EQ Magazine 1st edition - Equens

equens.com

EQ Magazine 1st edition - Equens

sharing insights

VISA & MASTERCARD

Ten questions to MasterCard and Visa

SWIFT ABOUT SIBOS

What makes Sibos the world’s

premier financial services event

SMART SOURCING

How to use the scarce capital

and available resources

ECB

ELABORATES

ON SEPA

GERTRUDE TUMPEL-GUGERELL

EXPLAINS HOW

THE CRISIS AFFECTED

THE IMPLEMENTATION

OF SEPA


Editorial

sharing

insights

coloPHon

We proudly present ‘EQ’, the new

magazine from Equens. The title says it

all: EQ is an abbreviation of Equens, but

is also known as the index for emotional

intelligence. Equens realises all too well

how important it is to have market

knowledge, but also to understand the

wishes and needs of our customers. You

can only operate successfully if you

know what is going on, take care of

your relationships, and take a real

interest in your clientele. With EQ, we

are providing a platform that customers,

authorities and other insiders in the

European payments market can use to

share their insights with you, hence the

magazine’s subtitle ‘Sharing insights’.

2009 was a turbulent year. Every party

in the financial industry felt the impact

of the crisis. In this issue of EQ, Belgian

bank KBC talks openly about the

consequences of its pioneering role in

SEPA. Gertrude Tumpel-Gugerell, a

member of the Executive Board of the

European Central Bank, provides a more

in-depth look at the crisis and its effects

on SEPA. MasterCard and Visa share

their views on the future European card

processing landscape and the role of

third-party processors. And there are

many more interesting articles to read!

Equens 2009 Milestones and Financials

EQ replaces Equens’ traditional annual report.

Whilst it is an Equens magazine, we are not

the focal point. If you are interested in finding

out about Equens’ milestones, services and

key financial figures from 2009, please visit

www.equens.com/milestones

or www.equens.com/finance2009

EQ magazine online

EQ magazine is also available online:

www.equens.com/eq

Your feedback is valued!

We would welcome your feedback on this

edition of our magazine. Please send your

comments to communications@equens.com,

go to www.equens.com/eqfeedback or fill

in the enclosed response form. For each

response, Equens will transfer 10 euros to

the International Red Cross.

EQ Management

Equens SE - Annemieke Lambregts,

Esmée Burger, Marcel Woutersen

Editors

SPJ Financiële Communicatie -

Siebrand van der Ploeg

Total Identity - Yvonne van de Wal,

Frank Kessel, Susan Hunt, Ed Lute

Translation

TechText bv

Concept and design

Total Identity - Erik olde Hanhof

Photography

Jack Tillmanns, René ten Broeke,

Hollandse Hoogte, Christian Lindholm

Illustrations

Dik Klut

© Equens 2010. All rights reserved.

Neither this publication nor any part of it

may be reproduced, stored in a retrieval

system, or transmitted in any form by

any means, electronic, mechanical,

photocopying, recording or otherwise,

without prior permission of Equens.

We hope you enjoy reading EQ, and that

it offers you some interesting insights.

EQ Editorial Team


3

contentS

furthermore

ECB, Gertrude

Tumpel-Gugerell

Member of the Executive Board of the

ECB, Ms Tumpel-Gugerell gives her

vision on how the crisis has affected the

implementation of SEPA.

Smart sourcing

Michael Steinbach, CEO Equens SE,

explains how to use the scarce capital

and available resources where they are

most likely to be profitable.

4

18

Rediscovering the customer 9

The pan-European Banks & Future survey, conducted

by Fraunhofer, reveals that European banks are

committed to investing in customer management.

Is volume still king 12

Transaction volume is not only necessary to offer

low prices; it also facilitates the development of

solutions for banks with a wide range of requirements.

EQ spoke to Johan Kestens of A.T. Kearney

Belgium on collaboration on infrastructure and

profitability requirements.

A Europe united in crisis 15

Tony Barber, bureau chief of the Financial Times,

outlines his personal view on the unification of

Europe.

SWIFT about SIBos

What makes Sibos the world’s premier

financial services event The history of

Sibos from 1978 till 2010 in a nutshell.

20

KBC SEPA front runner 16

Kristine De Lepeleire of Belgian bank KBC talks about

strategic choices and their pioneering role in SEPA.

The gain and pain of the ancient brain 24

How to make complex and major financial decisions

with a brain dating back to Neanderthal days Social

psychologist Jaap van Ginneken explains.

VISA & MASTERCARD 26

How do the two major schemes view

the role of third-party processors in the

changing European payments market

EQ magazine presented ten questions to

MasterCard and Visa.

E-SEPA 30

E-commerce is exploding. To what extent are

payments becoming web-based and mobile too

Push the limits 33

“Optimising payments is always about making

a trade-off between security, speed, ease of use

and costs”. According to Dr Niklas Bartelt, Director of

Product Management Cards & Payments at

DZ BANK, banks will always endeavour to push

the limits.

Future of EU card processing revisited 36

In 2004 Peter Jones of PSE Consulting made a

forecast how the EU’s processing market would

shape up by 2010. Six years on he looks back.

Did his predictions become true And how will the

market evolve in the next five years

New combinations lead to innovations 38

Promising examples of innovations in the

payments industry.


SePA back

on the agenda

5

EQ magazine spoke with Gertrude Tumpel-Gugerell

of the Executive Board of the European Central Bank.

How has the crisis affected the implementation of SEPA

What will happen next Gertrude Tumpel-Gugerell:

“SEPA will bring more competition and pressure on

revenues, but also more business opportunities and new

sources of profit for retail payment service providers.”

What are the lessons learned from

the financial crisis

There have been a number of lessons

learned from the financial crisis. Let me

just mention that it has illustrated the

close interdependencies between financial

markets, intermediaries and infrastructures.

While public attention has been mainly on

banks and the banking sector, the solidity of

infrastructures, i.e. payment and securities

clearing and settlement systems, has also

been put to the test.

EU market infrastructures have supported

the liquidity and stability of financial markets

and proven resilient to more volatile

market activity and peaking transaction

volumes. Thanks to sound risk management

frameworks, they have helped contain the

systemic impact of the default of critical

counterparties.

The financial industry, regulators and overseers

have interacted successfully to weather

the storm, and we have now established

measures to reduce the likelihood of another

similar crisis.

There is a need for enhanced crisis management

arrangements across market infrastructures

to improve the existing information

sharing framework and the cooperation/

coordination between oversight authorities.

Furthermore, the Eurosystem is actively

contributing to the review of existing international

oversight standards for financial

market infrastructures (including liquidity

management standards), and to the

establishment of a sound infrastructure for

OTC derivatives.

Another area that warrants particular attention

is that of retail payments, given the

importance of retail markets to the overall

stability and efficiency of the financial system.

The Eurosystem sees the need for

a more integrated and harmonised retail

payments infrastructure. This is why it

strongly supports the realisation of SEPA.

In what way has the crisis influenced

the importance of SEPA

While it is certainly true that the crisis has

claimed a lot of resources in the ECB, it has

not diminished the importance attributed to

SEPA. We have to be aware that retail payments

represent the interface of the financial

system with the day-to-day lives of almost

every individual and every company in

Europe. Therefore the retail payments market

has a crucial function in preserving the

public confidence in the financial system and,

ultimately, the euro as the single currency.

It is also worthy of note that the financial

crisis has highlighted the importance of retail

payment services to the banks’ balance

sheets. While retail payment services have

certainly not been prominent in the public

debate, retail business has successfully

withstood the financial crisis and provided

a steady and reliable source of revenue.

Banks with a balanced business model have

been best equipped to cope with the

situation.

What changes will SEPA bring

SEPA will result in more competition and

pressure on revenues, but also more business

opportunities and new sources of profit

for retail payment service providers. Thus,

it requires banks to change their business

and revenue models. This is never easy –

especially not in a period of limited growth

and higher risks like we have now. But

regardless of external conditions, banks

need to invest in SEPA to position themselves

strategically – the earlier, the better.

Will SEPA ever be realised if there is

no end-date

To avoid a lengthy, costly and confusing

period of dual processes, and in order to

make the SEPA benefits attainable, in 2008

the ECB stressed the importance of setting

an end-date for the migration to SEPA

payment instruments. In 2009, the financial

sector and European institutions reached the

consensus that the most viable option for

determining a migration end-date is regulation

by public authorities. The European

Commission is currently investigating the

possibility of a regulation to facilitate the

migration to SEPA.

Which additional regulations do you

expect with regard to SEPA

It is in the interest of the banks to encourage

their clients to embrace the SEPA payment

instruments by providing good and

accessible information to their customers.


6

Even more importantly, the banks need to

convince their clients of the benefits of SEPA

with attractive, high-quality product and

service offerings.

At the same time, it has to be recognised

that the self-regulatory powers of the banking

community have their limits. In January

2010, i.e. two years after the product launch,

SEPA credit transfers accounted for only

6.2% of the overall credit transfer volume.

Although we expect to see an increase in

this figure by the middle of the year – as

public administrations in several countries

have planned to migrate to the SEPA products

– further action is needed. For instance,

a regulation could facilitate the migration to

SEPA. Furthermore, customer acceptance of

SEPA products can be encouraged through

further involvement of the users in the governance

of the SEPA project. In addition to

the EPC organising stakeholder involvement

around the design of the SEPA products, a

new governance body, known as the SEPA

Council, will be established. The aim is to go

beyond the interbank and inter-payment

service provider domain, taking into account

general welfare considerations and balancing

the (sometimes conflicting) interests of

the different stakeholders. Consequently, this

governance body will also play a crucial role

in the move towards SEPA.

