Visa B2B ConnectA Network Solution for Global Large-Value Payments

Utilizing the network efect for growthB2B cross-border payments create an estimated 300B in revenue for banks1,amounting to over 40% of transaction banking activity2. For their businessclients, cross-border payments are more important than ever: over the last twodecades, trade as a percent of global GDP has grown over 50%, reaching anestimated 71% in 20173. However, legacy clearing and settlement methodshave become a hindrance to growth for fnancial institutions and businesses ofall sizes across the globe.These execution methods are expensive, opaque, and lack the amount of detailneeded to process cross-border payments efciently. As a result, resourcesand capital get tied up in the management of transactions, rather than usedfor business expansion. Some of the management issues associated with B2Bcross-border payments are: High-transaction costs across a decentralized market Lack of transparency into transfer times and unclear payment fnality Regulatory and operational complexity, but insufcient data to meet needs Inefcient access to competitive foreign exchange (FX) rates Growing threats of fraud and data security ‘De-risking’ and ‘de-costing’Visa GlobalPayment NetworkGlobal scale across200 countries andterritoriesNetwork of over15,500 fnancialinstitutionsConnects millionsof businessesProcessed over 11.4T globally asof March 31, 2019Visa: A World Leader inDigital PaymentsTo address these issues, Visa has developed a highly scalable, non-card solution designed to solve large-valuepayment issues across borders.* With B2B Connect, Visa is working with its financial institution clientsand technology partners to build the beneficial network effects Visa has already built for its global cardpayment network with over 15,500 Financial Institutions in more than 200 countries and territories.4Visa B2B Connect is designed to reduce complexity in and beyond the payment process, to help fnancialinstitutions and their clients become signifcantly more efcient in their cross-border payments execution andenable global growth.About Visa B2B ConnectMore than a messaging standard –a data-rich, unifying solutionAddressing correspondent bankingend-to-endDesigned for fnancial institutionsand their clients globallyScalable network enabled by acombination of tech and governanceValue in payments and beyond, allowingfor new products & experiencesAligned with fnancial institutions’infrastructures and strategies* Availability varies by country. Contact your Visa representative for current availability.2 2019 Visa. All Right Reserved.

More than a messaging standard:A data-rich, unifying solutionWith B2B Connect, Visa provides a new way for participating fnancial institutions to manage large-value,cross-border payments on behalf of their corporate clients. Able to process cross-border transactions across158 currencies, Visa B2B Connect is an integrated network that combines data-rich, real-time messaging withmultilateral settlements in multiple prominent currencies.5 Visa B2B Connect is simple and fexible: fnancialinstitutions only need one account to transact with many currencies, and they can either fund with the transactioncurrency or access Visa-sourced rates (at Visa scale) for FX. The network enables predictable exchange of value sothat fnancial institutions and their corporates can realize improved processing efciency and enhanced liquidity,while also moving beyond costly maintenance and upgrades to legacy systems.Transforming thePayment FlowVisaB2B ConnectCompany ABank ABank BCompany AWhat we are solving for:Predictability andReal-time visibilityFinality ofpaymentConsistency oftransaction dataDigital identityInteroperabilityMultilateralnetworkWho can Beneft:FinancialinstitutionsDirect participants onthe networkCorporationsMarketsEnabled throughtheir fnancialinstitutionsGovernment agencies& fnancial value chainstakeholdersFigure 1: Benefts of an Integrated Messaging and Settlement Solution3 2019 Visa. All Right Reserved.

