The new CBI enhancing einvoicing and epayments services

The new CBI enhancing e-invoicing and e-payments services Pierfrancesco Gaggi INTERBANK CORPORATE BANKING ASSOCIATION - ACBI Paperless Trade in International Supply Chains: Enhancing Efficiency and Security 1 UN/CEFACT Geneva, June 20 th 2005

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 2

What is CBI ? ▪ CBI is the national standard for multibanking electronic banking ▪ It was promoted by the Italian Banking Association (ABI) in 1995, targeting small, medium and large Corporate Clients enabling them to exchange standard edi-flows with all their banks in a market where: – banks participating to the schema are 650 – there are 450. 000 companies (of which 95% micro-enterprises) – the average number of bank accounts of corporates exceeds 4 ▪ The range of available services and related communication standards are defined by ABI, through the CBI Association (namely, ACBI, that was founded in 2001) ACBI INTERBANK CORPORATE BANKING ASSOCIATION 3

Current operating model of CBI is based on 4 players Company Access Bank Interbank transmission network RNI ITP • Payment orders file set -up • File Sending • File receiving from the sending company • Routing of files of payment orders to be executed by other banks • Execution of payment orders in charge to the access bank Executing Bank ITP • File routing to the right executing bank Execution of these activities is generally outsourced by the bank to an external service provider owned by the same bank (namely, ITP) • File receiving • Payment orders execution Key: ITP Interbank technical processor (could be either local ACH or a bank-owned service provider) Italian National Inter-bank Network 4

The ACBI organization chart INTERBANK CORPORATE BANKING ASSOCIATION - ACBI Shareholders meeting The aim of the Association is to plan, design, develop, maintain and promote: • technical and legal/regulatory solutions enabling banks to link up and communicate with customers, with a view to domestic and international interoperability for the provision of services to customers • electronic services of financial intermediation and other instrumental or auxiliary services. WG Technologies and Standard Payment Systems field Governing Council Service evolution approval Technical Secretariat Coordination Work Groups activities WG Business and Services Forum Secretatiat WG Internationalization Forum WG Governance and Regulatory Focus Group 5

Companies and Banks connected to actual CBI Number of companies connected to CBI Number of Companies and Banks connected to CBI has rapidly grown. . . Banks connected to CBI (%) Data elaborated by: ACBI 6 Note: data refer to end March of each year * Actually the Banks connected to CBI are 614

The actual CBI financial services Debit transfers delivered through CBI are RIBA, RID, MAV, Freccia. Those instruments allow the payee to instruct his bank to directly debit the debtor’s account at the debtor's bank Payments CBI allows for several different credit transfer instructions: e. g. salary payments, domestic and cross-border credit transfer, tax payments, . . . Reporting Main services Daily and optionally periodical reporting of statements and balances on bank accounts and securities trading activities, final settlement notification of credit and debit transfer instructions Market Place Service category This service enables e-Market Places to connect to the CBI payment initiation system to route payment orders to the customers’ ordering banks Volumes 7 Elaborated by ACBI

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 8

The new CBI New services are being developed in response to corporates’ needs and through the participation of new players Complex Payment and Non-payment Services New CBI Nature of Services Service level improvement in terms of information quality and security Basic Payment Services From services whose major added value is a single access point to the banking system. . . Current CBI … to end-to-end services with integrated financial value chain functionalities that connect all players of a business community Real time for the transmission of the actual CBI services and introduction of new nonpayment services leveraging the CBI wide customer base Payment services extension to support Corporate and Public Administration business needs Banks Corporates Public Administration Third Parties Banks Corporates Participants 9

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 10

Characteristics of the new CBI services Through the analysis of corporates and banks needs, the characteristics of the new CBI services were defined… Main characteristics Banks needs • • • Business developing Efficiency Cost decreasing Compliance Governance End-to-End Digital signature Corporates needs • • • Safety Speed Documents exchanging High service levels Compliance Flexibility Exogenous trends • • • Zero latency ADDED VALUE Automatic reconciliation International standard compliancy Workflow and process automation Political-economic trends New legal framework Technological trends Business trends TWIST - Final Recommendations of the IST Harmonization Team and International trends 11 SWIFT - Customer-to-Bank Payment Initiation Standards are the basis for the standard message definition