Should public authorities take the lead

When referring to bank customers, we

usually think of individual retail clients and

companies. However, it should not be forgotten

that public administrations, e.g. tax

authorities, benefits agencies, etc., generate

a critical mass of retail payments. Migration

of these payments to SEPA will bring substantial

volumes. The European Commission

established that in autumn 2009, the migration

rate of public authorities to SEPA was still

below the overall migration rate in the euro

area. Despite some differences in the migration

rates of public authorities in different

countries, I think that the use of SEPA by public

administrations could play a very prominent

role in the overall migration to SEPA.


7

When do you think SEPA will be

realised

In my view, the realisation of SEPA will not be

a steady state, but a process. It depends on

the ability of the European retail payments

market to both harmonise and modernise

payments. The harmonisation of retail

payment instruments and standards is a

precondition for overcoming the current

fragmentation and creating a competitive

European retail payments market. At the

same time, the harmonised retail payment

instruments need to be complemented with

innovative features to be able to keep up

with user expectations and market realities.

These user expectations and market realities

are not stable, but governed by technological

progress, as is SEPA. The chip, the internet

and the mobile phone are three innovations

that have had a profound impact on society

over the last 20 years. They are undoubtedly

having an impact on customers’ payment

needs and payment behaviour, too. This

needs to be taken into account in the further

development of SEPA.

SEPA Direct Debit: achievement or

overregulation

First of all, we should not forget that SEPA

Direct Debit (SDD), which was launched

in November 2009, is the first direct debit

instrument ever that can be used for both

national and cross-border collection of payments

throughout the 32 SEPA countries. The

creation of such a scheme is a great achievement,

as it is geared towards achieving

consensus among representatives from 32

countries, all of whom have had very different

experiences with legacy instruments

and payment habits.

In my view, SEPA Direct Debit is not overregulated.

First of all, the respective SEPA

Direct Debit Rulebooks are the product of a

market-driven, decision-making process of

the EPC. Furthermore, the public statements

and subsequent references to direct debit

interchange fees in the new regulation on

cross-border payments in euros stemmed

from banks needing clarity regarding the

long-term business model for SDD.

It is clear that the rollout of SEPA Direct Debit

will not be a ‘big bang’-style event. Instead,

it will be a gradual process, since reachability

for direct debit transactions will only be guaranteed

as of 1 November 2010. Furthermore,

it is evident that the SEPA Direct Debit

schemes are basic models to which extra

features can be added as required as additional

optional services. I think a lot of the

reservations regarding SEPA Direct Debit

stem from the fact that customers are not

sufficiently informed. Obviously, this is an

area for improvement. More importantly,

they need to be convinced of the benefits

of SEPA Direct Debit with attractive, highquality

product and service offerings.

Is the ECB in favour of a third card

scheme besides V PAY and Maestro

The Eurosystem has always been in favour

of banks setting up at least one additional

European card scheme. The rationale behind

this is that it would first of all enhance competition

between card schemes and give

cardholders, merchants and banks more

options. Secondly, it would allow for diversity

in card scheme governance and scheme

ownership models.

In the EU, card payments have been the

strongest driver for cashless payments.

This proves the potential of this means of

payment to generate revenue for the financial

industry through growth, even at a time

when interchange fees are under pressure.

Card payments can be strategically positioned

as a real alternative to cash. I expect

that, based on these strong arguments,

banks will look carefully into their cards

business strategy.

What major effects has SEPA had on

infrastructure to date

It is interesting to note that the effects of

SEPA have so far been most visible at the

infrastructure level. Most infrastructures

have been processing SEPA credit transfers

since their launch in 2008, and a large

number are also SEPA Direct Debit scheme

Gertrude Tumpel-

Gugerell (1952) is

an Austrian economist.

She is the former

vice-governor of the

Austrian National Bank

(1998-2003). Since 2003,

Ms Tumpel-Gugerell has

been a member of the

Executive Board of the

European Central Bank.


8

compliant. Several infrastructures have

taken the step from being purely national

operations to become pan-European service

providers. There is also a choice between

core clearing and settlement service providers

and those who offer additional payment

processing-related services. A number of

infrastructures have also established interoperability

links for the exchange of SEPA

transactions across infrastructures, thus

creating wider reach.

Will the card processing market benefit

from standardisation

In the medium term, the ECB expects that

card processing will benefit from use of the

same standards and infrastructures utilised

for credit transfers and direct debits. The

integration of a new card processing framework

in the existing PEACH/CSM framework

by the EPC will represent an important contribution

to this development. Some European

infrastructures are already being used for

card processing. In the long run (and in a

market-driven process), the ECB also expects

that the harmonisation and modernisation

of the infrastructures will pave the way for a

more integrated and consolidated market in

order to utilise economies of scale and scope.

Do you foresee the need for a standardised

payment area larger than SEPA

In the course of 2009, it became apparent that

the international financial community considers

SEPA one of the world’s most important

payment harmonisation projects. In fact, SEPA

has become a point of reference for other payment

harmonisation projects. One example of

this is the International Payments Framework

(IPF), an association that plans to improve

non-urgent multi-currency cross-border credit

transfers.

The ECB welcomes the fact that initiatives such

as the IPF take the SEPA Rulebooks and the

SEPA standards as an example when designing

their framework for cross-border and

cross-currency payments. In terms of governance,

these payments need to remain clearly

separate from SEPA payments to provide the

necessary legal clarity to customers, payment

service providers and governance bodies.

Overall, I believe that more standardisation will

also lead to greater efficiency in the payments

market at a global level. However, we should

not forget that the harmonised legal framework

for payments at the SEPA level is not

available across countries globally. It is therefore

difficult to envisage a time frame for such

harmonisation activities to come to fruition.

ECB, ESCB and the Eurosystem

Since 1 January 1999, the European Central Bank (ECB)

has been responsible for conducting monetary policy

for the euro area – the world’s largest economy after

the United States. The euro area came into being when

responsibility for monetary policy was transferred

from the national central banks of eleven EU Member

States to the ECB in January 1999. Greece joined in

2001, Slovenia in 2007, Cyprus and Malta in 2008, and

Slovakia in 2009. The creation of the euro area and a

new supranational institution, the ECB, was a milestone

in the long and complex process of European

integration.

European Central Bank

The legal basis for the

single monetary policy

is the Treaty establishing

the European Community

and the Statute of

the European System of

Central Banks and of the

European Central Bank.

The Statute established

both the ECB and the European

System of Central

Banks (ESCB) as from 1

June 1998. The ECB was

established as the core of

the Eurosystem and the

ESCB. The ECB and the

national central banks together

perform the tasks

they have been entrusted

with. The ECB has legal

personality under public

international law.

European System of

Central Banks (ESCB)

The ESCB comprises the

ECB and the national

central banks (NCBs) of

all EU Member States

(Article 107.1 of the

Treaty) whether they

have adopted the euro

or not.

Eurosystem

The Eurosystem comprises

the ECB and the

NCBs of those countries

that have adopted the

euro. The Eurosystem and

the ESCB will co-exist for

as long as there are EU

Member States outside

the euro area (comprising

the EU countries that

have adopted the euro).


9

Banks & Future 2010

Rediscovering

the customer

The pan-European Banks & Future survey, conducted

by the Stuttgart-based Fraunhofer Institute for

Industrial Engineering IAO, reveals that banks across

Europe will remain focused on internal processes,

while at the same time having rediscovered their

customers. The banks have expressed their commitment

to investing in customer management and are

looking for new ways to communicate and interact

with their customer base.

In cooperation with several international

banks and IT partners, Fraunhofer investigates

interests and research issues related

to the current and future needs of banks.

Its partners include Equens, IBM and Wincor

Nixdorf. The survey has been conducted

in Germany since 2004 and was extended

across the rest of Europe in 2007. The

European survey for 2010 focuses exclusively

on payments. “Each year, we’re seeing more

banks looking to participate,” says Claus-

Peter Praeg from Fraunhofer IAO and responsible

manager for the survey. “This year’s

international survey covers all the countries

in the Eurozone, with a total of 80 respondents.

Although that may not seem like a lot,

in their respective countries the respondent

banks actually represent large market shares.

Of the respondents 40 percent are board

members and 50 percent are members of

senior management. That ensures that the

survey is receives high attention and that

the results have strategic relevance for bank

executives and managers.”

Investing in customer interaction

Since the research report will be published

around the same time as this magazine, we

are not yet able to disclose the full results.

However, Mr Praeg has identified a number

of key trends. “We’ve been seeing growing

price competition for several years now,

which has resulted in increased process

automation, both internally and in e-business.

Also, banks are increasingly focusing on

European integration and standardisation as

part of SEPA, and they regard the increasing

number of regulations – both those imposed

by governments and those under the Basel

Accords – as a significant challenge. A particularly

striking trend this year, however, is the

renewed focus on customers and the commitment

of banks to investing in new channels

of customer interaction. Specifically, they

are focusing on integrating internal processes

into customer processes, in order to simplify

the communication with customers.”

Social networks

The survey results show that these latter

investments will focus on extending the

communications and sales channels, as

well as on bank branches and online banking,

which is now well integrated. Mr Praeg:

“Banks will be investing in new channels

such as social networks, and in forms of

online services. They are explicitly investigating

how they can gather more information

on their customers, other than on the basis of

traditional data, ranging from their financial

situation to their birthday. They think they’ll

be able to learn much more about their

customers by analysing and interpreting the

social networks they use. Several banks have

already created customer communities in

order to define products and give customers

the opportunity to discuss product terms and

conditions, and some banks are even linking

specific products to social networks, for

example by integrating payment options. It

will be interesting to see what new business

models will evolve from these trends.”

