1. Workers’ Remittances Barbara Sacchi Senior Account Director - SWIFT Roma, 26 Novembre 2009 New perspectives, new opportunities

2. 2 Market overview Market: International migrants  200 million Financial flows  USD 400 billion Industry revenue  USD 15 billion Annual transactions  1 to 1.5 billion Average transaction value  +/- USD 300 A remittance is a cross-border, person-to-person payment of relatively low value.

3. February 2006 3 Immigration in Italy Albania>310.000 Rumenia>240.000 China>100.000 Ukraine>90.000 Philippines>80.000 Poland>65.000 India>45.000 Morocco>290.000 Tunisia >60.000 Senegal >50.000 Egypt>40.000 23% 15% 10% A r e a l i t y o f m o r e t h a n 2, 5 m i l l i o n p e o p l e Peru >40.000 Ecuador >40.000

4. 4 Issues and options for Bank service delivery 2.Build a proprietary network 4.Build a bilateral service with a correspondent 3.Use open correspondent banking arrangements Cost scalability Poor service Options: Issues: 1.Open correspondent arrangements do not deliver price and time transparency for consumers 2.Processing is inefficient and costly for banks 1.MTO franchise Commercial autonomy

5. Regulators benchmark the quality of service World Bank remittances price database –LAUNCHED SEPTEMBER 2008! –Remittanceprices.worldbank.org Main findings : Transparency insufficient in some corridors Transaction timelines vary from same day to 10 days and unpredictable In general, banks are more costly and slower than MTOs Corridors from Saudi Arabia, Singapore, Spain and USA are less expensive than average Corridors from South Africa, Germany, Japan and the Netherlands among the most expensive Biggest reductions in Saudi Arabia and Italy Reforms to National Payments Systems crucial Workers' Remittances Seminar - Dubai, 28 October 20095

6. G20 objective 6 Observation In many remittances corridors the cost of sending remittances is still high relative to the often low incomes of migrant workers and their families Objective Reduce average cost of sending remittances globally over 5 years Action plan Step 5 out of 8 Heal the (cross-border) world: Recent developments around international networks and messaging services (e.g. dedicated SWIFT message for workers’ remittances) have the strong potential to significantly reducing the cost of clearing and settlement internationally and should be encouraged Based on presentation at Sibos 2009 by Massimo Cirasino – Head of Payments Systems, World Bank Workers' Remittances Seminar - Dubai, 28 October 2009

7. Workers’ remittances – options from SWIFT 7 Purpose built for cross- border person-to-person For new correspondents, new payment instruments Options Solution for workers remittances MTOs and Exchange Houses traditional banking Workers' Remittances Seminar - Dubai, 28 October 2009 Connect in MA-CUGs Category Group1 and 2 New since September New since April FIN MT 101 and 103 ACHs and national payment systems SEPA Exists today

8. Workers’ remittances – options from SWIFT 8 Provides time & price transparency + easy of use to end-customers Reduces time and cost to set up agreements Supports any type of retail payment product Is commercially and brand neutral Options Solution for workers remittances MTOs and Exchange Houses Traditional banking Workers' Remittances Seminar - Dubai, 28 October 2009 Connect in MA-CUGs Category Group1 and 2 FIN 101 / 103 XML transactions in SEPA ACHs

9. MT/FIN service framework for P2P payments 9 sender Beneficiary MT103 MT202 MT950 SWIFT FIN characteristics : used for 20+ years by SWIFT community for correspodent banking broadly used for Corporate ang high value payments in correspondent banking P2P payments not identified and not processed differently from other payments Sending bank Receiving bank

10. SWIFT value proposition for P2P payments 10 maturityCounterpartsService level EfficiencyScalability MT/FIN20+ years Widely used in correspondent banking Existing correspondants Account Low speed Bilateral WR MX FileAct 5/6 years (SEPA) MT/MX migration New correspondants New Instruments High speed Rulebook Certification Agreement template

11. Workers’ remittances – options from SWIFT 11 Provides time & price transparency + easy of use to end-customers Reduces time and cost to set up agreements Supports any type of retail payment product Is commercially and brand neutral Options Solution for workers remittances MTOs and Exchange Houses Traditional banking Workers' Remittances Seminar - Dubai, 28 October 2009 Connect in MA-CUGs Category Group1 and 2 FIN 101 / 103 XML transactions in SEPA ACHs

12. New membership categories 12 Group 1 - Supervised Financial Institution –Engages in payment, securities, banking, financial, insurance, or investment services or activities, and that, for such purposes –Is licensed by, authorized by or registered with Financial Market Regulator Group 2 - Non-Supervised Entity Active in Financial Industry –Main activity, engages in payment, securities, banking, financial, insurance, or investment services or activities to Supervised Financial Institutions and/or to third parties unrelated to the Non-Supervised Entity –Is not subject, for such purposes, to supervision by Financial Market Regulator Workers' Remittances Seminar - Dubai, 28 October 2009 Easy for exchange houses to join SWIFT

