Why Banks Need to Revisit Payments

The Time to Act is Now

Anand Ramachandran
Senior Director, Global Banking Solutions Practice
Oracle FSGBU
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 2
Rank (1 to 5) the below South East Asian countries where consumers are keen
to go cashless (e-payments) for 3 consecutive days

Singapore ? 5

Malaysia ? 4

Philippines ? 2

Indonesia ? 3

Vietnam ? 1
Visa Consumer Payment Attitudes Survey 2017

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Confidential – Oracle Internal/Restricted/Highly Restricted 3
 Key Data Points for Consideration in Vietnam Payments
Context
• Vietnam Inter-bank e-payment turnover hits $3.2 trillion in Upside Hanoi HCMC
2018 - 13 Times Country’s GDP
Direct Economic 600 M $ 2.3 B $
• Ratio of cash to total payment instruments to less than 10 per Gains
cent by the end of 2020 – Prime Minister Directive
• By 2020, 70% of Utility service providers must accept non-cash Increase in 3.5% 3%
payments of charges, while 50 per cent of individuals and Employment
households in major cities will use cashless payment
instruments for their shopping and consumption activities Productivity & 0.2% 0.2%
Wages
• At least 70% people in 15+ years age bracket will hold a bank
account by 2020 GDP Increase 36.4 33.1
(% BPS)
• Prime Minister has directed the banking sector to take the lead
in the Fourth Industrial Revolution by embracing e-payment in
2019, a move that would boost the whole economy.
• Potential Gains of Going Cashless

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Confidential – Oracle Internal/Restricted/Highly Restricted 4
Real-time payment (RTP) schemes are being launched and
adopted across 51 countries

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Confidential – Oracle Internal/Restricted/Highly Restricted 5
Forces Shaping the Payments Industry are Compelling Banks
to Review their Payments Businesses Globally

Real-time payment E-payments and M- Machine learning and

(RTP) schemes are payments are robotic process
being launched and forecast to grow at a automation are
adopted across 51 increasingly being adopted
CAGR of 17.6% and
by banks for automating
countries 21.8% from 2015– cyberattack prevention and
2019E respectively improving overall process
efficiencies

Payments is the #1 Open API adoption will Fintechs have built

Business Area transform the banking
witnessing ISO 20022 payments space. More
adoption followed by transactions are
Securities and Trade expected to flow through
Services fintechs than banks by
2020
sustainable alternative
cross-border payments
and settlement
infrastructure using
distributed ledger
technology.
Mainstream adoption
expected to grow further

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 6

No Bank is Insulated From These Industry Drivers
Drivers Late Movers’ Disadvantage

The world added 15 new RTP mandates in the last year Inability to service instant access to funds or real-time visibility
Real-time payments into cash flows is a threat to customer retention

Disaggregated data and standards leading to Failure to adopt ISO20022 means patchwork integration with lack
ISO 20022 harmonization initiatives in over 70 countries of visibility, low interoperability and reduced relevance in
payments value chain

Open Banking momentum is making banks explore Limited technical ability to collaborate with fintechs and third
Open Banking leveraging APIs to securely share customer data and party apps restricts entry into a lucrative global market worth GBP
innovate with fintechs 7.2bn

Market Infrastructure Modernization of domestic payments infrastructure Internal silos and inability to scale to infrastructure modernization
being undertaken by over 15 countries to address silos leading to value chain bottlenecks and spiraling costs of meeting
Modernization in payments settlement processing demands

Consistent, high-quality user experience across channels Disaggregated experiences and no differentiation in offerings
Digital Uprising is being sought by banks leads to becoming irrelevant to the new age digital customer

Banks are seeking ways to unlock new revenue

Payments Data streams through monetization of customer data and Inability to derive extra revenue out of data monetization
deriving insights

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 7

Payments Processing Within Core Systems is not the Sweet
Spot to Address this Rapidly Evolving Space
Core Banking Led Payments Processing What’s Sub-Optimal?
Siloed processes that aim to cater to multiple customer
01 and merchant payment types

Tedious change management with need to ensure point-

02 to-point integrations across disparate systems every time

03 Increased cost and product go-to-market time

Reduced visibility because of existence of

04 transaction legs in multiple systems

Cumbersome reporting and insights due to heavy data

05 collation effort across multiple systems

Core System with patchwork of enhancements

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Confidential – Oracle Internal/Restricted/Highly Restricted 8
The Ideal Solution is to Centralize Processing on a Unified
Payments Hub
Input Applications Networks Payment Methods
Large Corporate Cash
Cheque Clearing Network Physical Instruments
Shield the Core
Management
From..
Small Business Cash Domestic – Low Value,
ACH Network
Management DD’s
• Continuous feature
Payments Hub
Domestic – High Value,
Retail OLB Wire Network
DD’s upgrades to meet
ATM EFT Network Faster Payments market needs
Mobile SWIFT Network X-Border Transfers
• Managing
unprecedented volumes
Remote Check Capture Card Network
that come with the
Branch
Product Processors
(Loans, Markets, Trade Finance & Others) digital uprising
Downstream Applications
• Data security
consideration required
Disputes /
from an ultra-modern
AML/
OFAC
Adjustments/
Investigations
Billing
Credit
Limits
GL FX
DDA
System
Pre-
Process
Data
Analytics
Cross
Sell
architecture
Archives STP