Specialisation by segment and region

According to Mr Praeg, another key trend

related to the renewed focus on the customer

is further specialisation in specific

customer segments and regions: “The main

challenge is to increase customer satisfaction,

so banks are adapting their value chains

as much as possible in order to facilitate

that. In the survey we defined this situation

as ‘glocalisation’. Customers are increasingly

globally mobile but in many cases they

would prefer to use the service of their local

bank in their home base. They demand products

and services which are tailored to their

special situation and needs. This will result in

new services which are provided regionally,

but can be used worldwide and at any time.


10

Investing in Business Process

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several years ago. Mr Praeg: “Back then,

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several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

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several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

several years ago. Mr Praeg: “Back then,

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banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

banks were raving about the potential

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

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benefits of outsourcing, but in our work as

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benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

benefits of outsourcing, but in our work as

consultants we have noticed that many of

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them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

them, from an organisational perspective,

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

are not ready to make a fundamental ‘make

or buy’ decision. Before they’re ready to take

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that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

that step, banks will need to invest in

updating their business process manageupdating

their business process manageupdating

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adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

ment, adapt their organisational structures

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

and build up competencies in managing

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external value chain partners. Experiences in

external value chain partners. Experiences in

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external value chain partners. Experiences in

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external value chain partners. Experiences in

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external value chain partners. Experiences in

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external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

external value chain partners. Experiences in

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

the banking sector indicate that sometimes

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they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

they lack even the most basic data and

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

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processes, such as quantitative information

processes, such as quantitative information

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processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

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processes, such as quantitative information

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processes, such as quantitative information

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processes, such as quantitative information

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processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

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processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

processes, such as quantitative information

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integrate external partners.”

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integrate external partners.”

integrate external partners.”

integrate external partners.”

integrate external partners.”

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integrate external partners.”

integrate external partners.”

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integrate external partners.”

integrate external partners.”

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integrate external partners.”

integrate external partners.”

integrate external partners.”

integrate external partners.”

integrate external partners.”

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

Consultancy as an extension of research

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great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

great deal of interest in the Banks & Future

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

survey: “From feedback we have received

from our contacts and through our other

from our contacts and through our other

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activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

activities in the industry, we’ve learned

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our survey plays a key role in stratethat

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2010

2009

THE Main

challenges in 2010

Just like last year, almost three quarter of the

respondents see the increase of productivity

through cost and process optimisations as

the main challenge in the payments business.

The attention for the migration to SEPA

products has decreased, probably due to

the longer period after the launch of SCT and

SDD. However, still over half of the respondents

consider the migration of customers to

the new SEPA instruments as their biggest

challenge.

73,3 Increase productivity through cost and process optimisations

74

53,3 Migration of customers to the new SEPA instruments

49

40 Achieving readiness to send and receive SEPA direct debits

54

38,3 Expanding the business (countries, products, functionality)

23

35 Interpretation and national implementation of the Payment Services Directive (PSD)

66

33,3 Introducing innovations to the market

21

30 Standardisation

Not available

18,3 Achieving readiness to send SEPA credit transfers

23

16,7 Getting SEPA Cards Framework (SCF) compliant

33

8,3 Non-Banking competitors (e.g. payment institutions)

Not available

11

Innovations

in payments

As to which new innovations will drive future

growth in the payments business, the

expectations towards the growth potential

of the different innovations haven’t changed

very much. The top three innovations still are

e-invoicing, e-payments and e-billing. What

has changed however, is how banks think

about the support or even delivery by

external service providers. Last year for

e-invoicing this was 45% of the respondents,

for e-payments 30% and for e-billing 36%.

These percentages have increased considerably,

which proves that the discussion on

‘make of buy’ has become more animated.

SUPPORTED/DELIVERED BY SERVICE

FUTURE GROWTH POTENTIAL

65,4

50

E-Billing (business to consumer)

55,8

36

84,4

61

E-Payments (e.g. online banking based e-payments) 48,1

30

69,2

63

E-Invoicing (business to business)

44,2

45

40,4

27

Prepaid cards (e.g. remittance cards, gift cards) 38,5

45

38,5

36

Risk management services (e.g. fraud prevention) 36,5

32

50,0

43

Contactless cards

34,6

32

51,9

48

Contactless m-payments (e.g. NFC mobile phone) 30,8

39

50,0

48

M-Payments (e.g. SMS remittance services)

28,8

39

15,4 Biometric payments

7,7

14

13

Technological

advancements

Technological advancements (new question)

Looking further ahead, the banks gave their

view on what technological advancements

they expect will most affect the payments

industry in the next five years. Not surprisingly

the main ones are related to ICT with two

thirds of the respondents mentioning security

technologies and an equal percentage betting

on mobile technologies. Contactless technologies

occupy a strong third position. The

similarity of these three is that they are being

applied on a considerable scale already. Other,

more exotic technologies are expected to

have much less influence.

64,3

64,3

55,4

25

25

17,9

Security technologies

Mobile technologies

Contactless technologies

Virtualisation

Biometric technologies

Cloud Computing


is volume

still king


13

Payment processors have in many cases developed

from bank-owned shared service centres into fullgrown

and independent market parties. In the specific

area of payment processing, many have outgrown

their founders, which in some cases also redefines

the former governance relationship with shareholders

into a new customer centric relationship.

“Banks sometimes may feel like they regret

this,” says Johan Kestens, financial services

specialist and partner at A.T. Kearney Belgium,

an international management consulting

firm. He believes this is something the banks

will have to learn to live with. “It doesn’t have

to be a bad thing, provided there is enough

competition. Besides, in the aftermath of

the financial crisis, banks now have many

matters to deal with, in terms of capital

structure and business mix.”

A national infrastructure was natural

Historically, collaboration between banks

to create efficient infrastructures was a

natural thing to do. In the seventies, when

ATMs were introduced and later on POS

systems, the natural step for banks in several

European countries was to jointly establish a

national infrastructure. This was more costeffective

than each of them attempting it on

their own. Consequently, Belgium, France,

the Netherlands, Portugal, and others set

about realising this goal, resulting in evermore

efficient national payment systems.

Subsequently, the euro and SEPA arrived. So,

at first sight, what would be more logical to

cooperate on a common infrastructure again

Fragmentation of interests

Apart from the many subtle but relevant

differences in payment systems and conventions,

the European banking market today is

far less ready to collaborate on new infrastructures,

unless encouraged by regulators,

such as the creation of CLS or Target II. A

wave of domestic bank mergers in the first

half of the nineties was followed by another

wave of cross-border mergers, resulting in

international banking giants. For example,

ING acquired BBL and a few other banks,

HSBC bought CCF, Deutsche Bank took over

Crédit Lyonnais Belgium, and Santander

purchased a large number of banks in

Spanish-speaking regions and one in the UK.

All of these banks started occupying specific

positions in the international markets. This

led to fragmentation of interests. “Which also

means that the argument for joint investment

in a European infrastructure has now

lost some of its weight,” says Johan Kestens.

a volume of 10 billion

transactions

facilitates the

development of solutions

for customers

with a wide range of

requirements

A new market structure

“A new market structure is currently taking

shape. The direction it will take is currently

anyone’s guess, but a group of banks

may be established which focuses on

global transaction banking – in other words,

cash flow and transaction management for

customers. Other banks may focus on taking

deposits and lending them at the local level

based on their knowledge of the creditworthiness

of their customers. Consequently,

they may outsource the non-core activity,

for example international payments. Finally,

a third, hybrid category may present itself,

combining lending with regional payments.

The choice a bank makes will also depend on

the resulting changes in business portfolio

as a consequence of the crisis. I expect ten

to twelve worldwide players and 20 to 25

regional players will form the core in Europe.

Examples of banks with global ambitions are

HSBC and Deutsche Bank, on a regional level

Nordea, UniCredit and KBC are examples.”

Profitability requirements

For the payment processors, developments

in the banking market have had entirely

different consequences. Johan Kestens:

“Over the years processors matured, and in

many cases became independent, or even

were sold to third parties whose shareholders

have profitability requirements. Banksys,

which was sold to Atos, is one such example.

There have been similar developments in

securities trading. Mergers allow stock exchanges

such as NYSE Euronext to turn themselves

into information powerhouses. Banks

of course benefited by capital gains at the

sale or IPO, but I wonder whether they nowadays

sometimes regret the loss of influence.”


14

Solutions for a wide variety of needs

“Processors will continue to strengthen their

positions, as scale is essential in an increasingly

competitive market. Prices for end consumers

in Europe are already extremely low,

compared to North America for example.

By inference, processors are fairly efficient,

but now have to carry the investments of

adopting the new SEPA instruments. But the

A few major players, countless

innovators

“The ongoing consolidation will lead to the

establishment of pan-European clearing

houses. I expect there will be room for three

to five truly pan-European processors in the

broad electronic debit and credit market.

Specialists and niche players will as always

survive, and there could be a continuing

Equens’ vision

on infrastructure

In today’s market payment

processors are

in the position to take

the lead in creating a

common infrastructure.

In doing this, they will

have to meet the banks’

two main requirements

of today:

• Flexibility to facilitate

solutions for a wide

range of requirements;

• Reach throughout the

euro zone and beyond.

The position of the

major processors is

something regulators

will start looking

at more closely

Equens is working on

several fronts to realise

this by:

• A comprehensive SEPA

compliant product

portfolio;

• Full reach throughout

Europe via the threetier

strategy: Equens

community (intra-CSM),

the EACHA inter-CSM

network and PE-ACH;

• Participation in the

International Payments

Framework Association

(IPFA) to create a global

payments network.

processing business can not be consistently

loss-making. It requires a proper earnings

model. Companies need to be coerced to

meet the required efficiency levels, but at

the same time they need to be sufficiently

profitable to realise growth and make

improvements in their products and services.

