Electronic And Mobile Sepa, The Key To Unlocking The Full Potential Of The Internal Payments Market

International Payment Summit 2010

Royal Lancaster Hotel, London

El t i d M bil SEPAElectronic and Mobile SEPA:

the Full Potential ofThe Key to Unlockingthe Full Potential of

the Internal Payments Market

9 March 2010Harry Leinonen

The views expressed are those of the author and do not necessarily reflect

SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 117.5.2009 Harry Leinonen

The views expressed are those of the author and do not necessarily reflectthe views of the Bank of Finland.

Current SEPA credit transfer developments


Source: ECB

Future SEPA credit transfer developments

100%

90% Swift Rapid Moderate Slow90%

80%

70%

Swift Rapid Moderate Slow

70%

60%

50%50%

40%

30%30%

20%

10%

2008 2009 2010 2011 2012 2013 2014 2015 2016 …0%


Speed factors

Clear info and dead-lines Little info and messy timing

Increasing Decreasing

Clear info and dead lines• Consistent and supporting info

y g• Conflicting info, moving targets

Firm supported standards Conflicting standards Firm supported standards• Common to all banks

Readiness for change

g• National, proprietary versions

Lack of prerequisites• Software availability&installation

Positive customer incentivesC i b fi

• Missing software availability Negative customer incentives

C f h i h b fi• Concrete economic benefits • Cost of change without benefits

Need to capture customers interest


pversus other priorities

Clear deadlines

Common final start date for e SEPA customer transactions Common final start-date for e-SEPA customer transactions

Common proposed final end-date for legacy transaction

formats

Good arguments for common end-date based on customer Good arguments for common end-date based on customer

and economy-level benefits

P liti l d d t b ki i l ibl b dPolitical end-date backing is only possible based oncustomer benefits and unanimous industry support


Need for firm-supported eSEPA standardsPayer Payee

Payer’sbank

Payee’sbank

Sending- credit transfers

Sending- e-invoices

Payer Payee

- sending directdebit mandates

ti i i

- direct debits- card payments

Receiving- accepting e-invoicesReceiving

- e-invoices

Receiving- payment notifications

- credit transferse invoices- direct debits- card payment info

- direct debits- card payments

- statements of accounts - direct debit mandates- statements of accounts

Common e-standards are basis for e-efficiency.Common ISO20022 standards with sufficient data.

Common implementation via JAVA libraries (reusable code)SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 6

Common implementation via JAVA-libraries (reusable code).

Electronic payments are the main part and the growing part of EU non-cash payments

Compoundaverage =

%89%


SEPA is a de facto eSEPA undertaking

Non-cash electronic payments in EU-15 = 70 billionsNon-cash paper payments in EU-15 = 9 billions

Market share ofe-payments in EU 15in EU-15


SEPA efficiency gains achievable mainly in e-payments

Software houses need to implementthe new standards for customers

Customers buy, lease, outsource, use as a remote service their payment/cash management applicationstheir payment/cash management applications

Almost completely dependent on external IT vendors Customers pay for all application updates and changes Customers pay for all application updates and changes IT vendors’ interest will grow with common standards and

growing marketsgrowing markets Common testing facilities will support changeover

Th t bj tiThe concrete objective:- same POS-terminal works throughout SEPA- same cash management software connects everywhere- same cash management software connects everywhere- same direct debit application functions in all countries- same e-invoicing solution for all EU invoices


g- same e/m-payment solution for e/m-commerce

Positive customer e-incentives and e-benefits

C t d d ti t ll b k i SEPA Common e-standards connecting to all banks in SEPA Receivers’ e-reference (ISO RF) available throughout SEPA

d t t t t di t d bit i E e-mandates to automate direct debits in Europe Common e-invoice service including cross-border usage Common card and card transaction standards incl ding Common card and card transaction standards including

expanded transaction e-info in-line with e-invoices Common certified EFTPOS terminals and software Common certified EFTPOS terminals and software e-payment solution for e-commerce e-discounts or lower e-tariffs on e-SEPA services (compared e-discounts or lower e-tariffs on e-SEPA services (compared

to old legacy services)Positive customer benefits will promote p

rapid voluntary move to SEPA,forced deadlines without benefits will


delay the move to near or after the deadline.

Mobile phone and m-payment- payment instrument of the future ?

Person-to-person In shops Ticketing010101001010101011010110101001101

Digitalised card infoth i (OTA)

Up-to-date balance info

over-the-air (OTA)into phone Complete

transactionVersitile m/e-ID and transactionrecords

Auto-Mobile = miniPC

encryption and back-up

Enhanced NFC((()))

recon-ciling

Mobile = miniPCfor payments

Enhanced NFCand RFID input

SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 11

Increased convenience, speed and security at lower costs

All kinds of accounts and issuers can use the same platform and technology

♦ Banking services (debit card credit card etc)♦ Banking services (debit card, credit card, etc)

♦ Money remittance services

♦ Payment institution services

TELCO billi i♦ TELCO billing services

♦ Central bank services (m-cash?)( )

Parallel usage requires a trusted service manager (TSM)to administrate the security and identification environment


The m-payment infrastructure will requirea complete set of common standardsa complete set of common standards

m-identification standards m identification standards Payment transaction standards including remittance info Ticketing transaction standardsg Near-field-communication (NFC) and remote (OTA)

communication standards SIM and/or security card standards etc

Developing and implementing m-standards (mSEPA)p g p g ( )will require even wider cooperation than for eSEPA


Necessary m-payment cooperation parties

TELCOsTELCOs

MerchantsH d tHandsetsuppliers

EFTPOSli

Inter-suppliers

-bank

Banks, card companies etcConsumers

Development of new integrated servicesrequire a longer chain of cooperation than before


require a longer chain of cooperation than before

M-payments can

- make card payments more efficient

- improve e-commerce/web-payments

- replace some cash payments

but in general the total payment volumes

will remain as before.

Note! m-payments are improved e-payments


Conclusions

eSEPA as the only viable SEPA - more attention needed

Focus on completely common implemented standards for Focus on completely common implemented standards for

both e and m -versions

ICT vendors are in key position for implementations

Clear cost and fee benefits for customers are needed Clear cost and fee benefits for customers are needed

e-reference, e-invoices, e-mandates, e/m-payments and

e-promoting tariffsOnly a common bank-initiated pushy p

based on customer benefitscan speed up SEPA implementation


and unlock the full potential

Payments are a cost industry

d t t b i and not an amusement business.

New options must outperform legacy services

in costs and content

andeSEPA is the road to future.


Thank you for your attention.

Q&AQ&A


Electronic And Mobile Sepa, The Key To Unlocking The Full Potential Of The Internal Payments Market

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