Open Forum on Open Banking Dublin, 20 th June 2017 ERPB Working - - PowerPoint PPT Presentation

Open Forum on Open Banking

Dublin, 20th June 2017

ERPB Working Group on PIS - Status

Thomas Egner Secretary General, Euro Banking Association

The journey so far

2016 November 2016 Mandate of the ERPB Working Group on Pay-

ment Initiation Services (PIS)

Today

ERPB Working Group on Payment Initiation Services

2017 5 Meetings of the ERPB Working Group on Payment Initiation Services (PIS) 3 weinars October 2016 Stakeholder meeting on payment

initiation services -

ECB

PIS-WG

Identification Interface

• O. Operational &

technical matters

May 2016 Report of the ERPB Working Group on

Payment Initiation Services (PIS)

June 2016

7th ERPB Meeting

The working group needs to continue ist task

• Technical Aspects
• Operational Aspects
• Business Practices

Outcome of the Working Group: 9 recommendations addressed to different players

Provide further clarification in relation to passporting, liability regime and insurance Design a shared directory infrastructure for ASPSPs and TPPs and determine content and modus operandi Promote timely establishment of Qualified Trust Service Providers (QTSP) across the EU

Develop the requirements for a standardised ASPSP-TPP dispute handling process to ensure harmonisation on a pan-European level

Produce an operational guide describing how registration, certificate handling, notification and exiting processes should work in a harmonised way across countries in the EU

Adress the open question on data elements (which, format, were to store) to be used in a certificate plus the obligations of QTSPs

Define harmonised framework for the testing of interfaces Define modus operandi for the provision of such information and investigate other fraud mitigation actions Clarify the liability framework

KEY FINDINGS

✓ Maintaining trust. ✓ Providing the information necessary for the effective

• peration of PIS.

✓ Avoiding fragmentation at European level. ✓ Ensuring clarity of the liability framework and regulatory requirements.

Parallel to the ERPB the industry presses ahead - recent press releases

Javier Santamaría Chairman, European Payments Council

James Whittle Director International Standards and Services, Payments UK

Russ Waterhouse EVP Product and Strategy, The Clearing House

Parth Desai Founder and CEO, Pelican

Digital India – Potential & Pitfalls Parth Desai

Founder & CEO, Pelican

Key drivers for the Indian digital economy

1. SOCIAL

➢ Subsidies fully not reaching the needy ➢ Lack of Financial Inclusion (especially poor and rural India)

2. FISCAL

➢ Reduce usage of Cash based transactions (out of ambit of taxation authorities) ➢ Reduce avenues for use of black money like gold & properties etc

3. REDUCE COSTS USING TECHNOLOGY

➢ Leveraging on vast use of mobile phones (Total 730m, smart phones 340m) ➢ Biometric technologies matured, available for security and KYC

4. BUILD ROBUST BANKING INFRASTRUCTURE

➢ Several large banks are nationalised with e-systems ➢ Central Payments Body - NPCI

OVERVIEW of GOVT DIGITAL OFFERINGS IN INDIA

2005 2005 2011 2010 2012 2014 2017 2016 2016 2016 2016 2011 2009

Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM

The following are few initiatives introduced by NPCI boosting Digital payments in India: 1. RTGS – REAL TIME GROSS SETTLEMENT Real time transfer from one bank to another on "gross" basis but settlement in "real time” 2. NEFT – NATIONAL ELECTRONIC FUNDS TRANSFER Facilitates one-to-one funds transfer for individuals / corporate, batch settlements at hourly intervals 3. IMPS – IMMEDIATE PAYMENT SYSTEM Round the clock funds transfer services as it operates 24*7 4. UPI – UNIFIED PAYMENT INTERFACE Integrates multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one platform 5. BHIM – BHARAT INTERFACE FOR MONEY – MICRO ATM`s App using Unified Payments Interface (UPI) to make instant bank-to-bank payments and Pay and collect money using just Mobile number or Virtual Payment Address (VPA).

Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM

6. NACH – NATIONAL AUTOMATED CLEARING HOUSE Web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature, used for paying and collecting bulk transactions (low value, high volumes ) 7. NUUP – NATIONAL UNIFIED USSD PLATFORM Unstructured Supplementary Service Data PLATFORM (*99# service) - Enabling banking customers transact using ANY mobile phone through an interactive menu displayed on the mobile screen. 8. AEPS – AADHAR ENABLED PAYMENT SYSTEM Empowers a bank customer to use Aadhaar as his/her identity to access his/ her respective Aadhaar enabled bank account and perform basic banking transactions through a Business Correspondent. 9. APB – Aadhaar Payment Bridge system Electronically channelizing the Government subsidies and benefits in the Aadhaar Enabled Bank Accounts (AEBA) of the intended beneficiaries

Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM

10. BBPS – BHARAT BILL PAYMENT SYSTEM “Anytime anywhere” interoperable Bill Payment System by providing integrated platform connecting banks and non-banks in bills aggregation business, Billers , payment service providers and retail bill

• utlets

11. BHARAT QR (Common QR Code) Allows all the merchants to receive digital payments without the use of Point-of-Sale (POS) swiping machine using a smart phone to the merchant bank account. 12. RuPay A new debit card payment scheme

Key PLAYERS IN DIGITAL PAYMENTS ECOSYSTEM

Other Players & Instruments

1. PAYMENT BANKS Performs most banking operations but can't advance loans or issue credit cards. It can accept demand deposits (up to Rs 1 lakh), offer remittance services, mobile payments/transfers/purchases and other banking services like ATM/debit cards, net banking and third party fund transfers (e.g. AIRTEL, VODAFONE, INDIA POST , ADITYA BIRLA NUVO LTD etc.) 2. E- WALLETS Electronic Wallets (PAYTM, JIO MONEY, CITRUS WALLET, FREECHARGE, MOBIKWIK etc.) 3. PREPAID BANK CARDS Works on the theme of pay now and use at your convenience, very similar to prepaid mobile phone cards. 4. POINT OF SALE - (Mobile, Physical , Virtual) 5. BANKING CARDS - (Credit /Debit Cards ) 6. Micro ATMs – PoS style devices for collection and delivery of cash via human correspondents

OVERVIEW of DIGITAL BANKING IN INDIA

India Stack – OPEN API to digital infrastructure

✓ Governments, ✓ Businesses, ✓ Startups and ✓ Developers ➢ Cashless ➢ Paperless ➢ Presence-less

Incentives & efforts to Promote Digital Payment

INCENTIVES

• 10% discounts at fuel purchase, highway tolls, rail tickets and insurance premiums
• No service tax on all digital transaction up to Rs. 2,000
• PSBs advised to reduce PoS rentals to Rs. 100 per month
• Free accident insurance cover of up to Rs. 1 million for online rail tickets
• No transaction fees for payments made through digital means by Central Government

Departments and PSUs

EFFORTS

• 100,000 Villages to be provided with at least 2 PoS machines
• Regional Rural Banks & Cooperative Banks to issue 43,2M “Rupay Kisan Cards”

Key challenges facing digital India

1. CASH HABIT - A large percentage of population still are habituated to use cash 2. COMPLEXITY OF USE - Many digital product complex – elderly and less literate population 3. LACK OF BENEFITS - Lack of compelling benefits or advantages of using digital payments 4. INCONVENIENT - Perceived inconvenience and prone to errors (high rate of illiteracy) 5. NO INCENTIVES - Lack of incentives to use digital payments especially in rural India 6. SECURITY ISSUES - Lack of robust security features by the regulatory authorities 7. RURAL REACH - Government not effective in ensuring reach into rural areas 8. AADHAAR CONCERN - Use of Aadhaar card in multiple applications (“”Big Brother” issue)

FINTECH & THE BANKING ECOSYSTEM

Four drivers for the transition from mutual suspicion to engaged collaboration. 1. OPEN INNOVATION

• The traditional bank closed proprietary approach is ill-suited to the open architectures of today.
• Open API framework of PSD2 reinforces the collaborative and interoperable environment that financial

services must operate to win customer support and trust 2. COLLABORATION

• Banks and Fintech occupy opposing cultures of completely different development cycles (slow build v

rapid development / Proven and tested v experimental and novel)

• Banks benefit from collaborating with different non-traditional sectors to harness their intellectual

creativity and vitality

• Fintechs benefit and leverage the deep domain knowledge that the banking sector possesses

FINTECH & THE BANKING ECOSYSTEM

3. PARTNERSHIPS

• Expansion of the digital economy - core consumer and business touchpoints are digital channels and

mobile devices

• Increased willingness by banks to strategically partner with Fintechs to engage with these channels

4. DATA INSIGHTS

• Value from customer insights utilising data science and predictive analytics
• New innovative service and product opportunities that leverage customer big data and derive context

from payments

• Approach harnesses core banking domain expertise and technology innovation of Fintechs

Thank You

For any comments or questions, please contact us at

• pen_banking_forum@abe-eba.eu

Open Forum on Open Banking 20th June 2017 25

Have a good EBAday !