In the future, the ability to process at least

10 billion transactions annually will be essential

to achieve a cost position to survive as a

mainstream processor. However, this volume

will not only be used to offer low unit prices,

it should also be a platform that has the

scope to offer differentiated services to

end customers, as those will need these

services to develop unique propositions for

their customers. What will be important is

that an annual volume of at least 10 billion

facilitates the development of solutions for

customers with a wide range of requirements.

If volume is king, service is heir to

the throne.”

burst of innovative start ups covering specific

payment areas such as pre paid or electronic

invoicing. Banks must pay attention regarding

electronic transactions, as new players

will try to penetrate the market in a wide

variety of ways. This includes payments for

cinema tickets, parking, mobile phone calls,

public transport passes, but also for online

purchases while watching TV. I believe it is

dangerous for banks to leave these activities

to other market players and create opportunities

for aggregators to bundle these types

of payments and allow customers to pay in

one go. This is a case of re-intermediation

by new entrants, creating some distance

between banks and their customers.”

More critical regulators

“The position of the major processors is

something regulators will start looking at

more closely – not only from a competition

perspective, but also from the perspective

of systemic risk. For instance, what could

happen when a processor’s operations are

disrupted, or when it goes into liquidation

This in principle requires some form of redundancy,

which could be a limiting factor for the

growth of, for instance, Equens. For this type

of vital function, all aspects that may have

consequences for the society as a whole will

have to be considered carefully. Europe, for

many years has been the leader in efficient

interbank and point-of sale electronic payment

systems, and they have become an

essential artery for the economic fabric.

Therefore their continued well being, but

also fitness level is really key to the broader

economy. This will become an important

consideration for banks, their customers and

policy makers alike.”


15

A EUROPE UNITED

IN CRISIS

Helmut Kohl, the former German chancellor,

used to say that building European unity was

like riding a bicycle. You have to keep going

forward because otherwise you will fall off.

It was a clever image, creating a sense of

inevitability about European integration. But

it didn’t paint the full picture. European unification

has made most progress in response

to crises, not when times are calm. In other

words, Europe’s leaders tend to pedal faster

on their bikes after a bomb has exploded on

the side of the road.

It was an upheaval in the world’s geopolitical

balance in 1989-1991 that provided the

impetus for the two biggest advances in

European integration of the past 20 years –

the creation of the euro, and the European

Union’s expansion from 12 to 27 memberstates.

The collapse of communism set up

an unmissable opportunity to overcome

the east-west divisions of the Cold War.

Meanwhile, Germany’s reunification forced

the pace of monetary union, especially

after several crises in the EU’s exchange

rate mechanism threatened to destroy

the project. Then the EU’s failure to react

effectively to the 1991-1995 Yugoslav wars

convinced governments of the need to forge

a common European foreign and security

policy.

Today, two years after the near-meltdown of

the western world’s financial system, we are

seeing the first signs that the crisis may produce

another advance in EU integration. But it

will probably be a modest step forward, not

a big leap. Consider the agreement reached

by euro area leaders in late March on how to

rescue Greece if it proves unable to refinance

its debts. Up to that point, the EU had no

crisis management system in place. It seems

almost unbelievable, but when Europe’s

leaders designed their monetary union they

assumed that national balance of payments

problems would simply disappear because

everyone was in the same currency area.

Now we know this isn’t true. We also know,

for the first time, that euro area governments

will assist a member-state that is in

severe difficulty with bilateral loans (and

some help from the International Monetary

Fund). Moreover, the European Commission,

the European Central Bank, the eurogroup

of euro area finance ministers and the IMF

will monitor with the utmost strictness the

budgetary and economic polices of the government

receiving the aid. This represents

progress toward closer European unity – but

only limited progress.

In the first place, the decision to involve

the IMF demonstrates that the disciplinary

framework of the EU’s Stability and Growth

Pact – the euro area’s fiscal rulebook – is

not robust enough for the taste of financial

markets. Secondly, EU leaders have shown

no appetite for a fully fledged fiscal union of

the kind that in the United States allows the

federal government to transfer funds from

states in good financial condition to states in

temporary trouble. Finally, Germany wants to

rewrite the rules of monetary union so that a

country such as Greece can be expelled from

the euro area if necessary. This proposal

goes against the whole concept of European

unification.

The financial crisis has put other pressures

on European integration, notably on the

development of the single market. The

service economy accounts for 70 per cent of

EU output and employment, but the political

barriers to completing the single market in

this vital area are more visible than ever.

Overall, the EU is in an introspective, unambitious

mood, with rival national agendas often

cancelling each other out and blocking the

path to greater unity. The opportunities are

there, but the willpower – among both politicians

and the general public – is not.

Tony Barber has been

the bureau chief of the

Financial Times in Brussels

since September

2007 and was previously

the bureau chief in

Frankfurt and Rome. In

this column Tony Barber

outlines his independent

and personal view on the

unification of Europe.


kbc sepa

front runner

“At KBC we made major investments in

order to be ready for SEPA early. At the

start, we were the first bank in Belgium

to have all the front-end channels ready

for the customer. With domestic SCTs,

we now have an overall average of 26

percent. However, due in part to the

worldwide financial crisis, SEPA seems

not to be top of mind anymore in the

European banking industry and certainly

among customers. Consequently,

we are still equally enthusiastic about

SEPA, but the costs and benefits

involved have gained importance on

our priority list.”

Much wiser and a little sadder To an extent,

yes. Until the summer of 2009, Kristine De

Lepeleire, General Manager of International

Cash Management & Cash Clearing at KBC,

was responsible for the bank’s large-scale

SEPA programme. “Belgium is a small open

market economy, so all the large banks

wanted to be part of the SEPA framework as

early as possible. KBC was at the forefront

and wanted to explicitly position itself as a

SEPA bank, because we believe that this is

the way to enable our customers to reap the

benefits of SEPA, by offering European wide

products based on more efficient processing.

For this reason, KBC decided to adopt a

thorough approach. We were initially hoping

for a short implementation time, but it now

seems that things are going to take longer.

Customers require more time although

interest to get started is clearly growing.

However, the higher costs of a longer

dual period will impact our relatively small

market. This is why we are convinced there

should be a fixed end date, preferably 2012,

although this may prove quite ambitious. We

believe in SEPA, but we have had to adjust

our expectations.”

Basics first

Nevertheless, KBC is still at the forefront of

the European market with its SEPA services.

Ms De Lepeleire: “We were ready for SCT

and SDD from day one and are now in the

process of migrating our customers to SEPA.

This is not without its difficulties. For SDD in

particular, large companies have numerous

requirements. We are now focusing primarily

on an approach that allows customers to get

started with the basics. We’ll add the bells

and whistles later.”

The difference between the consumer

and business markets

“For private customers, the transition to SEPA

went very smoothly. Naturally, for them the

process was fairly transparent. We gave

them all kinds of support when implementing

the changes, by, for instance, adding the

extra letters and digits to their bank account

numbers and the BIC. We also changed the

transfer forms early. In Belgium, there is a

strong tradition of sending these forms with

invoices. For the consumer market it was

important that large private and government

billers, such as the tax office, made the

switch first.

In the business world the transition has been

less smooth. Despite all the support from

their banks, companies need to invest own

time and money in, for instance, loading up

the IBAN’s and BIC’s, and modifying their

XML templates. A lot of accounting software

has not yet been modified, even though it is

now changing quickly.”

Service above minimum level

At every pace, KBC – like the rest of the

Belgian banking industry – manages to

maintain its service levels, even where the


17

EPC standards are lower. Ms De Lepeleire:

“Belgian payments are of a high quality, and

thanks to high efficiency, low-cost. There are

many services we know customers need.

Accordingly, we won’t start offering these

at the minimum SEPA level. In this way, we

continue to support ‘structured remittance

information’, a standardised type of transfer

that facilitates automatic reconciliation.

Naturally, in other areas we need to satisfy

legal requirements, such as the eight-week

refund period for SDD.”

Communication strategy

KBC made a conscious choice regarding the

communication strategy. “The way we see it,

private customers will only need information

on SEPA when effectively making a transfer.

We did not go for big information campaigns

because the message will have long been

faded away by the time the customer actually

needs the information. Consequently, we

made instruction leaflets that corporates can

send with their invoices. Naturally, we also

trained our branch employees extensively so

they can advise customers. The electronic

banking tools were enriched with extra help

functions and ditto information.

We have advised our business customers to

appoint a dedicated SEPA officer. The large

companies approach things in a highly structured

manner, but for smaller companies this

is often difficult, especially in the current economic

climate. Still, if they have SEPA-proof

electronic banking and accounting software,

they get started with it. For instance, there is

considerable demand for customer information

sessions on SDD.”

A concern of all stakeholders

“Until now, SEPA seems to have primarily

been a concern for the banks. Naturally,

someone needs to take the initiative and

rise to the challenge. But SEPA is clearly a

matter of common interest that should have

received broader support from the outset.

Companies operating on an international

level see the advantages. What is important

now is to make it clear to all other stakeholders

that SEPA significantly lowers the

threshold for conducting international business,

and that keeping the dual period short

by setting a deadline will avoid unnecessarily

high costs. However, the more reservations

SEPA encounters, the longer it will take for

the benefits to be realised.”