Designed with security and governance at every layer, Visa B2B Connectis built to scale. Providing a consistent standard and governance for allparticipants, Visa B2B Connect makes all data pertaining to a particularpayment immediately available with an immutable, centralized systemof record for each and every payment. Operationally, this is a substantiveimprovement – it provides fnancial institutions a single resource to,among other things: Quickly send, receive and validate payment details Help inform their respective pre-screen eforts Have confdence across functions in the audit trailOver 2XGrowth in Cross-Border B2BTransfers Value v. Global GDP(Source: Juniper Research28, IMF29)3 of 4Businesses across SegmentsMake Cross-Border Payments(Source: AFP30)50% Of Corridors have LimitedCorrespondent Coverage25%Percentage of Banks’Traditional Cross-BorderPayments Revenue Streams atRisk from New Digital Bankingand Fintech Models9.With Visa B2B Connect, fnancial institutions and their clients canovercome costly processes and geographic barriers. This translatesto a more seamless end-to-end experience in which fnancialinstitutions can ofer new value-added services to their clients.For fnancial institutions and their corporate clients, Visa B2B Connectarrives at a critical moment – Accenture estimates that for banksthat do not evolve to meet the needs of the market, up to 25% oftraditional bank revenue streams in cross-border payments maybe at risk of competitive disruption from new digital banking andfntech models.6With the growing sophistication of clients, the competitiveenvironment, and internal proft expectations, spending hundredsof thousands in messaging-related maintenance (in some cases, percorridor) is no longer sustainable7. Rather than continually investingin outdated systems, Visa B2B Connect’s network-orientatedsystem transforms the payment fow and helps to position fnancialinstitutions and their corporates to realize benefts beyond whatlegacy cross-border payment approaches can ofer.(Source: BIS31)Addressing correspondent banking end-to-endLarge-value, cross-border fows are measured in the trillions per day, as enterprises engage in cross-bordercommerce and operate global businesses. In 2018, corporate B2B transactions alone accounted for 153T ofcross-border payments, according to an estimate by Juniper Research. These kinds of transactions are projectedto grow at 10% per annum (more than double global GDP growth), covering activity from micro-businesses tothe global Fortune 50.8Today, the vast majority of B2B cross-border payments are initiated through banks.9 Previous Visa studies havefound that over 80% of fnancial institutions process B2B and other cross-border payments through correspondentbanking channels.10 These corridor-based, bilateral relationships remain prominent today, with nearly 500,0004 2019 Visa. All Right Reserved.

active correspondents globally. It should be noted that reporting difers by market such that an internationalbank can be counted several times by BIC8-level, corridor, currency and message type; while seemingly large,this number fell over 10% from 2011 to 2017 and is highly concentrated in major corridors.11 With more than 92%of transactions facilitated by ‘traditional’ market participants,12 over 27 trillion sits outstanding in transactionalaccounts globally,13 trapped or inefciently deployed.As part of Visa’s settlement of 11.4T in payments annually between 15,500 global institutions, Visa has frst-handexperience with global cross-border payments. Some of the common cross-border payment challenges are:Cross-border Payment ChallengesInefciencyLarge, decentralized network working through bilateralrelationship structure. Suboptimal deployment of liquidity andsourcing of FXComplex datarequirementsTransaction data necessary to AML / KYC may be truncatedacross “hops, skips and jumps” as core it systems diferLack ofpredictabilityAmount received by benefciary, timing and/or funds delivery isunclear at originationInsufcientMessagingToday there are standards but implementation of standardsdifer across banks and markets, creating signifcant challengesin reconciliationFigure 2: Cross-Border Payment ChallengesRising costs for maintaining regulatory compliance14 and lower than expected profitability are leading to shifts inthe current web of correspondent banking relationships.15 In general, global financial institutions havestreamlined counterparty relationships. In particular, regional and local institutions – facing prohibitiveliquidity and other costs, as well as lacking multi-directional flows or access to scaled FX rates – have alsoreduced relationships, a process sometimes referred to as ‘de-risking’.As a consequence, payment chains have become longer, with a smaller number of intermediaries in key partsof the chain. According to one estimate, 83% of large, international banks have decreased their vostroaccounts globally and 60% of regional / local banks have seen a decline in foreign correspondent bankingrelationships.16 This rises to ‘macro-critical’ levels in several, predominately emerging, markets.17 However, one ofthe most telling statements regarding the fundamental market challenge is that ‘available statistics do not allowidentification of the messages that are part of the same chain of payments, and therefore the lengthening ofpayment chains cannot be measured accurately’.18Existing internal inefciencies – operational, compliance, liquidity, FX sourcing – can grow with each participantin the transactional chain. The more complex the payment path, the greater the risk that value leakage canimpact originators and benefciaries as miscommunications multiply along the chain.5 2019 Visa. All Right Reserved.

