Overview Report

1
FedACH InternationalSM Mexico Service

• Overview Report
• To the THIRD LATINO CREDIT UNION CONFERENCE
• San Juan, Puerto Rico
• June 9, 2004

Larry Schulz Vice President Retail Payments
Office Federal Reserve System
2
Partnership for Prosperity

• The Banco de México and the U.S. Federal Reserve
  agreed to study the possibility of setting up an
  automated clearinghouse system (ACH). Once
  established, there will be an efficient interbank
  mechanism to carry out payments between both
  countries that will be available to all financial
  institutions.
• Partnership for Prosperity, September 2001

3
Partnership for Prosperity

• The electronic payments highway created by the
  Banco de México and the Federal Reserve
  accommodates personal payments (i.e.,
  remittances) and commercial payments for small or
  large businesses.
• Remittances, payroll and pensions are examples of
  the types of payments that can be made via ACH.
• Payments from Mexico to the U.S. will be added at
  a later stage.

4
Value Proposition of Services

• Utilizes NACHA format
• Cross-border payments in same file as domestic
  ACH
• Direct and easy access to accounts in foreign
  countries
• Provide broad coverage for our customers
  customer can reach 51 of global GDP via FedACH
• Competitive per item fees
• continued

5
Value Proposition

• OUR pricing
• User DIs implement own customer fees
• Foreign exchange (FX) translation included at
  competitive rates
• Certainty of payment
• continued

6
Value Proposition

• Assist customers in learning about international
  payments, and provide customer tools
• Information on foreign banking requirements in
  service manuals
• http//www.frbservices.org/Retail/intfedach.html
• Updated daily and historical foreign exchange
  rates
• http//minneapolisfed.org/fedachfx/index.cfm

7
Foreign Exchange Webpage
http//minneapolisfed.org/fedachfx/index.cfm
8
Mexico Service Features

• Gateway with Banco de México gives access to all
  account holders in U.S. and Mexico
• Bi-directional, credits-only service starting
  with transfers from United States to Mexico
• Credit to RDFI in Mexico on Day 2 (i.e., one day
  after the U.S. settlement date)
• Fixed-to-variable currency option
• Cross-border surcharge 0.67 to send item to
  Mexico

9
Mexico Service Features

• Foreign Exchange
• Current Guaranteed maximum spread of one percent
  over Bank of México daily wholesale exchange rate
• Fall 2004 Introduction of new, tiered foreign
  exchange rates based on U.S. dollar value of
  payments file

10
Mexico Payment Flow
11
Other Services

• Canada Since July 2001
• Transatlantic Since November 2003
• Austria
• Germany
• The Netherlands
• Switzerland
• United Kingdom

12
Challenges

• Originating person to person payments?
• Origination capability of ACH payments for
  smaller banks?
• Software
• Developing and marketing a new product

13
Opportunities

• Creating new products
• Attracting new customer base
• Contributing to goals of the Partnership for
  Prosperity

14
Getting Started

• You too can make payments to Mexico!
• One page document available highlighting steps
  and resources for customer initiation of
  international services.
• Guide to a Successful FedACH InternationalSM
  Launch

15
2004 Plans

• Resolve OFAC screening concerns
• Add Latin American partner country in the third
  quarter
• Sponsor conference on Electronic Payments in the
  Americas, October 2004
• Work with NACHA and industry to revise CBR/PBR
  format
• Focus on existing services by increasing volume
  and planning for expanded features

16
Contact Information

• Larry Schulz
• [phone]
• larry.schulz_at_atl.frb.org
• Elizabeth McQuerry
• [phone]
• elizabeth.mcquerry_at_atl.frb.org