SEPA, the KBC approach

• Focus on an approach to

get customers started

with the basics, add the

bells and whistles later

• Make information on

SEPA available for private

customers when they

have to make a transfer,

e.g. by providing large

billers with leaflets to enclose

with their invoices

• Advice corporate

customers to appoint a

dedicated SEPA officer

• Make clear that SEPA

is a matter of common

interest that needs

broad support from all

stakeholders

• Be aware that under the

current circumstances it

will take longer for the

benefits of SEPA to be

realised.

Equens is KBC’s processing

partner for SEPA Credit

Transfers. Read more about

our SEPA solutions on

www.equens.com/SEPA


Smart

sourcing

Following the crisis, when it was a case

of ‘all hands on deck’, banks are seizing

the current period of early recovery

as an opportunity for reflection. They

are reconsidering their strategy and

ambitions, and are reassessing their

core competencies, operational models,

cost control and financial position.

Stability and quality of services are

more important than ever in creating

a foundation for renewed growth. The

challenge is to use the scarce capital

and available resources where they

are most likely to be profitable.

By Michael Steinbach,

Chairman of the Board

of Directors of Equens

There are two developments in progress.

First of all, banks are shedding activities that

are not generating sufficient earnings, or no

longer tie in with the redefined core activities.

Secondly, based on the reassessment of

the operational model for the future, there

is the mounting discussion regarding the

sourcing of activities that can be performed

more cheaply and better by third parties, but

without putting the banks’ own market position

or the continuity of their vital processes

at risk. In my opinion, the latter is an essential

addition, given the lessons learned in the

past. I firmly believe that the payment and

card processing segment offers interesting

opportunities in both respects.

The right choices

For the majority of banks, continuing payment

services is essential for growth and stability.

However, full or partial outsourcing of

intra-bank and inter-bank processing services

is a possibility. In doing so, it is imperative

that a bank makes the right choices. Equens


19

can play an important role in this respect by,

in consultation with the client, taking a close

look at every aspect of the processes within

the bank, and jointly determining where

profits could be made through outsourcing.

This can then be achieved through anything

from standardised solutions to full outsourcing

of client-specific services. In other

words, ‘smart sourcing’.

Reinforcing competitive position

Banks are being forced to modify all of

their payment processes in order to make

them fully SEPA compliant. This became

even more important following the ‘SEPA

resolution’ of the European Parliament of

March 2010, which called for the European

Commission to set a deadline no later than

31 December 2012.

Equens has seized the arrival of SEPA as an

opportunity to develop processing solutions

for the whole intra-bank and inter-bank payment

processing chain. Our solutions consist

of a variety of service modules that together

cover the whole of this chain. Banks can outsource

parts of the chain to us individually or

in different combinations. On their behalf, we

can take care of each of their process steps.

As we already work for a large number of

banks in Europe, our clients benefit from our

economies of scale and scope. This allows

us to balance business cases more quickly,

and also shorten the time to market for new

services, which in turn reinforces the competitive

position of the bank.

Domestic services remain within SEPA

SEPA payments currently account for only

2 percent of the overall payments volume.

Even after the large-scale migration to

SEPA, there will still be a need for countryspecific

functionalities. Banks in the various

European countries will, partly at the request

of their own customers, want to provide

the level of service they currently provide

in their domestic market. SEPA must not

result in lower service levels, anywhere.

Consequently, we have chosen the core

CSM services as the basic component for

our portfolio, extended by a wide range of

optional Value-Added Services (VAS). The

VASs are geared to the various service levels

that the different European countries have

become accustomed to.

Importance of local expertise

Many parties lack the knowledge of local

markets and the experience to respond to

specific market demands (with the exception

of the current local players, but they

lack the necessary volume!). However, this

is essential in enabling banks to offer the

level of service they already offer in their

domestic markets. The origins of Equens and

the European growth model that served as

its foundation mean that we offer significant

added value in this respect. The Dutch part

of our organisation has been providing a

wide range of services for banks for years,

not only in the area of clearing & settlement,

but also in terms of functionalities that can

be used for a much wider range of activities.

By contrast, the German part of Equens

has a different background, and has always

focused on the back-office processing of

payments within the actual banks. This also

applies for the Italian and Finnish operations.

Our European presence, combined with our

broad experience, allows us to respond efficiently

to the varying local market situations

and demands.

Independent sourcing partners

Another justifiable requirement that banks

make is that a payment processor should be

independent and have card and payment

processing as its core activity. This is fully

understandable. After all, as a bank you want

to be sure that your interests and those of

your customers come first. Processing has

been Equens’ raison d’être for many years.

We are not affiliated to one specific bank, and

occupy a brand-independent position in the

cards market. Our broad presence in Europe

allows us to operate independently, set our

own course, and define a European growth

strategy that focuses on our customers.

Time and confidence

In our experience, banks like to play it safe

when it comes to sourcing, especially where

fundamental capabilities such as card and

payment processing are concerned. Sourcing

processes are time-consuming, and require

building a relationship of trust, whether

they involve a standardised service or full

outsourcing. Rightly so, in my opinion. Banks

need extremely solid sourcing partners who

can guarantee long-term continuity. This in

turn provides sufficient scale in the processing

market. We know from experience to

what extent banks can benefit from economies

of scale by sharing substantial parts

of the infrastructure. Johan Kestens of A.T.

Kearney also points this out in this magazine.

Sufficient scale leads to economies of scale

that facilitate a low cost price, but also result

in an earnings model that leaves room for

investment in innovation. This allows the

needs of the bank to continue being met.

After all, it is vital to keep looking ahead!

Deeply rooted processing experience

Equens is a truly European

company, with

roots and offices in four

European countries – the

Netherlands, Germany,

Italy and Finland. Out

biggest asset in a Europe

with growing SEPA traffic

– also domestic – is twofold.

First of all, payment

processing has been our

core business for years,

which means we have

more than four decades

of experience to build on.

In addition, our national

roots and local expertise

allow us to meet national

and bank-specific market

demand right across

the payment processing

chain. With clients in ten,

and partnerships in six

European countries we

offer European market

coverage. We offer full

reach in Europe, and

even beyond SEPA – via

the IPF Association and

our strategic partnership

with the Federal Reserve

Banks. The organisation

is bank and brand-independent

and has a stable

governance structure

with shareholders all over

Europe. This, combined

with our European growth

strategy, enables us to offer

long-term continuity.


the

making of

Lázaro Campos was

appointed Chief Executive

Officer of SWIFT in April

2007. He was previously

Head of the Banking Industry

division, responsible

for SWIFT’s commercial

activities in the banking

and payments markets.

EQ spoke to SWIFT CEO

Lázaro Campos, about

what makes Sibos the

world’s premier financial

services event. Facilitated

and organised by SWIFT,

Sibos is the forum for the

industry to define future

strategies and take collective

action to shape its

future. Campos: “One of

the key components of

Sibos today is advancing

critical dialogue.”

“Sibos is basically two events in one. It is a

conference, like many others in the industry,

but it is also an exhibition where we have

around 170 exhibitors showcasing their

products and services.” There is a strong link

between the conference and the exhibition,

so the exhibitors (financial institutions and

vendors) help shape the programme and

participate in the debate. “It is this combination

which makes it unique.”

Advancing critical dialogue

Sibos first began in Brussels in 1978 with

300 participants and now regularly attracts

up to 8,000 delegates. “Initially it was a

get-together of the community: the SWIFT

customers at the time. Often, it was actually

working sessions, because we were still

defining standards for the different transactions

and so on. It was really a working

environment with a few people getting

together, almost around the table. Over time

it became more of a platform where issues

can be debated, discussed and advanced,”

Lázaro Campos explains. “The programme is

defined in close collaboration with the worldwide

SWIFT community; the motto of Sibos

today is advancing critical dialogue. And this

actually goes a long way towards explaining

why it is so successful.”

Professional partners

Sibos is planned in a three-year cycle,

rotating between EMEA, the Americas and

Asia mainly in global financial centres. A

core team starts work on the next Sibos

long before the current one has ended.

“As the organiser of Sibos, we set out the

framework, if you like. However, we equip

ourselves with professional organisations


21

that are highly experienced and know how

to run events of this size and complexity,”

says Campos. “We create the opportunity for

exhibitors to be there. But once we are there,

it is Sibos that takes over – it is not SWIFT

anymore, but Sibos.”

Quality

Last year, Sibos was in Hong Kong, this year

in Amsterdam, and planning has already

begun for Toronto 2011 and Osaka 2012.

“We secure locations five years in advance;

we have to pinpoint the right dates – just

getting the dates right is a nightmare. You

have to take into account all the different

religious, national holidays and other significant

events. You have to set the right dates

for the event to be successful and attract

as many people as possible,” he explains.

“I believe there is a quality component too.

I think Sibos is well attended because it is

very well organised compared with other

industry events – it is on a different level in

terms of attracting people,” says Spanishborn

Lázaro Campos.

Topical themes

The themes for the conference are very

much dictated by what is going on in the

industry. “That is the biggest challenge we

face – how to decide in February/March what

will be hot in September/October. And we

do sometimes add or change slightly the

scope of the sessions because we know

from experience that the more specific a

session is – the more relevant it is – the more

interesting it becomes,” he explains. If it

is too generic then it is not very engaging.

“Everybody agrees at 30,000 feet, but it is

when you really get down to the detail that

people start diverging in their views, and that

is what makes the debate more interesting.”

The three key themes this year will be regulation,

rebuilding trust and recovery.

How flexible does the programme need to

be to ensure it is relevant to the industry

when Sibos opens Lázaro Campos: “Very

flexible. To give an example of how difficult

it can be: it was on Monday, the first day

of Sibos 2008 that Lehman Brothers went

bankrupt. We were at Sibos in the plenary

sessions, and we found that in the few hours

that followed we lost 20% of our speakers.