There have been some benefcial innovations in the transaction chain, particularly in messaging, the continuedevolution in technologies such as blockchain.19 However, the economic risks to executing cross-border fundstransfers remain elevated. In this context, Visa has inverted the equation by ofering a one-to-many, real-timemessaging and multilateral, net-settlement network.In Existing MarketVisa B2B ConnectGrowing Complexity of Bilateral RelationshipsGlobal Multilateral NetworkBenefciary Decreased regionaland local fnancialinstitution rmediaryDomesticCorrespondentBankOriginatingBank Fewer global fnancialinstitution vostros(due to de-risking) Potentially manyhops where eachintermediary isinvolved (can reach6-7 hops and 100 per transaction)VisaB2B Connect Price impacts toemerging marketsOriginatorFigure 3: Visa B2B Connect Solves for Growing Complexity in processing global B2B paymentsFor fnancial institutions and their corporates, Visa B2B Connect ofers simplicity and certainty, enabling a moreefcient and transparent market model through existing fnancial institution processes. This new paymentjourney can support the stability and growth goals20 of stakeholders across the value chain. With Visa B2BConnect, fnancial institutions and their corporates can turn their focus to attracting and growing relationshipsby delivering value-enhancing products and services, as opposed to maintaining costly and inefcient legacyinfrastructure.6 2019 Visa. All Right Reserved.

Designed for fnancial institutions and their clientsVisa B2B Connect is designed to overcome the intrinsic end-to-end challenges of cross-border and cross-currencypayments, enabling fnancial institutions and their corporates to improve their global payments capabilities.Visa B2B Connect aligns with common fnancial institution and corporate business objectives, enabling efciencyand growth for the fnancial institutions and their clients:From Complex Bilateral Relationships to a Centralized, One-to-Many NetworkThe relationship between fnancial institutions and their corporates can be afected by market shortcomingsin any single corridor, including high FX rates, hidden fees, or impacts to commercial economics due todelays. While several initiatives have sought to address elements of the B2B cross-border difculties, theefects have been fragmented, stymied by the current system.Visa B2B Connect ofers a clear alternative: one-to-many, global access 24/7, data-rich messaging with netsettlement fexible FX optionsRather than using a system of varied corridormethods, Visa B2B Connect links with a fnancialinstitution’s architecture and provides directsettlements of large-value transactions withother known participants on the network.Visa B2B Connect’s direct connectivity addressesa core issue found in today’s transactionaljourneys – the many ‘hops, skips, and jumps’inherent in a system so decentralized thatthe number of entities cannot be accuratelydetermined.21 Visa B2B Connect streamlinesand transforms the payment path; it is the onlyconnection needed for all Visa B2B Connectcross-border payments.VisaB2B ConnectLack of Standardization to Consistent, Contextualized Data for Global PaymentsThe data disconnects that exist between compartmentalized payment systems today exacerbate existingmarket inefciencies, while creating new pain points. These disconnects can be found within messagingand settlement systems, diferent clearing and settlement infrastructures, and payments and functionalsystems within fnancial institutions. This lack of standardization impacts not just the payments, butsurrounding processes at and across fnancial institutions and their corporates.7 2019 Visa. All Right Reserved.

Financial institutions may have pay amendmentor return fees due to inefcient lines ofcommunication across jurisdictions or banks. a lack of communication can also lead tospillover efects to and from other functionssuch as compliance, liquidity management, andrelationship management.This can go the other way as well – KYC/CDD, AML/CFT,and sanctions screening silos can lead to redundanciesand otherwise inconsistent experiences for fnancialinstitutions and corporates that distract from theirbusiness objectives.Architected to interface with diferent standards andapproaches (including ISO 20022), Visa B2B Connectprovides consistent data and delivery standards forparticipants on the network. This fexibility is critical torealizing process and payment efciencies for transactionsand for a fnancial institution’s supporting internalprocesses (such as compliance, liquidity, FX, and paymentoperations).Figure 4: Current Operational InefcienciesSimplifed Interoperability with Financial Institution InfrastructuresConnectivity is key for international payments, yetlocal market and fnancial institution infrastructurestoday are highly complex, which can inhibit importantconnections. Beyond payments, fnancial institutionsrely on platform and system silos to facilitate frontand back end operations. Yet, even though simplicityis the goal, local market and regulatory requirementshave bolstered platform and process proliferation overtime, leading to dozens of systems and thousands offunctional activities for global payments.In a rapidly changing environment where businessand technology must evolve together, Visa B2BConnect is helping enable connectivity for partnersbeyond payments by facilitating interoperabilityacross platforms and processes. With its ecosystem partners, Visa has developed Visa B2B Connect within anevolving fnancial institution technology and operating environment. This approach enables interoperabilityand technological fexibility. Now, fnancial institutions can align usage to their desired operational modeland client experience.8 2019 Visa. All Right Reserved.

