItaly La CaixaSpain Société GénéraleFrance Standard Bank of South AfricaSouth Africa Standard CharteredSingapore SwisspostSwitzerland