We reviewed topics, we reviewed sessions,

we found replacement speakers and people

hardly noticed that anything had happened.”

By invitation

Invitations are sent to the SWIFT national

member groups and major customers asking

them to comment on the programme

and propose speakers for the sessions.

“Managing the influx of requests is also a difficult

task. We have to do that in a way which

bigger constituencies of financial services –

global banks, broker dealers, fund managers,

central bankers, correspondent bankers and

investment bankers. People with all sorts of

different profiles, from business to operations

and technology.”

Sibos and SWIFT

In a nutshell, the success of Sibos can be put

down to the fact that it is an industry forum,

by the community for the community with

SWIFT behind it. “We operate two brands here:

SWIFT and Sibos. Sibos is and continues to be

a reflection of the industry. The people who

come feel that they are discussing the right

topics, with the right people at the right time.”

Everybody agrees at 30,000 feet,

but it is when you really get down

to the detail that the debate

becomes interesting

is impartial and objective and helps to create

the best possible event. It is not about the

commercial relationship with SWIFT – it really

is about the success of Sibos as an industry

event,” he says.

Global event

When Sibos first began, it was mainly a

European event with a few delegates from

the US, but now it is very much a global

event. “We have seen a shift in the geographic

representation over the years. For

example, of the more than 6,000 people

who attended last year 1,500 were from

Asia, and the seniority of the attendees

has also gone up significantly, especially in

the last five years,” says Lázaro Campos.

The people who come to Sibos are industry

practitioners, from both the business and the

technology domains. “They represent the


See you

at sibos 2010

The first

commercially

automated

cellular network

(the 1G

generation)

was launched

in Japan

Introduction of

the IBM Personal

Computer. The

first IBM PC ran

on a 4.77 MHz

Intel 8088

microprocessor

The European

flag was adopted

by all EU heads

of State and

government

as the official

emblem of

the European

Union

Invention

of the World

Wide Web

East Germany

accepts the

Deutsche Mark

as its currency,

thus uniting the

economies of

East and West

Germany

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

Brussels

Five years

after SWIFT

is born, the

first Sibos is

held

Amsterdam

SWIFT opens

its first North

American

operating

centre

participants in 1978 (x 100)

Copenhagen

Asian countries

connect

to SWIFT

Düsseldorf

Washington

The fifth

Sibos is held

outside Europe

for the

first time

Montreux

The National

Bank of

Belgium becomes

SWIFT’s

1.000 th

member

Barcelona Brighton Nice Montreal

SWIFT goes

into securities

and the first

BIC directory

is issued

Vienna Stockholm Berlin Hong Kong

The first

Sibos in

Asia Pacific

Brussels Gefor

the neva

second time

since 1978

Sibos is more than a conference and exhibition,

it is the financial services industry’s premier

event. Networking and doing business are at

the top of the agenda.

Sibos is the only event that covers all sectors

of the financial community, and therefore

attracts the industry’s leading figures and

companies. The presence of so many senior

represen tatives from leading institutions

worldwide means that dialogue about the

future of the industry is lively and thought-

Major theme Regulation

At Sibos 2010 the industry’s

collective response

to regulation following

the financial crisis will be

discussed. The operational

impact of financial reform

will be examined, and

how the industry can

engage with regulators

more effectively.

Major theme Rebuilding trust

How will the industry go about regaining

the confidence of its customers

and the public at large, and how will

it approach the inevitable conflict

between reducing risk and reducing

costs. At Sibos 2010 the discussion will

be, for example, whether the industry

should change the measure of success

beyond profits and share price.

Including some showcases of pragmatic,

practicable CSR ideas for the

financial industry.

Major theme Recovery

What can financial services players do

to be ready to capitalise on recovery

Can they ‘innovate their way out of

this’ as Steve Jobs once said How do

they best leverage technology

What about the uncertainty that

prevails in the marketplace: where to

compete Where to collaborate

Twelve streams

In addition to the themes, the Sibos 2010

programme has something of interest to every

participant. In practice this means that everyone

can partcipate in sessions covering all of the

following twelve streams:

Banking, corporates, custody & asset servicing,

funds & investment management, innovation,

market infrastructures, payments & cash

management, securities trading, standards,

trade & supply chain, technology & operations,

and ‘other’.


23

The first

on-line shop

served by

Netscape

The first

content

sold to

mobile

phones

was the

ringtone,

launched

in Finland

The first

full internet

service

on mobile

phones was

introduced

in Japan

The September

11 attacks

were a series

of coordinated

suicide attacks

by al-Qaeda

upon the

United States

Social

networking

sites emerged

like MySpace

Linkedin

en Facebook

The first

tweet

was sent

to invite

coworkers

Introduction

iPhone

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Boston

Florence Sydney Helsinki Munich San

Francisco

Singapore

is cancelled

Geneva

Singapore

SWIFT

turns 30

Atlanta

Copenhagen

Copenhagen

for the

3 rd time

Sydney

Boston

Lázaro

Campos

becomes

SWIFT’s

new CEO

Vienna

SWIFT

celebrates

its 35 th

anniversary

Hong

Kong

participants in 2009 (x 100)

provoking. Therefore the conference

sessions are designed to highlight and

explore the current challenges and initiatives

arising in the industry. Leading experts in

their field come to debate and share their

knowledge about new technologies,

processes, requirements, alliances, and

of course, efficiency and security.

Sibos draws audiences in excess of 8,000

participants from the financial industry ranging

from the established financial institutions

to application and middleware vendors,

system integrators, central clearing systems

and consultants. They come to Sibos to do

business, learn about new products and

services, and simply to network. Bankers,

investment managers, broker-dealers,

treasury specialists, operations professionals,

corporates, and representatives from emerging

markets, all see the Sibos conference

and exhibition as an excellent investment.

Sibos Boston 2007

7,000 attendees

6%

10.5%

Sibos Vienna 2008

8,114 attendees

8%

8%

Sibos Hongkong 2009

5,782 attendees

5%

49%

14%

42%

40%

34.5%

70%

Europe Americas Asia Pacific ME & Africa

14%

Why Amsterdam

All sorts of criteria are looked at before a

city can be considered as a location for Sibos.

At a minimum it must be perceived as a

major business centre, it is relatively safe

from crime and terrorism and have already

hosted similar-sized events.

If the city meets these requirements, the

Sibos crew start examining things in a lot

more detail. They evaluate the infrastructure:

the transport, the security, the hotels, the

catering, the conference and meeting

facilities. All of these need to be world-class

in order for Sibos to be held there.

Sibos goes green

Efforts are being made to make

Sibos a ‘greener’ event. These

include: using recycled carpets,

reducing printed materials by at

least 30% and only using recycled

paper for the rest. Cutting food

waste by 30% and using local

suppliers where possible. Implementing

a certification system for

‘green’ busses and ensuring that

European-based SWIFT employees

travel to Sibos by train where

practical.

Participants per region

The majority of participants still come from

Europe, typically followed by North America

and then Asia. This does change however

depending on where Sibos is being held.

For instance, last year in Hong Kong Sibos

had primarily Asian participants.


THE GAIN AND PAIN

of THE ANCIENT

The internet is some twenty years

old, industrial society two hundred,

money two thousand. But we still

make our major financial decisions

with… a Cro-Magnon brain dating

back to Neanderthal days.

Our brain is highly asymmetrical. For

instance, our ‘fear of loss’ is on average two

and a half times as strong as our ‘hope for

gain’. This translates into strange stock market

quirks, as it makes many online investors

sell their falling shares too late, and their

rising shares too soon.

It also makes the boom-time consumer an

overconfident spender, and the recession-era

consumer a suspicious saver – as if another

side of our personalities has suddenly taken

over.

The Cro-Magnon brain consists of three layers.

On the outside, the human cortex, which

is no more than a hundred thousand years

old. In between, the mammalian intermediary

part, which is two hundred million years

old. Beneath them is the reptilian lower part,

which is half a billion years old. In cases of

real financial panic, it is our most primitive

urges that suddenly take over.

Is it possible to influence such archaic

reflexes Maybe, marginally. There are two

ways of looking at financial mass behaviour.

On the one hand, as the sum total of

individual decisions, and on the other as a

collective, where the social pattern is much

more than the mere sum of its parts.

The exterior and interior of a financial institution

should, of course, radiate robustness

and make people feel at ease. But beware:

even a faint smell of sweat may make clients

more fearful, whereas a whiff of the newly

discovered pheromone oxytocin in the air

may make them more trusting.

Other odd cues may play a key role as well.

Research has found that even two black dots

on the wall next to people, similar to peering

eyes, may suddenly make them slightly

more honest. A lost wallet on the pavement

is three to four times more likely to be

returned if it contains a picture of a laughing

baby (unconsciously triggering a ‘nurturing

response’), rather than one of an elderly

couple. Strange!

financial behaviour

differs between cultures.

within europe there is an invisible

frontier halfway between the

north-west and the southeast

What about advertising The mass media

are losing their effectiveness, due to their

fragmentation, and the overexposure of

the public. But the internet is gaining punch

instead, as searches and offers can be honed

to the finest detail. It has also emerged that

people can even be ‘primed’ by subliminal

cues (below the threshold of conscious perception)

in audiovisual presentations, such as

brief flashes of smiling faces.

And what about the context of a payment

transaction It is, of course, well known that

credit cards make people spend more easily.

But research has shown that even the mere

image of a credit card, on the plate with the

bill in a restaurant, makes them give significantly

larger tips – even if they pay in cash.

Influencing individual behaviour

So let us begin with the first question: how

can one influence individual behaviour

Naturally, by highlighting the advantages of

a financial product, and downplaying its disadvantages.