Financial institutions are increasingly seeking to achieve 99% straight-through processing (STP) acrosschannel and payment operations.22 This is done using processing partners, such as enterprise payment hubproviders. The success of payment hubs, and other internal infrastructure initiatives, is highly dependent onsound upstream and downstream data, along with trusted settlement. Yet data inconsistencies, as foundin messaging, settlements, and internal functions, leave room for error and can require costly manualintervention, particularly for more nuanced functions such as compliance, reconciliation and pre / postpay processes. These interventions can create spillover: delayed payments, short pays, false-positives, andother cross-border pain points create an impact beyond those operations to infrastructure and processefciency, more broadly.Visa is not just providing another platform, but also the governance, and technology, and messagingcapabilities (including ISO 20022) to fnancial institutions. These are highly-compatible, data-rich structures,and through them, Visa is providing the building blocks for fnancial institutions to achieve straight-throughprocessing from initiation to execution. Tactically, the system’s fexibility ofers fnancial institutions thefreedom to evolve their processing approaches alongside market conditions, as opposed to investing inlong-builds with greater risk of delays, cost overruns, and already being outdated by the time the solutionlaunches.Limited Predictability to Automated Straight Through Processing (“STP”)The core issues for B2B payments go beyond just the payment: a transaction is more than processingthe payment cross-border. The lack of predictability and real-time visibility into the status of transactionscauses friction in the market, particularly with less frequently travelled payment corridors. Further, achievingautomated STP requires consistent process standards, rich data, and systems connectivity. Visa B2B Connectprovides fewer steps in the payment chain, which reduces the chance for error and manual intervention;this in turn can reduce the likelihood of cost increases and delays.A fnancial institution using Visa B2B Connect can realize the potential of their processing investments, andthen expand the value to their clients. Services that can beneft encompass global procure-to-pay, order-tocash, trade fnance, supply chain management and more. These services need STP across multiple actors,and historically used siloed, paper processes, but with Visa B2B Connect they can go digital. Empoweredby Visa B2B Connect, fnancial institutions can help their clients start to realize the benefts of these newmodels for large-value payments.Disparate Functions to Optimize Payments, Compliance, Operations & LiquidityToday, legacy functions that touch cross-border payments are often in need of costly upgrades. Throughthe Visa B2B Connect solution, Visa delivers a unifed suite of features – from consolidated one-to-manymessaging to settlement. These features enable streamlined transactions, reduced recurring investment,and a shortened payback horizon. Further, fnancial institutions that use Visa B2B Connect can make theirclients’ and their own cross-functional business operations more efcient.Visa’s global profle, and the connectivity provided by Visa B2B Connect, ofers a unifed system for crossborder business.9 2019 Visa. All Right Reserved.

