Business Continuity & Payment Systems

Although many of us bank operations professionals are intimately involved in the day-to-day operations and functioning op payment systems, we tend to loose the true magnitude of what we are dealing with in the "system" with its "technology only" connotation. This is often compounded by an "on-us" view of our bank and our operations.

This view can cloud our thinking when planning for such critical issues as disaster recovery and business continuity. What is often overlooked is the big picture and how it all hangs together.

The events and aftermath of 9/11 clearly illustrated the problem. This is the subject of this short presentation are the events of that day, its impact on the financial system generally (and payment systems more specifically), the lessons learned and what we should be taking forward in our approach to Business Continuity Planning as regards Payment Systems.

The presentation was originally made by Stanley Epstein, one of our Principal Associates, to the Financial Services Technology Consortium in New York on 18 December 2008.

Business Continuity & Payment Systems

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Migrant Worker Remittances - Issues & Opportunities

CITADEL ADVANTAGE are presenting a 2-day intensive training course on Remittance Payments and the Business Opportunities that they create in Johannesburg, South Africa on the 25 & 26 January 2010.

International migration, the movement of people across international boundaries, has enormous implications for growth and welfare in both origin and destination countries. According to the World Bank nearly 200 million people live outside their country of birth. Although Remittances to developing countries are forecast to fall from an estimated $305 billion in 2008 to $290 billion in 2009, they will still outstrip private capital flows and official development aid.

For banks and payment service providers, migrant remittances are the single biggest untapped source of potential revenues. But to benefit from this vast sea of payments, banks and financial institutions need to gain a clear understanding of:
• What remittances are and how they work,
• The nature of the market,
• The market’s geographical spread,
• The customers for remittance services,
• The difficulties that both migrants and their beneficiaries face in the sending and the receiving of these funds, and
• How new initiatives and technology are changing the remittance landscape.

For numerous countries Remittance flows also represent the largest source of foreign exchange. In some developing countries they can account for as much as a 33% of GDP. International research reveals that the flow of remittances appears to be significantly more stable than that of other forms of external finance. This "resiliency" is because many migrants are unlikely to leave their adopted countries and will continue to send money home.

For senders and recipients the process is often times traumatic, and the difficulties associated with them have been increasingly recognized in recent years.
For banks and financial institutions remittances represent a huge opportunity – an opportunity to expand market share in a powerful, worldwide emerging market segment.

The rapid diffusion of technology into the payments world through devices such as the mobile phone heralds the promise of bringing modern real-time banking to even the remotest of villages.

This intensive interactive 2-day course will introduce partctipants to the biggest payment phenomenon of the 21st century. It will open your eyes to rapidly expanding market critically waiting for solutions to its needs.

This course is designed to assist banks, financial institutions and payment service providers who want to improve their understanding of this important market as well as develop the many business opportunities that present themselves.

Join us as we explore the world of Remittances and its many Business Opportunities.

For a fully detailed Brochure for this event please send a blank e-mail to courses@citadeladvantage.com (Please enter Remit -Jo'burg in the subject line)

European Commission Moves Closer to Enforcing SEPA End-Game

The European Commission is in talks with member states about setting a deadline for the migration of national payment schemes to the new Single Euro Payments Area (SEPA) after a public consultation exercise showed widespread support for the move.

The EC initiated consultation with key stakeholders in June on whether and how deadlines should be set for the migration of existing national credit transfers and direct debits to the new SEPA-compliant payment instruments.

The results showed that "a large majority" of respondents support the idea of enforcing dates for the use of legacy payment instruments, says the EC, although users expressed concerns about quality issues relating to direct debits and the need for enough time to become acquainted with the new products.

In July, a coalition of payments systems users published a highly critical report on the SEPA project and the lack of consultation with end-users, warning that the setting of an arbitrary end-date could destabilize the entire scheme.

One option under consideration by the Commission is to set separate deadlines for SEPA credit transfers and direct debits, since both schemes were not launched at the same time and do not have the same level of maturity.

Internal market and services commissioner Charlie McCreevy says: "Setting clear deadlines for the migration to SEPA would send a strong signal that SEPA is an irreversible process. It would provide certainty and predictability and act as a strong incentive for both industry and users to speed up migration."

Sins of the Risk Managers

Have risk managers really been doing their jobs properly? According to many they certainly have not. I came across this interesting item on the sum2llc Blog. It is certainly worth a read.

Click on the post title or the link below.
http://sum2llc.wordpress.com/2009/09/28/day-of-atonement-al-chet-for-risk-managers/

The Bank of England and Payment System Oversight

Central banks’ involvement in the oversight of payment systems arises from their core role as the systems’ settlement bank, providing the ultimate settlement asset, central bank money. This gives central banks a very direct interest in any potential systemic risks inherent in such systems. More broadly, payment systems are crucial to the functioning of the UK banking system and thus the wider financial system and economy, and it is therefore important that they operate in a way that contains risks to the system as a whole to an acceptable level. If payment systems are operated only in the narrow self-interest of their member participants, they may tend to underinvest in the mitigation of those risks. This can be countered by ensuring a broader risk perspective through central bank oversight.

This was recognized in the framework set out in the Memorandum of Understanding (MoU) with HM Treasury and the Financial Services Authority (FSA) in 1997.(1) The Banking Act 2009(2) puts the Bank of England’s oversight of payment systems onto a statutory footing.
On a recently published paper the Bank of England provides a brief overview of the relevant provisions of the Act and describes how the Bank intends to reflect these provisions in its approach to oversight. It also invites comments in relation to the draft Principles the Bank is intending to apply to recognized payment systems once the new framework is in place.

The full Bank of England paper may be downloaded at;
http://www.bankofengland.co.uk/publications/other/financialstability/oips/oips090928.pdf

Fraud and its Control – Get you Knowledge up to Speed

Fraud has been on many people’s minds this past year or so. Bernard Madoff in the US and Satyam in India are just two cases that come easily to mind. Are you able to recognize fraud in your organization? Do you understand the drivers of this specific form of Operational Risk?
“How to loose $360 million” is a case study taken from our extensive library of Operational Risk events. Shortly we will be offering a brand new training course aimed at understanding, recognizing and combating fraud. Watch blog and our Website (www.citadeladvantage.com ) for details.
In the meantime, for a taste of some of the material covered please view our short presentation.

Basel II Opps Risk How To Lose $360 Million Nov 2005

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The Bank Model Is Dead

Chris Skinner did an intersting presentation at a conference this week. In essence he says that the traditional model of banking is dead, replaced by a new one. The dead model is the one where 80% of costs of retailing are in bank branches. Branch based banking is dead. Branches however are still very much alive. What is needed is a new focus. See his presentation here.

The Bank Model Is Dead

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