New CBI Services The new CBI services can be divided in three main areas New CBI Services User category Benefits for the users n Automatic credit CREDITOR/ DEBTOR Payments CREDITOR/ DEBTOR Reporting New Credit Transfer supporting the reconciliation* Credit Transfer initiated by the beneficiary transfer n Payments initiated by the beneficiary n Possibility to have cross -reference information between documents and payments Payment status message versus debtor n Possibility for the debtor and beneficiary* and the creditor to have Cash account information payments status messages n Automatic reconciliation CREDITOR /DEBTOR Invoice financing Document exchanging E-invoice end to end transmission* Electronic documents “non structured” transmission* * Mandatory services for the banks n Sending/receiving electronic structured (as e-invoicing) and non structured documents n Possibility to have electronic invoice financing 12

Document exchanging – The e-invoice transmitting The new CBI allows the electronic document exchange between companies example Seller Document sending Document forwarding 1 2 Access Bank of the seller The new CBI can be considered as an other way to send and receive an electronic invoice Access Bank of the buyer Today E-invoice Tomorrow Access Bank of the seller Mail, etc. EDI Paper invoice The basis for the standard message definition are: EDI n Visa EDIFACT n Other eb. XML Indicod Buyer • structured • non structured (. pdf, . . ) Seller E-invoice n n The electronic documents can be: Other communities Other networks Access Bank of the buyer Buyer 13

The e-invoice transmitting – Illustrating schema End-to-end 1 e-invoice exchange through the new CBI Safety guaranteed by the bank network e-invoice download 4 Access Bank of the seller Access Bank of Buyer Together with the e-invoice it’s possible to send also the payment request Forwarding the e-invoice Agreement between the companies 3 5 Receipt message e-invoice upload Access Bank of the buyer Creation of the e-invoice 2 1 6 Seller Receipt download Access Bank of the seller 14 1 Both the Seller and Buyer must be CBI customers

The standard – different scenarios 1 For the definition of the messages are defined 4 different scenarios Without the body, it cannot be considered an invoice 1 Header 2 + Body “non published” Header 3 + Body “published” Header 4 + Body“white label” Message having only the core component (Header) but not the complete information of the invoice Message having the core component (Header) and also the other information of the invoice (body); the body is structured using a standard “non published” by the CBI (example: . pdf, EDI, …) Message having the core component (Header) and also the other information of the invoice (body); the body is structured using a standard “published” by the CBI (published EDI, …) Message having the core component (Header) and also the other information of the invoice (body); the body is structured using a standard already used by the companies and “published” by the CBI (UNECE standard, …) 15 Information that can be verified by the Access Bank Information that cannot be verified by the Access Bank

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 16

The components The new technical CBI Architecture in based on four main integrated components … Physical network Logical network < < It ensures safety and messages receiving Data transmission of the messages on the physical network < It manages the physical transport on the network INTEGRATION Directory < It provides the general information about the CBI customers and allows the routing information Time synchronization < It allows connected parties to have synchronized systems 17

The end-to-end communication The new technical CBI architecture enables the safety end-to-end communication between the CBI customers. Executing Bank Company Access Bank Company Use of: • File Transfer • Real time messages Competitive area Actual technical CBI architecture Service provider* Standardized area CBI New technical CBI architecture 18 * It is a part of the CBI community and provides CBI services

Standardized area CBI – Real time communication The message transfer on the New technical CBI architecture is in real time …. New technical CBI architecture Actual technical CBI architecture Example 1 hour file transfer Access Bank 1 hour CA CA file transfer 1 hour CA CA Up to 3 hours file transfer Executing Bank messages / file transfer Access Bank New CBI Network Executing Bank Few seconds New technical CBI architecture is able to transfer messages in real time enabling new Services and improving the actual Services levels 19

