Logica is to provide central payments processing for its US
Federal Reserve and SWIFT-based payments to one of Puerto Rico’s
largest banks.
Banco Popular de Puerto Rico (BPPR) has implemented Logica’s all
payment solution (LAPS), a multi-currency solution that delivers
central payments processing and risk management, enabling real-time
and streamlined payments processing.
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The bank will use Logica’s LAPS
technology for high-value domestic and cross-border
transactions.
LAPS will provide centralised payments
processing and risk management for BPPR’s US Federal Reserve and
SWIFT-based payments, anti-money laundering detection,
sanction-screening and financial messaging.
Logica will work with Banco Popular’s local IT
implementation partner, Evertec, to provide solution deployment
support. LAPS is expected to go live at Evertec’s data centre in
Cupey, Puerto Rico and in a disaster recovery site on the US
mainland in November 2012.
“LAPS contains a number of different
components and banks are able to buy and install the specific
components that they need,” said John Farrell, vice-president at
Logica North America.
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By GlobalData “For example, Westpac and ANZ in New
Zealand are using LAPS for low-value domestic retail payments,
while BPPR is using LAPS for high-value payments,” he told
Electronic Payments International at SIBOS in Toronto.
A major player in the
Caribbean
Having grown through mergers and acquisitions,
BPPR is the largest financial institution in Puerto Rico and a
major player in the Caribbean. It also has an operation on the US
mainland.
“The bank needed a central processing system
that would be able to process its growing volume of transactions,”
Farrell said.
“It also needed to refresh its screening
system for OFAC (US Office of Foreign Asset Control) mandated
sanctions.”
Tim Brew, market development director for
Logica’s global products business, told Electronic Payments
International at SIBOS that BPPR was already running Logica
software on its 25-year-old banking system.
“But adapting that legacy system would have
involved a significant upgrade. Instead, BPPR asked us to develop a
new architecture for the increased payment volumes that it
is experiencing. The new payment hub will handle both domestic
and foreign transactions,” Brew said.
“Most large banks have grown through mergers
and acquisitions, and not many have a centralised payments system,”
Brew said.
“Each acquisition brings with it a new payment
system, which means that a bank could end up with over 30 payment
systems. These separate systems will be used for individual
services such as retail banking, wholesale banking, card issuance,
or foreign exchange processing – and also there could be
different systems in different locations,” he said.
With payment systems that are 25-30 years old,
it is difficult for a bank to get an overall view of liquidity and
the operational risk from counterparty exposure.
“The effort involved in trying to do this
pushes up the total cost of ownership of a payment system,” Brew
said.
“Since it’s so difficult to change legacy
systems, some banks decide to buy a centralised hub that can
process any type of transaction. However, initially they might only
want to move some of their payments onto the hub.”
A roadmap for migration
Logica’s consultancy arm develops a road-map
for the migration process, which can take several years and also
provides regular reports to project stakeholders. “This is
important if the project is to survive cost-cutting efforts,” Brew
said.
“When a bank is looking for cost-savings,
complex IT projects such as migration to a payments hub offer an
easy target. So stakeholders need to be kept up-to-date with
progress.”
In some cases, the impetus for change comes
from regulatory requirements, said Brew.
“For example, in New Zealand the change in
payment infrastructure was pushed through by the Reserve Bank of
New Zealand, which required banks to move from a single end-of-day
settlement cycle to multiple intra-day settlements to reduce risk.
In South-East Asia, the drive to payments hubs has come from
growing transaction volumes, not from legacy systems.”
In Europe, the move to payments hubs has been
driven by SEPA, which has brought about a focus on low-value rather
than high-value payments. “However, very few banks have introduced
SEPA properly,” Brew said.
“Most have had a wait-and-see approach and
have only done the minimum required by European Union regulations
to receive SEPA payments. These banks handle low volumes of SEPA
payments, and often do some SEPA payments manually. In recent
months, we’ve had some enquiries from European banks who want to
move from this kind of ‘tactical’ SEPA system to an
‘industrialised’ SEPA system.”
Deutsche Bank decided to set up a scale-able SEPA processing
system using LAPS and is now the leading bank for SEPA
transactions, Brew claims. “The bank handles 50 million SEPA
transactions per hour in 14 European countries,” he said.