But also by utilising the careful

design of the physical environment, and its

subtle cues.

Naturally, communication is also important. A

bank investigated the effectiveness of various

loan offers. The key factor turned out to be a

small picture of a friendly cashier at the bottom

of the letter. This is particularly effective

if that person obviously belongs to the same

social category as the prospective client.

The flock follows the bell-whether

Now for collective behaviour. Conventional

behaviour does not change easily in isolated

individuals. Whole groups and social categories

may have to be won over. Up to a certain

point, change is extremely slow, and resistance

is high. But beyond that point, things


25

BRAIN

Jaap van Ginneken

is a social psychologist

and communication

scientist, specialised in

mass psychology and

collective behaviour. He

is a speaker, and writer

of some 20 books. His

latest work is on financial

psychology.

move increasingly fast. It is like an uphill

struggle followed by a downhill slide.

Deeply engrained habits concerning money

transfers and withdrawals proved hard to

change. Debit and credit cards, ATMs and

internet banking were slow to acquire ‘critical

mass’ before they really took off. One way to

facilitate this is by showing ‘opinion leaders’

and exemplary figures, such as entertainment

celebrities or tech-savvy youngsters.

There are other examples of uneven change.

Auctions are a good illustration of processes

of escalating commitment. In passing, one

may introduce an odd new rule: that the

bidder before last will have to pay up as

well. The unexpected result is that one may

ultimately sell a twenty-euro note for a

hundred, as all participants suddenly have

an additional incentive to try and remain the

highest bidder, rather than the one before

last. Do not try this at home!

Another surprising experiment had people

write down the last two figures of their

national insurance or mobile phone number

before entering a bid between one and a

hundred euro for a few bottles of Château X

wine. This often led to a correlation and

‘arbitrary coherence’ between the former

and the latter, as if a reference value had

been put into their minds.

Cultural differences

Financial behaviour also differs between

cultures. Within Europe there is an invisible

frontier, for instance, halfway between

the North-West and the Southeast – some

kind of compromise between the line for

prolonged winter frost (forcing ‘planning

ahead’) and the borders of the ancient

southern Roman/Latin empire.

It also translates into religious majorities of

Protestantism versus Catholicism, and into

secular mentalities related to spending and

saving. North-Western countries are more

trusting, in particular with regard to other

North-Western countries. This is another

reason why the Dutch and British publics so

readily entrusted their savings to a completely

new Icelandic internet bank.

By contrast, the majority of people hold, and

tend to overestimate, shares in companies

closer to their home town, region, country

and continent. Images of foreign products

– financial, but also physical (such as cars) –

closely conform to national stereotypes.

But the more we become exposed to an

unfamiliar name, a psychologist found, the

more we come to trust it – and buy into it.

So our financial behaviour continues to follow

mysterious paths – somehow still deriving

from our good old Cro-Magnon brains.


times of

change

The vision of MasterCard and Visa

The integration of the European

payment markets into a single

standardised payments market is

well underway. In order to understand

how two major schemes within the

payment market view these changes

and their consequences for thirdparty

processors, we presented ten

questions to MasterCard and Visa.


27

The number of processors is decreasing.

In your view, how many processors will

be required in seven years

Visa “First of all, consolidation will take place

on a European level. Local and national payment

products will migrate to internationally

standardised products that can be processed

by all processors. I expect an initial increase

in the number of newcomers in Europe. This

number will, however, go down after some

years, as prices will drop due to increasing

volume requirements and pressure from

competitors. How quickly this will take place

depends on the speed of migration and

standardisation. It is difficult to give an absolute

number of remaining processors.”

MasterCard “Developments within the

European payments market provide processors

with opportunities to benefit from

economies of scale. On the other hand, the

changing landscape opens doors for niche

parties to enter the market and specialise in,

for instance, prepaid services. There is currently

a visible decrease in number of processors,

and it is possible that this consolidation

will continue.”

Will the remaining processors be

bank-owned or private equity-owned

processors

MasterCard “I believe both will still exist in

seven years, but in a consolidated form and

on a larger scale than today.”

Visa “Most processors will probably not be

bank-owned, as banks that do not operate

Marcel Roelants, General Manager for the Benelux at MasterCard

worldwide will focus more on their core business,

which does not include processing.”

From a scheme perspective, is there a

preference for bank-owned or private

equity-owned processors

MasterCard “MasterCard has a worldwide

network, enabling us to collaborate with many

different partners within the market. These

can vary from third-party processors to alternative

payment systems, and from in-house

customer processing to domestic utilities.”

Visa “Visa does not have a preference. What

matters is that transactions are processed in

a fast, efficient and secure manner.”

On what scale should a processor

operate in order to survive

MasterCard “There are two ways of looking

to the future – from the perspective of economies

of scale, and from the perspective of

a niche. The minimum size of a processor

depends on the costs and feature drivers.”

Visa “In addition to scale, aspects such as

functionality, security, and service affect the

survival chances of a processor. There are

differences with respect to functionality and

innovation in particular. Price is important,

but it is not everything. In terms of volume,

10 billion is sometimes said to be the number

of transactions required for a processor to

survive in the future. But there are too many

aspects involved – competition, the speed of

European standardisation – for numbers like

that to have any real value.”

The banks will choose

a preferred brand.

Equens’ neutral position is

a strength and a clear asset

for the future

Equens is a dual processor, focusing

on both payments and cards. From

a scheme point of view, does that enhance

or diminish the survival chances

Visa “I believe that a dual processor offers

advantages. Many banks will want to

purchase both. They see it as a one-stop

shop. Furthermore, many card payments

are converted into payments. A concept like

iDeal shows that many card payments start

to blur.”

MasterCard “Companies like Equens should,

by definition, remain neutral. The banks will

choose a preferred brand. For Equens this is

a strength and a clear asset for the future.”

The services provided by processors

overlap with the services from schemes.

These include switching, clearing and

settlement. Within these areas, they are

in fact competitors. How do you see this

MasterCard “Processors can operate in

a number of countries, whereas cardholders

can pay all over the world. MasterCard

fulfils a complementary role, ensuring that

worldwide issuing processing and acquiring

processing are linked to each other via a

switch. Furthermore, MasterCard develops

additional services, such as fraud tools, data

analytics, loyalty and rewards, and up-andcoming

payment systems such as mobile

payments. These and other services can

also be of interest to banks on a local level.

In these cases, MasterCard can provide additional

services, while local processors can

enhance their services to banks and financial

institutions together with MasterCard.”

Visa “Just like a few other processors, Equens

provides issuing processing, acquiring

processing and switching. In the field of

switching, we do in fact compete with each

other, but only within Europe. Visa provides

switching within the entire value chain, as

we have a worldwide network for that

functionality. On a global level, we are

therefore not competitors within that field.

This form of competition does not rule out

collaboration. In the Netherlands or on a

European level, Equens does not need Visa


28

to provide switching services for certain

banks. However, on a global level we are

needed to deliver these services.”

Could a natural division arise between

processors and schemes In other

words, do the two grant each other

room to develop in a certain direction

Visa “That is not how it works. Banks will

choose a processor or a certain scheme for

functional and financial reasons. It is not

the case that if a certain party becomes a

client of Visa, Visa then grants that party

something in return. It does not work that

way. It really is a business decision based on

functionality and price.”

MasterCard “We see that different issuers

and acquirers have different requirements

for services. Some services can be provided

by both the schemes and processors.

Furthermore, there are many fields in which

both parties can complement each other. In

that way, there can be both healthy collaboration

and competition, as long as the client

benefits by receiving better and more costefficient

services.”

The ECB recently held a consultation on

separating brands and processing. What

are the chances for a processor in that

respect

MasterCard “In the future, issuers and acquirers

will have more options on a European

level. This will result in different parties offering

different services. This could mean that

one party provides issuing processing services,

while another party provides acquiring

processing services, and yet another party is

responsible for switching. In order to create

clarity, all parties in the payments value chain

will have to be able to provide their services

separately. MasterCard already offers brand

and switching services as two independent

products.”

Visa “First of all, Visa Europe provides only

a switching service which is a relatively

small part of the total processing value chain.

Due to the added value that we provide,

Visa Europe has a strong service offering

in this part of the value chain. But we do

not provide issuing and acquiring processing

services. We therefore believe that

the processing market today is already

open enough for competition between

the different providers. Moreover, financial

institutions choose a scheme based on

aspects such as the degree of acceptance,

brand strength, security, and service not on

processing capabilities alone, since we only

provide a small part of the total processing

value chain.”

I believe that a dual

processor offers advantages.

many banks will want

to purchase both payment

and card services

What are Equens’ strengths and

weaknesses

Visa “Equens is right to look beyond the

national borders to establish growth. The acquisition

and collaboration policy is focused

and integrated. This prevents Equens from

becoming a patchwork. The transition to a

world of fierce competition will not be easy.

Equens will need to become more commercial

and client-orientated, as they will be

competing with other parties. That requires

a more proactive approach, in particular

with the phasing out of PIN (Dutch domestic

debit) in 2012, and the entry of international

schemes. Equens must prepare itself for that.

Parties like Equens can play an important role

in determining a strategy for banks.”

MasterCard “Equens can be seen as one of

the European parties with growth potential.

Furthermore, Equens will need to respond

to the demand for complementary services

from different market parties.”

What will be more important in the

future: issuing processing or acquiring

processing

MasterCard “Both will be crucial. It is more

interesting to know in which area Equens can

offer the most added value.”

Visa “A processor opting for functionality

offers both and will become a one-stop shop

with full service, and may even offer switching.

A processor opting for one of the two

must focus on economies of scale. Then it is

all about volume.”