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 20

SEPA: definition and scope 2004 Definition « SEPA will be the area where citizens, companies and other economic actors will be able to make and receive payments in euro, within Europe*, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location. » Focus of the Roadmap SEPA will be delivered as a priority within the eurozone. Within Europe*, outside the eurozone there will be opportunities to participate in euro payment systems, and communities will be able to adopt SEPA standards and practices to contribute to the Single Market for payment services. * Europe is currently defined to consist of the EU 25 Member States + Iceland, Norway, Lichtenstein and Switzerland. (This refinement of definition and focus has already been accepted in principle by the EPC Plenary in October 2004 subject to formalisation within the Roadmap. ) 21

EPC’s SEPA timeline Scheme design and preparation Implementation and deployment 2004 2006 2005 2007 Co-existence and gradual adoption 2008 2009 2010 Responsible EPC Scheme “Framework” Design & Specification Stage for the 3 SEPA payment schemes EPC and operator(s) EPC, banks and national communities EPC and associations EPC ECB (ESCB) Pilots Planning Adoption and Implementation Programme management Regulator, legislator and lobby groups relationships and communication Monitoring and Support Monitoring realisation of SEPA in accordance with Cooperation Model 22

The operating model evolution of CBI for international payments CBI has designed a new operating schema to handle corporate services in international market (SEPA). The approach is based on a centralised platform to operate with foreign banks and corporate. Swift Net connectio n Italian Corporate Italian banking Foreign Banks with no direct access Foreign Corporate Service Categories n Credit transfer n Direct debit CBI Hub for core services Correspondent banks (directly connected) n Cash letter n Electronic Invoicing n Reconciliation support (URI handling) Service providers 23

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 24

New CBI Start up CBI plan Build phase 2 1 New Service identification Transition phase Start up User group test Gennuary 2005 New CBI 3 4 5 Technical Standard of New CBI Actual services migration Set up new services Dead line set up new services June 2005 May 2006 May 2007 At least 7 months Preliminary 25

AGENDA 1 Overview and Current model 2 New CBI 3 2. 1 New Services 2. 2 New Architecture 2. 3 Internationalisation 2. 4 Masterplan The UNECE Working Group 26

Electronic invoicing benefits Electronic invoicing enables more efficiency for companies and the possibility for Banks and Financial Institution for providing new and innovative Financial Services Financial services users Illustrative Company management activities Invocing Control and reporting Tresaury Identification of a standard “invoice core data model” for document exange Use of international standard for payment services (SWIFT, TWIST, …) Financial services providers . . . New Financial Services Financing Services Payment Management Account information Management … 27

Revise Recommendation 6 Project Team Member and Organization General scope Illustrative Revise the existing UN/CEFACT Recommendation 6 on the Invoice for International Trade, adapting it to the business and regulatory requirements of e-invoicing Industry Expert • Arthur D. Little • PWC • IATA • Swiss. DIGIN • . . . ERP Providers and SW Vendors • SAP • Oracle • Microsoft • . . . . Government Representative and Institutions • ONU • Politecnico di Milano • ABI/ACBI • . . . . 28

Members of the Recommendation 6 Working Group The participants of project team are divided into three “core competencies” groups Tax and legal issues Reconciliation Payment & Financing Objective Legal aspects on authenticity of the origin and integrity of the content; to define “how” a business should pursue its obligation to electronically “send” and “store” the invoice. Analyze the data content requirements from a VAT/Sales Tax perspective Define what data elements are necessary to make automatic invoice reconciliation with other commercial documents possible Define what information must be present so that financial institutions are able to process the invoice as effectively as possible 29

The business requirements The results of Reccomendation 6 revision will satisfy the Business Requirement identified Illustrative Business requirements identified Increase process efficiency Implication on invoice data model n Support to different roles and n n n actors (e. g. holding, sub-holding, buyer, seller, . . . ) Support to “company specific” information Alignment between “company” and “e-invoice” Data Dictionary Multi-platform/ERP compatibility Alignment between the information included into the invoice data model and those available to ERP systems …. Enable access to new financial services offered Financial Communities n Use of structured information for supplying Financial Services (e. g. electronic invoice financing) n Identification of specific information (e. g. “Remittance Information”) for supporting reconciliation activities n Support to the information required for split/multiple invoice payment process n …. 30

The new CBI enhancing e-invoicing and e-payments services Thank you Associazione per il CBI Piazza del Gesù, 49 00186 Roma segreteriatecnica_cbi@abi. it www. acbi. it 31