Banking Integration and Technology Update

Damien DugauquierSWIFT Commercial Manager, Corporatese: Damien.dugauquier@swift.com

Mark SuttonTreasury Advisory Group, Asia Pacific, Citi

Agenda

2

• Banking Integration− Challenges & Issues− Current Trends

• SWIFT− Overview− Corporate Connectivity & Why Corporates Are Joining SWIFT

• CGI and ISO 20022 XML Messaging− Common Global Implementation Group− Why XML Messaging Enables Greater Efficiencies

• Citi Interactive Solutions− A New Approach

Banking Integration – Challenges & Issues

3

The multi-banking corporate to bank landscape comprises of a plethora of different network, security and file format options, which create complexity, inefficiency and cost.

Corporates

Internet

Host 2 Host

Outsource

Proprietary

https

sftp

AS2

VPN

Leased Line

pgp

ssl

Entrust

Proprietary

MT101

IDOC

PAYMUL

Proprietary

Local

Channel

Connection

Security

File Format

Centralization of treasury and

operations Automation of

processing and reconciliation

Centralization of treasury and

operations Automation of

processing and reconciliation

Consolidation of connectivity channels

Simplify technical solution and reduce potential failure points by replacing

various bank-proprietary connectivity channels with single secure, robust and scalable bank-neutral network, such as

SWIFTNet.

Rationalisation of banking relationships

Reduce the integration effort and achieve greater consistency of

services by consolidating Treasury and SSC activity around fewer banking partners offering wide

geographical and functional footprint.

Harmonisation of file formats

Achieve efficiency by building the process around strategic file format.

This can be either existing core format or new industry standards,

such as ISO 20022 XML

Corporate

ERP

TMSISO20022

Industry Standard Connectivity

▲ Flexibility to select banking partners

▲ Scalable and Interoperable

▲ Single File Format

▲ Single channel

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

▼ Multiple Banking Relationships

▼ Expensive and Complex

▼ Multiple File Formats

▼ Multiple Channels

Corporate

Proprietary Bank Connectivity

ERP

TMS

PAYMUL

EDIFACT

ANSI

Host to Host

Internet Banking

FTP

Internet

Internet

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Ban

kS

yste

ms

Reducing integration points and harmonising formats are key to achieving higher centralisation and automation for corporates and the public sector.

Best Practices to Achieve Centralisation and Automation

4

A member-owned cooperative by and for the financial services industry

A platform to exchange financial information securely and reliably

Brings financial community together to work collaboratively to shape market practice, define standards and

debate issues of mutual interest

1 0 , 0 0 0 + C U S T O M E R S S P R E A D O V E R 2 1 2 C O U N T R I E S

O V E R 2 0 M I L L I O N M E S S A G E S / D AY 9 9 . 9 9 9 % AVA I L A B I L I T Y

COMMUNITY PLATFORM STANDARDS

About SWIFT

Corporate

Accountspayable

Accountsreceivable

Treasury

Other

Standardised gateway

Corporate

e-banking Y

host to host X

e-banking Z

VAN

Internet

Leased line

Accountspayable

Accountsreceivable

Treasury

Other

Multiple bank channels Single, standardised gateway

• Global visibility on cash• Cost reduction• Increased control and security• Reduced risk with automation

• Poor global visibility on cash• High cost• Impossible to centralise• Challenge of multiple connectivity channels and 

formats

BenefitsMultiple channels to reach multiple banks, a single standardised gateway

Finance operations without SWIFT

How we can help

Giving you the peace of mind

Provide visibility to cash

Optimize working capital

Reduce cost and risk

Provide flexibility and scalability

Enhance STP through automation

Provide Security, resilience and compliance

Addition of new banking partners and entities with peace of mind

0

200

400

600

800

1000

1200

1400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Num

ber o

f cor

pora

te g

roup

s

Asia Pacific

10% #1

How many corporates are connected to SWIFT?

