Complex Data Exchange and Single Euro Payments Area (SEPA)

SOLUTION PAPER Complex Data Exchange and Single Euro Payments Area (SEPA) SEPA Solution Accelerator Payments and Single Euro Payments Area Summary The EEC has initiated an effort to unify the numerous national payment systems and standards into a Single European Payment Area (SEPA). This initiative is intended to reduce the complexity of the interaction required between numerous national payments systems that exist today, while establishing the notion of a true European Community for financial transactions. For electronic implementation and development of SEPA solutions, the most significant inhibitors are data translation and transformation. To streamline this effort, Informatica has developed the SEPA Solution Accelerator. • Informatica SEPA Solution Accelerator (SSA) enables banks to address all of their SEPA transformation needs quickly and efficiently by optimizing their payments infrastructure with Complex Data Exchange (CDE). • SSA complements industry-standard middleware by providing a CDE capability, as well as the enhanced execution infrastructure needed to streamline deployment of treasury services payment hubs and gateways. • Four of the ten largest banks in the U.S. have chosen Informatica CDE technology and they are now implementing this technology to leading financial institutions in the European Community. Driven by its aspirations to become ‘the most competitive and dynamic knowledge-driven economy by 2010’, the European Union (EU) is fundamentally transforming the financial services industry. SEPA is a regulation that will erase the current distinction between national and cross- border euro payments and is spurring banks to reconsider their current strategies. In this environment of intensified competition, the winners will be those banks that maximize revenues and reduce costs by developing successful new strategies for products, pricing, market positioning, and sourcing. For banks in particular, SEPA transformation has major consequences. Increased competition and leveling of current price differences will cause revenues to decline, will require major investments in payment processes and systems, and will dramatically change the competitive landscape. Organizations will need two new pan-euro payment schemes for electronic credit transfer and for direct debits by January 2008. In the Eurozone by the beginning of 2008 the vast majority of banks will offer these new pan-euro services to their customers. A critical mass of transactions will naturally migrate to these payment instruments by 2010. As a result, market forces and network effects will rapidly make SEPA irreversible. 2 Solution Paper Core SEPA Transformation Pains The SEPA credit transfers, SEPA direct debits, and SEPA cards transactions must be cleared and settled in an efficient way. The settlements will be executed in central bank money via Target 2. The new eurosystem platform should be implemented in all euro markets between November 2007 and the beginning of 2008. Enhanced data acquisition, translation, and transformation are major issues for migration and conversion to SEPA compliant payment processing systems. The inflexibility, redundancy, and lack of integration in existing data transformation solutions cause serious pain in the treasury services IT operations. This is due to the multiplicity and complexity of formats and the expense and difficulty of introducing or changing payment message standards and internal payment systems formats and now ISO 20022 UNIFI for payment messaging interoperability. In response, IT has adopted practices such as overloading existing payment message formats to meet new needs. These practices can compound data management problems by introducing transformational errors that delay products from reaching markets. This in turn can increase back-office costs, reduce the effectiveness of fraud controls, and lower sales volumes. Finally, such practices typically introduce programmatic data errors that infect all electronic payment messages and transactions. LOWER COSTS, ADD INFINITE FLEXIBILITY SSA seamlessly supports all four SEPA payment processing options: SEPA payments on the current domestic platform • Many legacy domestic payment platforms cannot cope with the new requirements for SEPA payments. SEPA payments on the current cross-border platform • Cross-border platforms often lack STP and scalability. • Cross-border platforms have typically much higher TCO than domestic platforms. • When domestic payments are migrated, current cross-border platforms will probably not be able to handle the volumes. New SEPA platform • The possible solution to the SEPA challenge in the short-and mid-term • An option to consolidate platforms in the long term New platform for all payment products • Single, enterprise-wide payment platform • Lower TCO • Streamlined processes SEPA Solution Paper 3 Exploiting Complex Data Exchange (CDE) While the recognized “best practice” is centralizing payment infrastructure and consolidating operations around a payment hub, the fact is that payment hubs typically have gaps in their transformation capabilities. In fact, “best practice” is to implement data transformation as a shared service for translation in the infrastructure—which furnishes a set of standard conversion maps for payment formats such as ACH and SWIFT and supports ISO 20022 as a canonical (internal) format This is a non-invasive approach that solves the issues of interoperability with legacy systems. CDE provides such a service and lets non-technical business operations personnel define complex transformations, and immediately deploy and reuse transformations within any payment infrastructure. Transformations can be used for external and internal processing, and across any and all enterprise middleware platforms. With CDE, financial institutions deploy a flexible architecture to rapidly convert or implement new payment systems to accommodate new SEPA payment products. CDE also facilitates the increasing integration of payment systems’ customer financial data, ERP processes, documents, and workflows. CDE’s ability to integrate complex data lets institutions take advantage of distribution channel opportunities by enabling transaction data mining. INFORMATICA SEPA SOLUTION ACCELERATOR MAKES IT EASY TO: • Rapidly deploy SEPA compliant services • Support SEPA credit transfers and SEPA direct debit schemas out of the box • Support schema versioning • Extend legacy payment systems by enabling them as SEPA compliant web services • Implement immediate, codeless solution for ISO 20022 / SEPA mappings to domestic, cross- border, SWIFT FIN, and many more payment and file formats • Support unique EDI, EDIFact, IDOC and COBOL 4 Solution Paper SSA Enhances Payment Infrastructure with Universal, Cost-efficient Data Transformation SSA delivers order-of-magnitude improvements in business efficiency and reduced costs for customer data acquisition, translation, transformation, traceability, and visibility. With a standardized, broadly applicable, reusable, shared, and cost-efficient data transformation capability, SSA automates all types of data transformations. These include complex transformations between proprietary and financial formats (e.g., SWIFT and domestic ACH), unstructured documents (e.g., PDF and Excel), and legacy formats including complex COBOL. SSA is an advanced, high-value and low-cost solution that includes: • Collaborative visual tools for analysts and IT—eliminating custom transformations, significantly reducing IT costs, and enhancing speed-to-market of customer solutions. • Pluggable execution infrastructure that can run on any middleware platform including WebSphere™, NetWeaver™, BizTalk™, webMethods™, and more. • Out-of-the-box support for all payment messaging, EDI, and legacy formats, with automatic translation to new customer-specific formats—allowing a bank to on-board new customers quickly, and to facilitate customer STP workflow/ERP integration. • ISO 20022/SEPA-compliant XML schema validation for all data types, allows easy modification of business rules—allowing rich data transformation for immediate results, customer transparency, and reporting—as well as future-proofing the infrastructure as payment messaging standards converge on ISO 20022. CASE STUDY—MAJOR EUROPEAN BANK A large European bank undertook an initiative to modernize its payment processing environment, with the goals of: • Improving efficiency and reducing costs through a standardized, reusable, and cost-efficient data transformation capability • Supporting new ISO 20022/SEPA formats for credit transfers and direct debit • Deploying a single transformation system to handle all types of data transformations without change to backend payment systems • Replacing custom-coded transformations with standard conversion maps to accelerate solutions Utilizing Informatica’s SSA, the bank will achieve these goals and its payments systems will have the option of initiating or receiving all payments to employees or partners—check, ACH, dollar wire transfers, and foreign currency drafts and wires in their existing formats--with the ability to “switch-on” SEPA-based messaging for issue or receive processes, on demand, as needed to support the SEPA ramp up.