Electronic And Mobile Sepa, The Key To Unlocking The Full Potential Of The Internal Payments Market
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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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 217.5.2009 Harry Leinonen
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%
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 317.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 417.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 517.5.2009 Harry Leinonen
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%
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 717.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 817.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 917.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1017.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1212.8.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1317.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1417.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1517.5.2009 Harry Leinonen
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
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1617.5.2009 Harry Leinonen
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.
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1717.5.2009 Harry Leinonen
Thank you for your attention.
Q&AQ&A
SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1817.5.2009 Harry Leinonen
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