8

Per corporate group turnover & banking partners

Corporates by annual turnover (USD)

Corporates by number of banking partners

$1-10Bn28%

>$10Bn31%

<$1Bn41%

>20 banks13%

10 to 20 banks21%

5 to 9 banks29%

<5 banks37%

>$10Bn30%

$1-10Bn34%

<$1Bn36%

63% of SWIFT-connected corporates deal with 5 banks or more

64% of SWIFT-connected corporates have a turnover >$1Bn

Corporate group connectivity

9

Standards and formats

Messaging FIN FileAct InterAct

SWIFT MTsISO 20022

Domestic formatsISO 20022

• MT 101 for payments

• MT 940 / 942 account statements

• MT 300 FX confirmations

Example • ACH files• Supplier

payments • Direct debits • Salary payments• Domestic bulk

payments

• Exceptions & investigations

ApplicationTreasury and Risk 

ManagementCash Management Exceptions and 

Investigations

FIN & FileAct

MT 798Documents

• Letter of Credits• Bank

Guarantees• Supporting

documentation

Trade Finance

Overview standards and messaging

2ND TIER

Integration Portfolio

Standard Mgmt.• MyStandards

Reference data• Swiftref/BWO

SWIFT messaging platform / Standards• ISO 15022 : MT

messages • ISO 20022: MX

messages

Business flows• Cash mgmt.• Liquidity mgmt.• FX confirmation• Trade / BPO• Treasury• E-statements

Connectivity portfolio

Identity management• 3SKey

Sanctions• ScreeningAccord• Matching• AffirmationsRegulations• Trade reporting

Integration

Training• SWIFT4Corporates• Lite2

Services Portfolio• RFP• integration• Bank onboarding• Standards review

Overview of value-added solutions

Corporate Connectivity

• Aggregation of accounts worldwide• Intra-day / end of day balance• Cash forecasting for borrowing and

investment activities

• Payment factories (A/P consolidation)

• Treasury centralisation • Consolidation of Bank relationships

• Secure and agnostic connectivity to banks

• Compliance to new regulations

Centralisation and consolidation

Multibank cash reporting

Compliance and risk management

• Straight-through-processing• Low TCO

Automation

Finance in SSC Corporate‐to‐bank requirements SWIFT

Manage payments for the group

Manage collections for the group

Provide reporting internally

New revenue from better cash management

Actual cost savings

Opportunity cost savings

Risk management

Building your business case

In short: why are corporates joining SWIFT?

13

SWIFT Corporate Connectivity – Flexibility & Choice

14

SWIFT connectivity methods should be evaluated based on features, and costs to ensure the right fit for the corporate.

Internet

Service bureau or Member/Concentrator

VPN

Internetor VPN

Web serverWork flow

SWIFTAlliance

SWIFT

Network partners

VPN

VPN

Direct Connection

Very large volumes of messages and files

Manage your own SWIFT connection

Service Bureau

SWIFT Alliance Lite 2

Large volumes of messages and files

Outsource SWIFT connection

Volume no longer restricted

Solution does not rely on another third-party

Main Characteristics Popularity Indicative Cost

30% €15–50k

per annum

Main Characteristics Popularity Indicative Cost

Main Characteristics Popularity Indicative Cost

29% €10–25k

per annum

41% €5–10k

per annum*Source: SWIFT: based on new

corporate customers in APAC since Jan 2013

ERP

SWIFT Infrastructure

Paymentfactory

Shared Service Centre

FIN (individual messages)Payments (MT101) and statements (MT940/2) and FX confirmations

FileAct (File transfer)Transport any format; payments files, iDOC, ISO 20022, ACHs, BAI formats etc

SWIFTNet

ERP(s)ERP(s)

Treasury Workstation

Bank

Bank

Bank

Bank

Bank

Cash & Treasury

Classic SWIFT Implementation Model

Destination Architecture: Selecting the Optimum Solution Model

16

Each corporate operating model sets unique priorities for banking channel services. Citi has developed a rich set of solutions tailored for specific client needs.

