2018 Carolinas Cash AdventureInnovation in Global Payments

Monday, May 21st

Everette Glass - Director, Sr Treasury Product Mgr I

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Agenda

TECHNOLOGY

GLOBALIZATIONDEMOGRAPHICS

ZELLE

Real-Time Payments

PayPal

BLOCKCHAIN

API

Transformative Trends:

The global operating

market is changing. Three

major trends are

transforming business

models.

Real-Time PaymentsFast payments for everyone!

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The Expanding Real-Time Payments Landscape

27 countries have implemented immediate payments solutions, with many others in

stages of development/planning

Global RTP Schemes Drivers of Change

Customer Demand Information is moving in real time, and customers want their banking and payment services to keep up.

Evolving Payments Technology Alternative payment providers are gaining volume and market share through products and services that meet consumers’ need for convenience, speed and transparency.

Regulatory Influence Global adoption of faster payment networks has been driven by government mandates. While not a mandate in the U.S., “a safe, ubiquitous, faster payments capability” has been identified by the Fed as an important feature of payments modernization

Live In Development

Planning

Australia China Iceland Mexico Singapore Sweden Turkey Belgium HungaryCzech

RepublicSlovakia

Bahrain Denmark India Nigeria Spain SwitzerlandUnited

KingdomCanada Italy Malaysia

SaudiArabia

Brazil Finland Japan PolandSouth Africa

TaiwanUnited States

France LatviaNew

ZealandThe

Philippines

Chile Ghana KenyaRepublic of Korea

Sri Lanka

ThailandHong Kong

The Netherlands

Norway Vietnam

Mega-Trends, like demographics, population growth and global ecommerce

growth.

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24 x 7 x 365 Up-Time

Payments Processed

Message Process SLAs

CustomerNotifications

Message Routing

▪ Banks connected to RTP must be able to make funds available immediately for transactions received any time

▪ Credit-push only; no debits, but users can send “Request for Payment” messages

▪ Transactions capped at $25,000

▪ Payments may not be recalled once initiated

▪ Payment requests must be completed within 15 seconds

▪ Messages must be accepted or rejected within 5 seconds

▪ Participating banks must make RTP payment and status information immediately available electronically

▪ Message routing is based on bank routing and account numbers

▪ All accounts within a participating R/T are eligible for RTP

▪ Extensible messaging for payment remittance information

RTP development in the U.S.The Clearing House – RTP rail

In 2015, The Clearing House’s Board approved the development of a real-time payments solution that will be the first new payments rail in the U.S. in over 40 years.

The new RTP rail is NOW online.

Source: www.theclearinghouse.org/payments/real-time-payments

Key features

Early adopters:BNY Mellon, USBank,JPMorgan, Citi, Suntrustand PNC

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Real-Time PaymentsUse cases and How it works!

• Real-Time PaymentsCore Infrastructure

Confirmationof Payment

RTP validatespayment

and updates banks’ settlement

accounts in real time

Creditor/Receiver’sBank

Debtor/Sender’s Bank

Use Cases:

Business to Business

A convenience store making an instant payment to a beverage wholesaler for delivery of goods

A vendor sending a Request for Payment (RFP) message to a client, who then initiates a real time payment in response

Business to Consumer

A department store making a refund to a customer directly to his phone

An airline refunding a customer on the spot for a cancelled flight

An insurance company adjustor reviewing a claim and providing funds to the policy holder

A small business paying temporary employee wages or tips on an ad hoc basis

Consumer to Business

A homeowner paying for household services such as the gardener, maid, or child care provider

A consumer paying an electric company bill on the delinquency date in order to prevent loss of power

Person to Person

A roommate paying her share of the monthly rent A parent sending emergency funds to his college

student for school expenses

How it works:

• Omnibus account

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Real-Time Payments (TheClearingHouse)More “Partners” and growing!!

Current RTP and service providers:

ZelleP2P and B2C innovative payment solution

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Zelle▪ The first U.S. P2P payment network created by financial institutions for

financial institutions 2011 (called clearXchange)

▪ Revolutionized payments industry by bringing alias-based payments to P2P then B2C transactions

▪ BofAML first to offer business to consumer payments in 2014 using Zelle

Network▪ clearXchange® rebranded Zelle – June 2017

▪ Zelle app launched in September 2017

▪ In 2017, over 247 million transactions occurred via Zelle with a

combined value of over $75 billion

▪ Most transactions migrated from standard speed settling to money being available within minutes

Zelle in the marketplace▪ Current network comprised of over 80 member banks with 19

financial institutions now live and the rest going live over the following months

▪ Nationwide marketing campaign launched, bringing wider recognition and increased financial institution and consumer adoption

Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.

2017

2018

2011 2014

Journey with Zelle®

Q1 2018 - $25.1 Billion85 million transactions

5

Digital DisbursementsZelle® Marketing campaign

Image courtesy of RTL Group

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ZelleThe "Consumer-Side" mobile app for P2P payments!