Centrally Managed Utilities Value added Capabilities

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 9

A Modern Payments Hub Can Catapult the Bank to the Next
Level Of..
Efficiency
• Enable complete transaction visibility in the value chain with
built–in dashboards Support for digital channels
• Bring greater degree of automation Automated Processes
• Provide easier repairs
Innovation
• Enable Open API connectivity
• Seamlessly plug into industry DLT ecosystems
Payments Hub
Monetization Capability
• Effective leverage existing payments infrastructure data
• Integrate with industry-leading pricing and billing engines
Cost Reduction
• Build an enterprise-wide payments cost share Regulation Rich data for insights
• Drive down costs with a modular ‘use as you go’ architecture (PSD2,
Agility SWIFT GPI) Technology
(ISO 20022, Open API)
• Effectively manage application change management for new
regulation & integrations with internal and external applications

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 10

 Towards Intelligent & Intuitive
Banking – pre-integrated with
FLEXCUBE suite of offerings

Oracle Banking Designed for Co-Innovation

Payments with APIs , Distributed Ledger

Technology Adapters and Open
Banking
Built for the Future

Agile & Progressive – Built on the

latest technology stack and
flexible architecture.

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

The Solution is Tailored to Meet Multi-Dimensional
Requirements of Banks
Offers a harmonized infrastructure on an ISO 20022 framework

Improved operational control through queues and configuration rules

Real-time Payments Ready with support for 24/7 schemes

Enabled for open banking with stack of JSON and REST APIs

Tailored for Industry Initiatives with blockchain adapters

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 12

Comprehensive Processing Framework:
Modular Yet Unified
Input Processing Output
Layer Layer Layer

Messaging

• Single Unified Platform to Connectivity

Uniform &
mixed bulk Cross-Border
Domestic Domestic
Real-time
(Faster/
Low-Value High-Value
Process All Payment Types payloads,
single
payloads
Instant)

Message-IN: ISO
20022 / SWIFT MT
Channels Direct Credits/ Clearing & Book
Direct Debits
Deposits Instruments Transfers
Messaging Connectivity

• De-Coupled Messaging and User Input Net bank

Dedicated Processing Flows

Processing Layer to Simplify Operations Beneficiary

Change Management C2B File App

Dashboards Pricing
Queues Register
Upload integration

Shared sub-systems

Integration APIs / Services

• Flexible Architecture that lets
you ‘Enable as You Go’ Bank’s application environment: Channels, DDA, Accounting/GL, Static Data, Sanctions, FX, …

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 13

 Oracle Banking Payments Provides Banks with Unbeatable
Advantages Over Payments Processing in Core
Processor for Multiple Payments
• Support for multiple payment types like
cross border, domestic low value,
domestic high value and book transfers
• Distinct process flows for each payment
type based on industry best practices
• Built-in new schemes–Real time
payments, SEPA rulebook, regional packs
Ops. Operational
Efficiency & Control
Enhanced Usability
• Context-aware Payments UI with
provision for mixed load initiation
• Specialized queues for investigations
• Complete audit trail of transaction
lifecycle and operations
• Dashboard to view transactions in
different queues with drill down options
SupportSuperior
for Industry
STP Initiatives Better Fraud Protection
Better C2B Bulk Payments
• Automatic message enrichment • High performance batching and un-
• Configurable built-in rules engine that batching of payment files in ISO20022
helps intelligent processing to resolve format
payment types , networks • Batch booking for mixed payment files
• Intelligent processing - automated • Auto closure of payments batch on
payment chain building, account specified time
derivation
Support for Industry Initiatives Flexible Architecture
• Flexible Deployment options that can
• Built-In SWIFT GPI Services with support enterprise level payments hub
complete support for gCCT rulebook strategy
• Support for PSD2 • Built-in work-flow stages for sanctions
• Availability of blockchain adapters checks, balance checks, FX rate feeds
• Powerful stack of JSON and ReST APIs
available for 3rd party systems &
channel integrations
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 14
Deployment Reference
Architecture

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 15

Reference Architecture - 1 Approach
Co-Deployed with FLEXCUBE
Oracle Banking Payments can be co-
Channels deployed with FLEXCUBE in a pre-
integrated mode and requires
Networks integration only for external service calls
Web Mobile Social Branch
such as sanctions checks , rates fetch
and other such services required for
SWIFT
payments processing.
Domestic ACH
ORACLE BANKING PAYMENTS
Domestic RTGS