Local or Decentralised

Model

Centralised Treasury

Shared Service Centre

CitiDirect BE

CitiConnect

SAP ERP Integrator

Financial ServicesNetwork

Operating Structure Integration Options Considerations

Rationalise

Workflow

Approvals

CentralizedProcessing

HarmonizedFormats

The Pros and Cons – Proprietary Connectivity vs. SWIFT

Pros▲ Once investment made, lower service and usage fees

▲ No extensive agreements

▲ Fewer hops make connectivity troubleshooting easier

Cons▼ Multiple bank connections result in higher maintenance costs

▼ May need to maintain multiple standards in connectivity, security

17

There are considerations for both bank proprietary and SWIFTNet connectivity, including the number of connection points, implementation timeline, cost efficiency etc.

Bank Proprietary Host-to-Host Connectivity Solutions SWIFTNet Connection

Pros▲ One connection. Service Bureau manages connectivity to SWIFT

and through SWIFT to banks

▲ Cost efficient on-boarding and migration of banks

▲ Proven reliability with over 99.99% availability, robust security

Cons▼ Agreements required by banks and SWIFT (and Service Bureau,

where appropriate)

▼ Network charges will be applied by SWIFT under the standard model – sender pays

Internetor VPN

Bank 3

Bank 2

VPN

VPN

VPN

Alliance Lite 2

Internet or VPN

VPN

Bank 3

Bank 2

VPN

VPN Service Bureau

Direct

SAP Financial Services Network – Outsourcing Integration

SAP® Financial Services Network is an innovative cloud-based network that offers a single connection point across multiple services, businesses, and financial institutions. It provides secure connectivity and tight process integration on a platform that accommodates future integration needs. This scalable network can deliver existing services while supporting the development and deployment of new ones.

18

Corporations Banks

Pro

cess

ing

Sys

tem

s

Con

nect

or

ER

PC

onne

ctor

ER

P

Direct

Networks

Platform Services

SAP Cloud

SAP Financial Services Network

Pay

men

ts

Sta

tem

ents

Rem

ittan

ce

Cre

ditC

ards

Mon

itorin

g&

Ale

rting

Oth

er S

ervi

ces

Business Cockpit

TMS Middleware

orFTP Server

ISO 20022 for corporate-to-bank exchange

More than 60 banksreceiving

ISO 20022 paymentinitiation

messages

Around90 members

(corporates and banks)defining

common global implementation

guidelineshttp://www.swift.com/CGI

CGI Drivers

CGI is driven by customer demand for multibank coordination of implementations

– Intended specifically for global, multi-country, multi-bank and multi-instrument implementations that the participating banks can commonly accept as ONE of their implementations.

– Focused on the general message structure and then successful creation of individual transactions that can be executed by the participating banks.

– Published and endorsed from appropriate communities. – Engaged through active corporate partnership.

“A corporate can use the same message structure for all their payments with all of their transaction banks reaching any payment system across the globe.”

ISO 20022 - Payments

Corporate A

Bank 1 Bank 2

ISO 20022 instruction templates Corporate B

Credit Transfers / Direct Debits / MandatesE

xcep

tions

& In

vest

igat

ions

Cre

dit T

rans

fer I

nitia

tion

Exc

eptio

ns &

Inve

stig

atio

ns

Dire

ct D

ebit

Initi

atio

n

Adv

ice

& S

tate

men

t

Adv

ice

& S

tate

men

t

Exceptions & Investigations

Acc

ount

Rep

ortin

g R

eque

st

Not

ifica

tion

to R

ecei

ve

Cha

nge/

Verif

y A

ccou

nt Id

entif

icat

ion

Man

date

s

Cre

dito

r Pay

men

t Act

ivat

ion

Req

uest

Cre

dito

r Pay

men

t Act

ivat

ion

Req

uest

Ban

k A

ccou

nt M

anag

emen

tChange / Verify Account Identification

Creditor Payment Activation Request

Ban

k S

ervi

ces

Billi

ng

Ban

k S

ervi

ces

Billi

ng

ISO 20022 XML Messaging – Enabling Greater Efficiency

Collaboration – All the key stakeholders have been actively involved in the evolution

Commitment – Both the banks and the vendors have committed to supporting the XML messaging following the initial corporate requirements

Governance Model – The standard sits firmly with the control of ISO, with UN/CEFACT agreeing to support the same standard

Corporate Position – To have a generic open standard that will be supported by any bank enabling a consistent automated process workflow to be established