Features:

• Available thru mobile device or online banking

• Register “token” or debit card

• Distribute funds to friends and family

• Request money from friends and family!

• Split the bill

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Features:

• Generate file-based or API depending on provider

• Distribute funds without paper

• To anyone with a U.S. bank account

• Using mobile phone number or email address (tokens)

• High same-day settlement

Electronic direct deposit into recipients account

No need to obtain sensitive bank account information

Higher customer satisfaction

Potentially reduce payment expenses

*

You’ve received notice of payment fromCBIZ - MHM

CBIZ - MHM is using Bank of America to process this payment

If you have questions about this payment, please contact CBIZ - MHMcustomer support.

ZelleThe "Corporate-Side" generates B2C payments!

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Potential B2C use cases

AIRLINES: Lost luggage claims, involuntary off-loading reimbursements

GOVERNMENT: Tax refunds, jury duty

HEALTHCARE: Patient/member refunds, conference travel, clinical trials

HIGHER EDUCATION: Stipends, housing allowance, research studies

INSURANCE: Claim settlements, annuities, membership dividends

OIL & GAS: Royalty and right-of-way payments

RETAIL: Returns, cancelled services, deposit refunds, employee rewards

STUDIOS: Residual payments

TECHNOLOGY: Developer dollars

UTILITIES: Account closures, overpayments, deposit refunds

WIRELESS CARRIERS: Customer incentives, employee bonuses, account closures, overpayments, deposit refunds

ANY: Loan/account overpayments, conference travel, recruitment travel reimbursement, company-paid relocation expenses, charitable donations or sponsorships, class action awards, employee tuition reimbursement

USE CASES

Claim payments to one payee

Annuities, Royalties or Residuals

Recruitmentreimbursements

Account closure or overpayment refunds

Player stipends

Donations or sponsorships

Conference travel or tuition reimbursement

Refunds to customers

Industry specific use examples

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ZelleDisbursement solution for the innovative consumer!

Question: What would you think of an company that offered this payment option to you?

Competition: Non-bank solutions.

Application Program Interface (API)

Real-Time access

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What is an API?

An Application Programming Interface (API) is a set of routines, protocols, and tools for building software applications.

APIs provide a way to connect software to software components (not UX)

APIs define interfaces by which components or systems communicate

APIs describe the data which is exchanged between the components

APIs have predictable and reusable patterns

COMMON LANGUAGE

APIs can be Closed (company internal use) or Open (Third Parties).

Partner APIs: available only to definedpartners

Member APIs: available to members belonging to a committee

Acquaintance APIs: available to anyone complying with a predefined set of requirements or contract

Public APIs: available to anyone

ACCESS AND CONTROL

API Gateway

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More information on API?

API uses may surprise you! They are all around us!

Common information you should know?

Top 10FacebookGoogle MapsTwitterYouTubeAccuweatherLinkedInAmazon Product AdvertisingPinterestFlickrGoogle Talk

Business models1. Free: available at no charge.

Available from theprovider or internet download

2. Indirect: no direct monetaryexchange. Example -music streaming companyusing an API for deviceinterface.

3. Developer Pays: usage based ortiered.

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Developer resources

Using our APIs on a real-time basis, clients can:

API Developer Portal

• Allows developers to learn about our APIs and review usage or specifications before onboarding

• View available API services and potential integrations

https://developer.bankofamerica.com/

Download account activity to your

workstation,

using the Transaction Detail API

Update account balances on an

automated basis,

using the Account Information API

Track payments

end to end,

using the Transaction Detail API

View account data from multiple banks

in one place,

using the Account Information API

Initiate a payment from an ERP

system,

using the Payment Initiation API

Blockchain

Getting easier to understand

2020

Cryptocurrencies – digital asset!More than just Bitcoin!

Bitcoin - The first decentralized ledger currency. Cryptocurrency with themost famous, popular, notable and highest market capitalization.

Ripple - Designed for peer to peer debt transfer. Not based on bitcoin.IOTA – The first cryptocurrency using the Tangle, a next generation

blockchain, as distributed ledger technology.Dogecoin – Introduced as a joke currency in Dec 2013. Jan 2014 valued at

USD$60M. Donations support various causes.Etherium - Supports smart contracts

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Blockchain – a simple definition

Five basic principles:

Distributed database

Peer-to-Peer transmission

Transparency with Pseudonymity

Irreversibility of Records

Computational Logic

Regulation

Security (not transactional but admin)

Standards – there is currently no standard

Foundational technology that will take years to develop (80% of banks are exploring)

Novelty vs complexity

Computationally intensive – are computers fast enough?

How does Blockchain work?

Roadblocks?

A blockchain is a cryptographic, or encoded, ledger comprising a digital log of transactions shared across a public or private network*

*BLOCKCHAIN.info

Applications?

