22 OPEN: PAYMENTS, ACcESS, BANKING, MIND

BNY MEllON

BNY MelloN – oNe Year oN Reach and impact of a centralised Global Payments Infrastructure

Bellacosa. “Another example was offering CHAPS clearing in the UK. The capability supported securities cash settlements, but we were able to leverage the hub concept to also roll out direct correspondent bank clearing for our treasury services business. There are also features that we can leverage across the entire business, such as liquidity management. We looked at how we manage intra-bank exposure at the central bank and nostro network levels across the company, not only to monitor and understand exposure, but to allow for forecasting with machine-learning capabilities and control tools, such as throttling, to manage those exposures. We concluded that, with a leading-edge platform and roadmap, we had a good foundation for optimising

changes, our clients had no service disruptions. The quiet was a good thing in this context: no news is good news.”

Beyond paymentsThe Global Payment Infrastructure, though initiated and sponsored by BNY Mellon’s Treasury Services business, touches the company on a wider scale, which is one of the core foundational principles of a payment hub. “With this system, we can quickly adapt to regulatory changes in particular jurisdictions and geographies. A good example would be an EU-based central bank’s request for BNY Mellon to clear and settle using one of our EU bank entities. Accommodating this request supports our investment services business in the market,” says

On a hot summer day in late August, we sit down in New York with Michael Bellacosa, managing director and head of global payments for BNY Mellon Treasury Services, and Doug Gross, general manager enterprise payments for the Americas at FIS, who have worked together on the project from the day BNY Mellon selected Clear2Pay’s Open Payment Framework (now FIS) as the core payment hub for their project.

“If you ask me where we stand today,” Bellacosa says, “I am happy to say we have implemented multiple phases and it works really well, which is great from a business perspective. It does what it is supposed to do, so we can focus on new capabilities and new markets. Most important, in terms of major concerns when you undertake large infrastructure

Having received both a Celent Banker Award and the prestigious The Banker’s Tech Project of the Year 2015 in the payments category, BNY Mellon’s Global Payments Infrastructure project, it is safe to say, continues to attract global attention since we first covered it in last year’s Banking Technology Sibos supplement with an extensive roundtable on the programme. Since going live in January 2014 with its first payment offerings, BNY Mellon’s London branch has significantly increased the number of global currencies it can provide and process through a single system, with the total expected to exceed 120 currencies over time.

But that is only the beginning. The new infrastructure operates as a single platform geared to process payments regardless of their value, initiation method, settlement mechanisms or location. Following a development process that began in 2009, the platform saw a multi-year, multi-phase release with some components still to be released in various locations. The standard and stand-out feature of the platform is its flexibility. With a core payments hub that works in cooperation with various sub-systems through the end-to-end payments process, new services and clearing channels can be introduced to the infrastructure without jeopardising or disrupting the core.

BNY MEllON

23OPEN: PAYMENTS, ACcESS, BANKING, MIND

our offering and working with our global clients to identify how we can extend those features to them from a liquidity management perspective. We explained what we were developing and, client by client, we got incredibly positive feedback that enabled us to push our initiatives to the market. In the process, we modernised our company’s and our clients’ experience.”

Enriched dataAnother topic that is much talked about these days is ‘enriched data’ or how to lift a pure payment into a wider contextual space. If viewed in a larger transactional context, payments can be of huge value in understanding a client’s business and delivering enriched data to the client. Now that the company has a central ecosystem for payments, there are repositories for the data flow from which it can deliver more and more relevant data, faster, to the company’s

clients. This data ranges from liquidity information to trends and flow forecasts on any BNY Mellon account impacted by a given transaction.

On the payments side, a holistic, enriched-data view has already led to a higher degree of STP for both company and client payments, and to an increased understanding of information related to payment processing costs. Making this information available to clients – both payment values and their client-specific data – helps clients better understand their payment flows, and gives clients a total view across the whole spectrum of their payment activities. The company not only gives its clients this view but, on top of that, layers the company’s industry perspective so that clients can benchmark against industry norms.