Industry Foundations

The Benefits

Simplified Business Rules: The original layer of payment level business rules used to filter data contained in the master vendor record has been moved from the corporate to the bank domain

Data Overpopulation: This new concept allows you to effectively provide your master vendor record data within the ISO XML messaging format. This unique concept allows you to build a single common global template, subject to agreement from your partner banks

Portability and Reduced Integration Costs: Through the achievement of a single common global template, it will provide the opportunity to have a plug and play financial message that removes a common barrier to changing or adding banks – the high cost of integration

Improved Operational and Financial Efficiencies: ISO 20022 XML allows simplification through standardisation. With a common implementation, there is a golden opportunity to streamline internal processes, improve monitoring and controls and increase visibility to optimise the use of all balances

ISO 20022 XML Messaging: Salient Points

Standardisation: ISO 20022 XML messaging provides the unique opportunity to standardise both the A/P and A/R processes, through using a single global financial messaging format.

Bank Agnostic:Building on the work of the CGI, a harmonisation exercise provides the unique opportunity to establish a single interpretation of the payment message, which provides a bank agnostic and therefore more portable interface.ISO 20022 XML removes the complexity and cost that exists today in the file format space.

Low Cost Environment:

Through a combination of establishing a core messaging template, the work of the CGI and the richness of the XML message, there is a clear opportunity to establish a truly low cost, low maintenance cash management environment.

Functionality: ISO 20022 XML supports all payment methods, including domestic and urgent wires, domestic ACH, cheques and provides compliance with SEPA..

Trends: Citi now has over 500 clients live processing in excess of 3.4m transactions per month across 91 countries. Over 40% of our H2H file based activity is now via ISO 20022 XML messaging, with a clear market trend that corporates are looking to adopt because of the clear benefits around simplification through standardisation.

Case Studies

HuaweiISO 20022

Testimonial

Global Payment Centre

Accounts Payable & Receivable

Treasury OR

AC

LE -

Sun

gard

The technology transformation project at Huawei has been a vital step in achieving our strategic growth plans. Working with SWIFT has been a positive experience, enabling us to demonstrate industry best practices in banking and

connectivity and provide leadership for other Chinese multinationals

“ “Cash management

Entity2SWIFT

Infrastructure SWIFTNet

Entity1Bank

Bank

Bank

Bank

Bank

IPLA

CSV

CSV

SFTP: multiple systemsCostly, complex and unstable

Host-to-Host: Insufficient to cover all banksLimited to certain number of banks and any

change generates incremental cost

Payroll: Time consuming Manual processing of spreadsheet in some

cases

Pain points

• Standardised output from back-office

• Conversion to appropriate format

• Payments channeled over SWIFT to banking partners and bank statements

received

New set-up

ISO20022

MT101/940

Entity3 CSV

Cash management

26

Case Study Shared Service Center in Malaysia

A B O U T

Testimonial

Accounts payable and treasury

Caterpillar

“We recognised the need to establish a standard approach to connectivity across the business, including both treasury and accounts

payableMartin Bina

Treasury Operations Manager, EMEA Caterpillar Inc.

MT 101 / ISO 20022 pain

“

Payments

Citi Interactive Solutions

29

A New Approach…..

Trade Module - Benchmarking

The Benefits

Liquidity Module - Concentration

The Benefits

Citi believes that sustainability is good business practice. We work closely with our clients, peer financial institutions, NGOs and other partners to finance solutions to climate change, develop industry standards, reduce our own environmentalfootprint, and engage with stakeholders to advance shared learning and solutions. Highlights of Citi’s unique role in promoting sustainability include: (a) releasing in 2007 a Climate Change Position Statement, the first US financial institution to doso; (b) targeting $50 billion over 10 years to address global climate change: includes significant increases in investment and financing of renewable energy, clean technology, and other carbon-emission reduction activities; (c) committing to anabsolute reduction in GHG emissions of all Citi owned and leased properties around the world by 10% by 2011; (d) purchasing more than 234,000 MWh of carbon neutral power for our operations over the last three years; (e) establishing in2008 the Carbon Principles; a framework for banks and their U.S. power clients to evaluate and address carbon risks in the financing of electric power projects; (f) producing equity research related to climate issues that helps to inform investorson risks and opportunities associated with the issue; and (g) engaging with a broad range of stakeholders on the issue of climate change to help advance understanding and solutions.