Smart contracts

Track items through complex supply chains

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Blockchain for Dummies

Blockchain for Dummies is an IBM Limited Edition "quick read" that equips you

with an understanding of what blockchain is, how it works and how it can enhance your business and the industry in which you operate.

Makes a lot of sense!!

www.ibm.com/blockchain

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Case study:IBM and Maersk

IBM and MAERSK form a joint venture to make global trade more efficient, transparent and secure.

Challenge:• 90 percent of goods are transported by ocean shipping each year• Use blockchain technology to transform/automate the global,

cross-border supply chain ecosystem• Coordinate large numbers of trading partners, government

authorities, banks and logistics companies.• Reduce costs (1/5th of the shipping costs are documentation

processing and administration)• Create a commercialized, proven product for use across supply

chain industries• One shipment can require signoff from 30 organizations and 200

communications• One lost form can create huge delays• The entire process can take more than a month

Objectives of the pilot:• Create a "shipping information pipeline" to

enhance visibility across the entire process• Developing “Paperless Trade” will digitize and

automate paperwork filings to enable participants to securely submit, validate and approve documents across organizational boundaries.

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Customs

Case study:IBM and Maersk – transport flowers pilot from Mombasa to Rotterdam

Grower Exporter Importer

1. Each entity involved in the shipping process (Grower, Exporter, Importer)2. Shipping goods from Mombasa requires 3 signatures3. 6 documents describing origin, chemical treatment and quality of product4. Kenyan Grower create an invoice and contract (loaded to DB)5. Each agency in step 2 reviews and approves the contract (updates DB)6. Contract becomes visible to the Port of Mombasa to prepare a shipping container

2

3

1

4

Source courtesy of IBM/Maersk

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Case study:IBM and Maersk – transport flowers pilot (cont)

All actions are captured and shared amongst involved parties

Source courtesy of IBM/Maersk

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Case study:Jordan refugee camp

A customer pays for groceries at a store in the Zaatari refugee camp

• No cash or credit cards• Uses biometrics (retinal scanning) for customer validation• First use of blockchain for humanitarian aide• Identity is confirmed in the United Nations database• The family account is queried and availability of funds validated• Ethereum blockchain processed by the World Food Program (WFP)

This program is called "Building Blocks" and helps distribute cash-for-food aid to Syrian refugees.

• WFP transferred $1.3 billion in such benefits in 2017• 30% represents transaction and other fees• Program expansion hopes to include a global digital wallet

containing things like transaction history, government id,financial account details

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How blockchain works

1 2 3

4 5 6

A wants to send money to B

The transaction is represented online as a ‘block’

The block is broadcast to every party in the network

Those in the network approve the transaction is valid

The block is added to the chain and becomes a permanent and transparent record of the transaction

The money moves from A to B

A

?

?

??

√

√

√

√

B

Blockchain records the history of transactions so that everyone on the network – all participants in the transaction – can see and verify.

Smart contracting

Inherent contracting

(e.g., pay X when Y

is confirmed

delivered) binds

participating parties

to the transactions

on the blockchain.

Industry Progression

Live Systems and Pilots

mid 2016Prototypes

Live/Limited Scope

Implementations mid2017/2018

Building Use Cases and Developing Industry Standards Future State

Consortium Membership NextGen Cross Currency Payments Digital Trade Finance

Cross-border transactions of fiat currencies using blockchain technology

Client Benefits– Reduced uncertainty over timing and

amount of delivery andincreased transaction visibility

– Reduced costs

Bank Benefits– Improved information and efficiency– Reduced Costs– Increased FX revenue

Letter of Credit issuance/advising on blockchain

Client Benefits– Standardization of forms and datafields– Reduced costs in handling paper LC

applications– Increased productivity from STP– LC status between banks andimporter

Bank Benefits– Reduction in cost to handle volumes

of paper LC applications for issuing banks and improved STP

Sounding board and industry consortium for 42 banks to discuss critical topics

Strategy– Participate in working groups

– SteerCo– Technology and Architecture– Legal and Regulatory

– Join PoC if appropriate use casesform– Trade Finance– Cross Currency Payments

Investigation... Experimentation....

Industry Progression

GTS Focus Areas

Participation...

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Do you need Blockchain?

11 questions to ask to determine if Blockchain is right for your business.

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Conclusion:Ignoring technology’s impact!

Business cycles are up for grabs

of Fortune 500 companies

disappeared in the last 15 years1

52%avg. company

lifespan on S&P 500 index (in 2015)1

17YEARS

of incumbents’ revenue shaved

off by digital disruption2

45%digital technology penetration into

the average industry2

35%

Not doing anything can impact your bottom line and your company’s existence

1. CB Insights 2017 – Corporate Strategy & Innovation2. McKinsey - Think digital is a big deal? You ain’t seen nothing yet, March 2017

Innovation bridges the gap

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