Scalable network enabled by a combination of tech andgovernanceVisa B2B Connect benefts from Visa’s decades of multilateral network expertise with the latest in digitaltechnology. Financial institutions and their corporate clients can plug-in and access other known participantson the network with the ‘one-to-many’ settlement with increased trust. Visa B2B Connect addresses intrinsiccross-border payment problems by combining the ‘one-to-many’ settlement system with a robust paymentsand messaging infrastructure that support the ISO 20022 messaging standard. These are combined with thetechnology and governance to scale.Technology, Operations and ComplianceWhether onboarding a fnancial institution, or their corporate client, or in everyday operations, Visa B2B Connectsupports scale and security, and enables new capabilities for fnancial institutions and their corporate clients ofall sizes. It is fexible and designed to integrate with a fnancial institution’s given infrastructure.Visa B2B Connect brings Visa’s experience and expertise in network safety and security to the cross-borderpayment process. Financial institutions are responsible for regulatory compliance, but Visa B2B Connect canhelp participants streamline the process with enhanced reporting. This also helps ensure that data pertinent to apayment – including relevant participant profles – is available to all applicable parties of that transaction.Visa B2B Connect: Quick FactsPayment Type Large-value, non-card Account-to-Account Credit transferNetwork Highly available and scalable Utilizes Visa core assets with blockchain technology No crypto-currency: the only digital assets would be fnancial institution-issued, Visavalidated payment instructionsParties All participating fnancial institutions and their corporates are known parties Supports role-based accessOnboarding Rapid technology onboarding Partnerships with integration providers to support ease of infrastructure integration,including testingCompliance Structured end-to-end governance process AML / CFT and Sanctions Compliance ProgramData Transmission Real-time 24/7 messaging giving the bank the ability to screen transactionsForeign Exchange Processed by Financial Institution or Visa (optionality to support best rate execution)Reporting Tools Reconciliation and audit reports/fles in real-time (and as per confgured intervals) Case management support toolsValue-Added Solutions Supports fnancial institution development of pre- and post-transaction processes tosupport their internal operations and service to their corporates (e.g., order-to-cash,procure-to-pay, reporting and analysis)Solution capabilities and service oferings will continue to evolve based on market conditions.Learn more: ology/visa-b2b-connect.html10 2019 Visa. All Right Reserved.

In addition, Visa is committed to meeting its compliance obligations for Visa B2B Connect which are distinctfrom other Visa products. To that end, Visa has built out a Visa B2B Connect compliance team dedicated toensuring that its AML/BSA requirements are met. From initial onboarding sanctions screening and KYC toongoing transaction monitoring, screening, regulatory reporting, and periodic risk-based reviews, all conductedwith dedicated compliance software, fnancial institutions can trust that Visa is as committed to compliance asVisa expects its partners to be.By providing transparent network information, Visa B2B Connect enables banks to reduce process duplication.This can help a fnancial institution enhance its own functional efciencies, including KYC / CDD analysis, AML/ CFT surveillance, and reporting. Data is immediately available and backed by an immutable audit trail, whichcan help fnancial institutions quickly expand their situational awareness. This helps companies quickly realizeefciencies in areas like enhanced transaction diligence, as opposed to traditional ad hoc, manual processes.Network Rules and ApproachVisa B2B Connect network rules create standards to support efcient and transparent B2B cross-border paymentoperations, across the globe. In combination with the Visa B2B Connect technology, such as, immutable recordsand message standards, these standards provide a common framework that enables Financial Institutions tomanage their B2B cross-border payments while keeping their distinct cross-border strategiesIn this context, Visa B2B Connect’s structured process for network maturation and governance can help fnancialinstitutions realize the potential of the technology to scale and process-related benefts.Unlocking ValueThe Visa B2B Connect network creates visibility and value within a global multilateral settlement system. If, forexample, a participating Australian fnancial institution needs to collect in USD, but also pay out in that currency,it no longer has to fund the transactions separately. As a result, it may be able to realize immediate nettingbenefts.By enabling inbound fow netting within a network, the network allows fnancial institutions to manage liquiditymore efciently than with a bilateral system. This results in more fexible liquidity and the agile deployment ofpreviously locked-in capital.Faster & More Agile Beyond just the PaymentAligning business and technology operations are critical for fnancial institutions and their corporate clients tofuel growth. To address complexities beyond transactions, Visa B2B Connect’s interoperable platform enablesconnectivity within a fnancial institution’s native, core systems. This fexibility provides a springboard to addresscommon manual processes (such as payments and order reconciliation) in the context of unique fnancialinstitution and client processes. Contrasted with the current maintenance-intensive system of cross-borderpayments and processes, the potential for savings and more efcient deployment of capital for value-add issubstantial for fnancial institutions and their corporates. Through B2B Connect, Visa and its partners are workingto enable that potential.11 2019 Visa. All Right Reserved.