Citi works with its clients in greenhouse gas intensive industries to evaluate emerging risks from climate change and, where appropriate, to mitigate those risks.

efficiency, renewable energy and mitigation

[TRADEMARK SIGNOFF: add the appropriate signoff for the relevant legal vehicle]

© 2014 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2014 Citigroup Global Markets Limited. Authorized and regulated by the Financial Services Authority. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used andregistered throughout the world.

© 2014 Citibank, N.A. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2014 Citigroup Inc. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

© 2014 [Name of Legal Vehicle] [Name of regulatory body.] All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

IRS Circular 230 Disclosure: Citigroup Inc. and its affiliates do not provide tax or legal advice. Any discussion of tax matters in these materials (i) is not intended or written to be used, and cannot be used or relied upon, by you for the purpose of avoid ing any tax penalties and (ii) may have been written in connection with the "promotion or marketing" of any transaction contemplated hereby ("Transaction"). Accordingly, you shou ld seek advice based on your particular circumstances from an independent tax advisor.

In any instance where distribution of this communication is subject to the rules of th e US Commodity Futures Trading Commission (“CFTC”), this communication constitutes an invitation to consider entering into a derivatives transaction under U .S. CFTC Regulations §§ 1.71 and 23.605, where applicable, but is not a binding offer to buy/sell any financial instrument.

Any terms set forth herein are intended for discussion purposes only and are subject to the final terms as set forth in separate defini tive wri tten agreements. This presentation is not a commitment to lend, syndicate a financing, underwrite or purchase securities, or commit capital nor does i t obligate us to enter into such a commitment, nor are we acting as a fiduciary to you. By accepting this presentation, subject to applicable law or regulation, you agree to k eep confidential the information contained herein and the existence of and proposed terms for any Transaction.

Prior to entering into any Transaction, you should determine, without reliance upon us or our affil iates, the economic risks and merits (and independently determine that you are able to assume these risks) as well as the legal, tax and accounting characterizations and consequences of any such Transaction. In this regard, by accepting this presentation, you acknowledge that (a) we are not in the business of providing (and you are not relying on us for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any Transaction, (c) you should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) you should apprise senior management in your organization as to such legal, tax and accounting advice (and any r isks associated with any Transaction) and our disclaimer as to these matters. By acceptance of these materials, you and we hereby agree that from the commencement of discussions with respect to any Transaction, and notwithstanding any other provision in this presentation, we hereby confirm that no participant in any Transaction shal l be limited from disclosing the U .S. tax treatment or U.S. tax structure of such Transaction.

We are required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with us. We will ask for your complete name, street address, and taxpayer ID number. We may also request corporate formation documents, or other forms of identification, to verify information provided.

Any prices or levels contained herein are preliminary and indicative only and do not represent bids or offers. T hese indications are provided solely for your information and consideration, are subject to change at any time without notice and are not intended as a sol icitation with respect to the purchase or sale of any instrument. The information contained in this presentation may include results of analyses from a quantitative model which represent potential future events that may or may not be realized, and is not a complete analysis of every material fact representing any product. Any estimates included herein constitute our judgment as of the date hereof and are subject to change without any notice. We and/or our affil iates may make a market in these instruments for our cus tomers and for our own account. Accordingly, we may have a position in any such instrument at any time.

Although this material may contain publicly avai lable information about Citi corporate bond research, fixed income strategy or economic and market analysis, Citi pol icy (i ) prohibits employees from offering, directly or indirec tly, a favorable or negative research opinion or offer ing to change an opinion as consideration or inducement for the receipt of business or for compensation; and ( ii) prohibits analysts from being compensated for specific recommendations or views contained in research reports. So as to reduce the potential for conflicts of interest, as well as to reduce any appearance of conflicts of interest, Citi has enacted policies and procedures designed to lim it communications between its investment banking and research personnel to specifically prescribed circumstances.