Gross has been close to the project throughout. “Moving on from the initial ‘plumbing and electrical connections stage,’ however, is no mean feat in terms of operations, as

the infrastructure is connected to a myriad of source systems and the capabilities we created are a result of leveraging the entire infrastructure and bringing data together,” he said. “We are now at a stage where the bank can focus on powerful innovation and this overlay insight prioritises to a high degree which element will

go live next.”

Staying true to ‘openness’At the time of the launch, emphasis was placed on building a truly open industry-standard-based infrastructure. “No one can predict future trends,” Bellacosa notes. “A company can only be ready and prepared with the right open framework.” Bellacosa confirms that the company stays true to its intent for the simple reason that it pays off. “Because of the openness, we have been able to augment and expand the platform quickly and efficiently. From a business perspective, it is incredibly valuable to see how much you can do now that the core open system is in place.”

Gross: “We can relatively easily add new currencies, but even new

“A compAny cAn only be reAdy And prepAred with the right open frAmework”Michael Bellacosa, BNY Mellon

DouG GRoSS, FIS

MICHAeL BeLLACoSA, BNY MeLLoN

crypto-technologies, but they want to be sure that we look at these developments and prepare for it to protect their business. And, in the future, it could very well be that the most valuable piece of a payment is the record, which shows who has

owned an asset” adds Gross.

The bank has got to figure it outBNY Mellon is executing on the company’s mission by growing with clients in terms of types of payments, geographies and currencies: to see where the client is and try to be a few steps ahead. When it comes to data, information and reporting, the company continues to evolve. “Understanding what our clients need tomorrow is key. To gain that understanding I continually speak with our clients around the world. However, we as a treasury services provider owe it to them to have a vision and strategy of our own for the future. Based on this vision, we set out scenarios on how and where we think we need to change our business and then get feedback from clients and industry stakeholders. We get our best input when we put a potential future into a context for our clients that’s aligned to their business activity – ‘what if we had this’ and ‘would it work if you could do that’. That feedback helps shape our direction and maintains our alignment to client needs. At the end of the day, we have to figure it out or someone else will.”

will it solve for current limitations? Will it reach critical mass as a value add?

So yes, we are very open to new technologies and initiatives, but we don’t want to just add more ways to do the same thing and get to a point where there are many solutions performing the same core functions. We see technology innovations developing in pockets in various markets, some receiving support in varying degrees from regulatory bodies. In addition to the collaboration taking place in our innovation labs and across our business and tech teams, we’re also making substantial investments to better understand relevant technologies, conduct various proof-of-concept exercises, and engage with various partners and clients. We stay very close to the developments and we see that as the most pragmatic way forward. Making sure we’re nimble, agile and able to do things faster is key. The industry is moving quicker than ever before. Rising client expectations coupled with a heightened regulatory environment that includes local, national, and, increasingly, harmonised global compliance requirements, makes it a challenging and exciting time.

“At FIS we feel that no customer expects a cut and clear answer to

values that might be unknown today can effectively be processed in the future.”

Bellacosa adds: “As a payment services provider, we are evaluating what cryptocurrencies and Blockchain-type technologies can bring to the payment services we provide internally to other BNY Mellon businesses and to the services we provide to external clients. Payments are a key focus for our Innovation Labs in Silicon Valley and other locations. Our research and interaction with start-ups and venture capitalists enable us to stay current with emerging technologies both at the Lab and through proof of concept engagements to begin to develop a vision on how these new technologies can provide better service to our clients. Developments in technology impact more than just payments and correspondent banking; other value transfer activities, notably securities or trade, may also be impacted. There is a place for this in the future. In fact, it is probably inevitable and there are very sensible use cases that will evolve as a result. We’re not likely to see the use of Blockchain for US ACH transactions today, but there are relevant explorations around regulatory compliance, complex letters of credit, settlement activities, etc. The core issue in this quest is: do these technologies genuinely add value for a specific activity? And, if we add something new, is it too complex, or

“in the future, it could very well be thAt the most vAluAble piece of A pAyment is the record, which shows who hAs owned An Asset.”Doug Gross, FIS

BNY MEllON

24 OPEN: PAYMENTS, ACcESS, BANKING, MIND