Balance Check Real-Time

Static Data FX Rates
Customer Data Accounting
Advantages
FLEXCUBE 1. Saves integration cost and risk,

Deployed Solution
3. Accelerated time to implement
3. Seamless data flows
4. Cohesive deployment

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 16

 Reference Architecture - 2 Approach
Centralized Hub for Payments Innovation
Oracle Banking Payments is in
Channels standalone mode and can integrate
with FLEXCUBE or core banking
Bank’s
system with the ability to service
Networks
Internal Systems Web Mobile Social Branch multiple DDAs at a time . Interacts
Vendor 1: through handoffs for static data load,
Corporate SWIFT
Loans accounting entries and amount block
Domestic ACH
ORACLE BANKING PAYMENTS checks
Vendor 2: Domestic RTGS
Trade Finance
Deployed Solution
Real-Time Advantages
Vendor 3:
Retail Loans
1. Designed for enterprise wide
Balance Check
Static Data
Customer Data
FX Rates rollout
Accounting
Payment Initiation 2. Servicing Multiple DDAs at a time
via Bank’s Internal
Systems DDA1 FLEXCUBE DDAn 3. Modular Architecture allowing
easy upgrades and changes
Multiple DDAs 4. Shared cost centre for payments
infrastructure
5. Enterprise wide visibility of
payments and liquidity
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 17
Banks can Realize Significant Benefits with Oracle Banking
Payments
Increased
Efficiency

Increased Reduced IT
Growth costs

Key
Benefits
Reduced Increased
Cost of Capacity to
Compliance Scale

Increased
Business
Value

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 18

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 19
Superior Straight-through Processing

Intelligent Payment chain building

Enrichment of Incoming Payment Parametrized Rule-based Network Resolution (Translation of cross border to local and
Instructions vice versa)

Automated processing based on external Automated cover suppression

Automatic queue segregation
system responses (eg. Sanctions, FX systems)
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 21
Advanced Corporate Bulk File Management
Accepting Mixed Payment Loads
Book Transfer
ISO20022
pain.001
RTGS
ACH
X Border
Differentiated for Customer Centricity
`
Competitive Batch Cut offs/Wait for
Rates at Realtime Auto Closure
Better Degrees of Operational Control
Manual Batch Regrouping
Force Release and Closure
Cancel and Carry Forward
Parsing and De-Bulking of C2B Files
Automated Payment Type Resolution
Itemized Processing
Batch level de-duplication
Batch or Itemized Processing depending on urgency
&`
Batch Processing
Automated Confirmations via pain.002
Choice of Accounting Methods
Net Accounting Gross Accounting
• Parametrized Batch Auto ` • Upfront batch amount
Consolidation of Debits block
Options for Debit and Charge
Differential Pricing Claim Preferences • Net Debit Accounting for • Itemized reversal of
only successful items Rejects and consolidated
posting
File and Batch Summary
File and
`
Batch Consolidation
Batch Booking Queue
Rollover , Sanction Seizure , FX Unwind
Payment Warehousing
`
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 22
Effective Queue-based Exception Management
Authorization

Automatic movement of Parking of transactions in Comprehensive status of queue Mandatory authorization for
transactions to relevant business override queue for management framework Queue level manual
queues based on status manual intervention interventions

Queues 23

Batch Booking
Repair Queue Network Cutoff Queue ECA Queue
Queue
Business Override Processing Cutoff Credit Approval
Sanctions Queue
Queue Queue Queue
Process Exception External Exchange
AuthLimit Queue Exchange Rate Queue
Queue Rate Queue

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Context Aware User Interfaces for Accelerated Data Entry
Dynamic Screen Layout based on
Payment Type selected

Contextual Autocomplete and Cross

Field Validations

Automated Data Enrichment and

Action Button to ‘Enrich’

Built-In ‘Validate as you go’ during

Data Entry

Data Entry Accelerators such

as Templates

Extensive List of Fields for

Transaction Search Criteria

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 24

360 Degree Visibility through Centralized Monitoring
Dashboard to Track Pending Transactions and Audit Trails for Tracking
End-to-end tracking across
Transaction Count Display,
by Payment Type and Drill Down payment status

• Track multiple payment types

ACH RTGS
• Track across various stages of
transaction
• Completed
Book DD • Liquidated
• Pending
Audit Trail
Cross Border Faster Pay

• Extensive Log of Activities across

System and Users
• Modification Tracking
• Authorized ID Tracking

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 25

Industry-Ready with SWIFT gpi

UETR

UUID Adherent UETR Service Type Identifier Automated Inbound End to End support for
(IETF’s RFC 4122 v4) Payment and Interim gCCT , gSRP and gCOV
Confirmations

gpi Directory Upload Extended Tracking FIN and API based Tracker All Status and Reason
(Non GPI to GPI) Interaction Codes Supported

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 26