Value in payments and beyond, allowing for new productsand experiencesVisa B2B Connect ofers fnancial institutions and their commercialclients considerable benefts when managing cross-border activities.These include certainty of provider, cost savings, organizational agility,and enablement of value.CertaintyToday, the costs associated with processing cross-border paymentsare not well defned. It is costly to manage multiple bilateralrelationships across jurisdictions. Depending on a fnancial institution’scircumstances, its infrastructure and process costs (i.e., operational,compliance, treasury, and nostro liquidity) can be over 90% of crossborder costs and can account for over 25 per transaction, accordingto Accenture research for Visa. In a market segment where capital isconstantly in motion, such spillovers to and from payment operationsare no longer acceptable.Moving from bilateral relationships to Visa B2B Connect’s multilateralmodel can help fnancial institutions align their functions and delivermore efcient service to clients across global corridors. The move fromcostly, time-intensive processes can mean less ongoing investmentcost, shortened payback horizons, and more time that can be placedon growing commercial relationships.Cost savingsCertaintyMore efcient, more timefor growth Trusted, globalconnectivity through VisanetworkCost SavingsPotential 50-80% savingsv. present End-to-endpayments and processsavings through data-rich,multilateral solutionOrganizational AgilityAccelerates digital modelevolution Facilitatesoperating model evolutionand creation of new valueadded servicesValue EnablementPayments as a valuegenerator Move fromfriction in cross-borderpayments to new sources ofclient valueEven with existing infrastructures, centralizing payments through VisaFigure 4: Benefts of Visa B2B ConnectB2B Connect can reduce payment costs substantively for fnancialinstitutions. Core benefts may be realized from Day 1 through fewer transaction hops, the streamlining ofcomplex intermediary and payment operations (especially in non-core corridors), as well as the option of directsettlement access to multiple currencies. Operational and liquidity benefts grow with network presence andthe network. For fnancial institutions, this could mean signifcant savings in end-to-end cross-border paymentscosts.23 These savings come before the benefts of greater certainty and reduced eforts (such as lower investmentvolatility and greater business agility) are considered.Additional detail on cost levers is available in Appendix A.Organizational agilityVisa B2B Connect allows fnancial institutions to focus on aligning their operational delivery models in the mostefcient manner, which includes helping protect their businesses against disruptors24 and driving more valuefrom their business (corporate customer) relationships. These business relationships are attractive to alternativeproviders, which are anticipated to nearly double their share of revenue25 in the absence of model adjustmentsfrom incumbent fnancial institutions.12 2019 Visa. All Right Reserved.

Contrasted with alternative providers, fnancial institutions have intrinsic advantages in serving commercialclients at scale. Visa B2B Connect enables fnancial institutions to utilize those strengths through more efcientmarket coverage in areas such as FX, creating the potential for new value-added services. As payments continueto trend towards digital within native marketplaces and ecosystems, Visa B2B Connect can be instrumental inbuilding relevance and orchestrating business through new digital channels.26Foreign CurrencyAccountsCADUSDCorp BUSA BankLocalCurrencyUSDDBenefciaryCAUSA BankForeignExchangeCorp CCADUSA BankCorp AVisaB2B ConnectUSDNZDNZDBenefciaryUSA BankDirect settlement in multiple currenciesFinancial Institution or Visa FX optionsFigure 6: FX Optionality: One of the Many Ways Visa B2B Connect is Enabling ValueBeyond FX, Visa B2B Connect enables a consistent, cross-border payments foundation, tailorable to each fnancialinstitution’s profle. In the future, this fexible design can facilitate the development of value-added enhancements,including the construction of value-added ‘middleware’ and the delivery of diferentiated transaction bankingservices, including pre-payment activities and cross-border capital optimization, even when a corporate usesmultiple fnancial institutions.Visa B2B Connect can plug-in and enrich the value propositions of any participating fnancial institution, includingregional institutions with few international branches looking for a solution with global scale, global fnancialinstitutions trying to optimize their network, or specialist institutions looking to achieve a competitive edg

158 currencies, Visa B2B Connect is an integrated network that combines data-rich, real-time messaging with multilateral settlements in multiple prominent currencies. 5. Visa B2B Connect is simple and fexible: fnancial institutions only need one account to transact with many