13. Workers’ remittances – options from SWIFT 13 Provides time & price transparency + easy of use to end-customers Reduces time and cost to set up agreements Supports any type of retail payment product Is commercially and brand neutral Options Solution for workers remittances MTOs and Exchange Houses Traditional banking Workers' Remittances Seminar - Dubai, 28 October 2009 Connect in MA-CUGs Category Group1 and 2 FIN 101 / 103 XML transactions in SEPA ACHs

14. 14 Workers’ remittances objectives Deliver a robust end-customer value proposition –time transparency –price transparency –ease of use Bring scalability to bilateral bank services Support any type of retail payment product Remain commercially and brand neutral

15. A business and technical framework for bilateral clearing and settlement 15 Business frameworkTechnical framework Business Contract Market Practices Reference Data Messaging Standards Messaging Services => Commercial flexibility => Interoperability, efficiency, scalability

16. Service framework fit in the person-to-person payments ecosystem 16 DebtorCreditorAgent Participant Settlement Agent Bilateral Contract Bilateral Service Level Template Market Practices Service Levels, Product Groups, Charges & FX Practices Reference Data Participant and Agent Capabilities and Points of Service Messaging Standards Instruction, Reject, Return & Status Messaging Services FileAct Store & Forward 6.1

17. 17 Market Practice Rulebook - Participants - Participants’ Agents - Service levels (instant, urgent, non-urgent) - Two product groups (account & cash disbursement) - Transaction ID specification (sender defined) - OUR (DEBT) charging default - FX guidelines - Reject/returns charging practices - Definition of sorting, transmission etc. - Transmission timing relative to service level - Gross bilateral settlement - Serial method recommended, but guidelines for Cover incl. - No restrictions on provider or currency choice Participation Products Charging practice Clearing Settlement

18. 18 Ref. data FileAct S&F ISO UNIFI 20022 Architecture Rules + Guidelines Settlement Sender Beneficiary Agent s Distribution network sending country Distribution network Receiving country participants MT cover payment participantsAgent s End-to-end service conditions Solution for workers’ remittances

19. Example: La Caixa About La Caixa Third F.I. in Spain, first in retail banking 11 million customers 5.200 branches in Spain, 8.000 ATM Workers’ remittances business 6 years of experience 10% of customers are immigrant 3 main corridors: Latin-American, Morocco and Eastern Europe. 1,5 million remittances in 2008 Current situation 14 countries, 25 partner banks 3 channels: Internet, MT103 and FileAct. 12 different solutions (different formats, files, status info, returns…) Each agreement: minimum 6 months Benefits SWIFT workers’ remittances Standardised definitions Technical framework similar to SEPA (ISO 20022 XML pacs) Centralised information database: all we need to know about our counterparties. Complemented with Integrator Expectation Each new agreement: implementation cost 80% lower Time to market new counterpart: reduced to 2 months 19 Workers' Remittances Seminar - Dubai, 28 October 2009

20. 32 participants to Workers’ Remittances 20 Americas (14)EMEA (14)Asia Pacific (4) Banco do Brazil Banco Guayaquil

21. 14 implementation partners Workers' Remittances Seminar - Dubai, 28 October 200921 VendorRegionFront- office solution Middleware solution back-office solution Service bureau AcotelEMEA & AmericasNoYes No AEGMEANoYes Alliance EnterpriseLatin AmericaNoYes BCGLatin AmericaNoYes No BISEMEAYes No Clear2pay AmericasYes No DecillionAsia pacificYes No EarthportEMEANo YesNo EastnetsEMEA AsiaNoYes IntegratechAsia pacificNoYes No MisysEMEAYes No NetsolvingEMEAYes No ProfixEMEAYes No SynergyEMEANoYes With customer reference

22. Workers’ remittances certification Workers' Remittances Seminar - Dubai, 28 October 200922 Reference data provisioning to SWIFT Directory Payment instructions from/to counterpart Payment status/reject from/to counterpart Payment return after settlement from/to counterpart FileAct service option Delivery notification Test 1 Test 2 Test 3 Test 4 Test 5 Interoperability Time to market Service readiness Enablement speed With new counterpart Service scalability

23. Thank you Barbara Sacchi Senior Account Director South Europe, Middle East & Africa SWIFT Corso G.Matteotti, 10 20121 Milano Italy +39 02 7742 5000 +39 02 7742 5015 +39 02 7742 5090 +39 335 144 74 41 barbara.sacchi@swift.com swift.com T D F M W E