Michiel Wielhouwer, VP Country Manager for the Benelux at Visa


E-Commerce is exploding

– even in the recession.

Mobile phones and other

portable devices are

everywhere. As everything

is going towards

internet and mobile, then

surely payments should

become web-based and

mobile too.

The huge demand for these solutions is

being matched by the EPC and the European

Commission who are developing and pushing

standardised solutions for Europe. These

allow the payment at web shops in a uniform

way, encourage paper-less payment, even

getting rid of the incoming paper invoice and

maybe making the mobile phone the new

payment instrument of choice. Currently

there are many different solutions in Europe

(over 300 solutions alone for paying on the

internet) and previously non-bank players

like PayPal are capturing the market.

So it is high time that the banks roll out the

proposed single pan-European bank based

solutions.

Online Banking e-payments

the search for interoperability

With the success of e-commerce (and the

‘success’ of fraud) merchants are increasingly

clamouring for an internet payment

method that guarantees them irrevocably

the money for their goods. Since the internet

is also real time, the payment must therefore

happen instantly. However current solutions

are either revocable (see cards) and/

or are not real-time (see credit transfer). So

the market has developed several solutions

in Europe, US Canada, China, Australia

and beyond which solve this: the customer

uses his normal Online Banking to make the

payment to the merchant. This is real-time

and irrevocable. The SEPA challenge now

is to bring all these national solutions into a

pan-European framework so that a merchant

in the Netherlands can sell to a customer in

Germany.

Samples of some online banking

e-payment systems in Europe:

• Austria: EPS (Electronic Payment Standard)

• Germany: Giropay

• The Netherlands: iDEAL

• Denmark: eDankort

• Switzerland: PostFinance e-Payment

It is expected that the EPC will release the

SEPA e-Channel Framework in June 2010.

It can be used by several national solutions.

Furthermore this work is closely discussed

with the ICPNO (International Council of

Payment Network Operators) to link solutions

in Europe, UK, US and Canada. The

resulting network of solutions will surely be

an even greater success than each national

solution (and iDEAL is already the biggest

success in the Netherlands) since it connects

across Europe and helps all stakeholders.

The guarantee is good for the merchant,

the immediacy is good for the customer

(whose items are shipped immediately,

whose download starts immediately) and

the banks have a bank-based solution that

matches anything in the market. They can

even charge merchants for the added value

of the guaranteed payment and thus have

a new source of revenue by adding value to

customers.


31

Equens has been a driving

force within the EPC to

develop the framework,

standards and recommendations

since the

beginning. Based on

the developments in

e-Payments, Equens has

identified SEPA e-Payment

as a focus area and is

working closely with

banks, national solutions

and the above interlinking

projects to bring the

European solution forward,

allowing e-Commerce

and e-Payment for banks

and merchants without

boundaries.

E-mandates

just beginning

The ‘direct debit mandate’ is given to bank or

merchant to allow direct debits to be taken

off an account in future. The e-mandate

does this without any paper. It allows for

example an electricity provider to get a

customer to sign up for green electricity

on the web and then authorise the future

monthly direct debit payments – all online.

This fully electronic process is clearly more

efficient for merchants, banks and customers.

E-mandates – although already fully

in the EPC rulebook – are still an entirely

new phenomenon. Some countries (e.g. all

banks in Portugal) are going ahead with this,

others are currently more reticent and are

investigating the added value to their local

community.

Equens offers banks a

full suite of SDD services.

These vary from a full-

STP, tailor-made back

office solution to a simple

web-based solution. The

company enables banks

to send and receive SDDs

and fully comply with the

SDD regulations and implementation

guidelines

drawn up by the EPC. In

any case it is clear that

banks must not develop

all this themselves

but can outsource the

management of the

(e-)mandates to specialist

service providers

who can provide the

solution much more costeffectively

for all banks

through synergies of

scale and scope.

Read more about our

SDD solutions at

www.equens.com/SDD


32

E-INVOICING

HIGHEST RETURN

Currently bills are typically printed, folded,

put into an envelope, stamped, sent by post,

opened and the data typed back in to the

recipient’s payment system. This happens 27

billion times a year in Europe. E-invoicing, by

contrast, is the sending, handling and storage

of an invoice wholly by electronic means.

This massive efficiency gain needs many

players to change their habits – a hard thing

to do. But for many years all larger corporates

are demanding of their suppliers that they

send electronic invoices if they want to stay

in business (‘e-invoice or no invoice!’). Also

an increasing number of countries (e.g. Spain,

Finland, Italy and Denmark) are making

e-invoicing compulsory – especially for public

procurements. So the tide will turn from

paper to e-invoices, no question.

Growing awareness of advantages

E-invoicing creates substantial cost savings,

improves cash flow and reduces credit

losses, increases productivity and makes a

direct contribution to a healthier environment

and the reduction of CO 2 emissions.

Awareness of these advantages is growing.

Equens was also active within the European

Commission’s Expert Group on e-invoicing

which recently delivered its report and

recommendations giving the market a

further push. Also public administrations

and the European Commission have made

major steps in making electronic invoices

just as acceptable as paper invoices for VAT –

a thorny issue and one that has been holding

development back in the past. In the Nordic

area and a number of other member states,

banking-led initiatives have complemented

those of other service providers leading to

a large scale adoption of e-invoicing in all

parts of those societies (corporates, banks,

governments and end users).

Easy solutions for SMEs

One segment has been elusive, however:

how to get the large body of SMEs to join the

fully electronic community. Solutions that

require no investment and no IT-skills are

now available for them and it is expected

that the market push from governments and

large corporates will finally win them over.

Then they will enter their bills on an online

banking portal (rather than typing the bill in a

word template) and will pay their bills by clicking

on an ‘incoming bills’ tab in their online

banking (rather than copying the IBAN, BIC,

reference code etc. from the paper bill on to

another credit transfer form).

The European Commission has launched

the PEPPOL initiative (Pan-European Public

Procurement Online) in which public administrations

of multiple member states participate

to promote electronic communication

between enterprises and public authorities.

In addition, the European Commission

is implementing a pilot project to enable

electronic invoicing within its own purchasing

activities.

Moving towards a fully digitised

real-time economy

Looking forward, it is reasonable to foresee

that structured e-invoicing will become the

predominant invoicing method throughout

Europe and apply to both domestic and

intra-member state business flows. Trading

parties will have a wide choice of solutions

and services to support e-invoicing. Further

steps after invoicing would be integration

into more parts of the financial and business

value chains. This means that Europe

will move from e-invoicing (with integrated

e-payment) via e-procurement (with

electronic catalogues and online ordering),

e-trade (with integrated e-financing and

digital trade papers), and finally to a fully

digitised real-time economy.

In today’s e-invoicing

market it is impossible

for the majority of businesses

and consumers

to make use of a single

e-invoice solution.

Equens provides a service

that literally ‘dissolves’

the problem: the Value

Document Switch (VDS),

which interconnects billing

service providers by

means of a standardised

approach. Further options

are being investigated.

Read more about our

e-invoicing solutions at

www.equens.com/

e-invoicing


Push

33

the limits

“Optimising payments is always about

making a trade-off between security,

speed & ease of use, and costs,” stresses

Dr Niklas Bartelt, Director of Product Management

Cards & Payments at DZ BANK

in Frankfurt. “And the banks will always

endeavour to push the limits. What used

to take hours now takes minutes. In a

hundred years’ time, the same things

will be happening in nanoseconds. So we

need to maintain the mindset that this is

an ongoing development.”


34

In the trade-off between the three components

security, speed & ease of use, and

costs the balance will shift over time. “These

days, limits are pushed mainly by technical

and regulatory developments,” adds Dr

Bartelt. “People will find new technologies

increasingly easy to use, and chip technology

is becoming cheaper all the time. This will

lead to all kinds of innovations.”

Contactless and biometrics

This does not mean that DZ BANK is in favour

of bringing everything that is technically

feasible to the market as quickly as possible.

Dr Bartelt: “Naturally, as banking professionals,

we are extremely excited about the

likes of contactless and biometric payments.

But we mustn’t fall into the trap of making

large-scale introductions of innovations

that companies and consumers don’t want

because they have made a different tradeoff

between the three components. It is a

question of cooperating to find solid and

all kinds of barriers that slow down innovation.

An obvious one at the moment is

merchants not wanting to invest in a new

terminal. Naturally, they are sensitive to the

arguments that it would reduce the likelihood

of fraud, speed up the process at the

check out and increase customer spending,

but there is the upfront investment as well.

We are dealing with people after all! As a

bank, we also try to consider what is right for

our clients. You can aim to make payments

a hundred percent secure, but that makes

them extremely expensive. At the same

time, we want to bring products onto the

market that are profitable. After all, we are

a commercial company.”

No silver bullet solutions

According to Dr Bartelt, there are various

ways of pushing the limits. “With offline

payments, for example, which save merchants

a lot of time.” This increases speed

and reduces costs for the retailer. Dr Bartelt:

self-administered checkouts are

a trade-off between speed and risk,

and so far merchants have been

choosing risk over speed

practicable solutions that clients are willing

to pay for. While things could go almost any

way, I personally don’t see contactless and

biometric payments breaking through on a

large scale within the next twelve months.

Of course, we have to do our homework for

the future, but we mustn’t forget that we still

have to do business in 2010!”

Good enough for clients

“Look how long it took for digital payments

to break through,” Dr Bartelt continues.

“Unfortunately we have to take into account

“Initially, it was difficult to determine the

right offline limits in order to prevent the

default rate from becoming too high.

Volksbanken Raiffeisenbanken started with

a low percentage, but in the meantime

several large merchants have had positive

experiences with off-line payments.

Consequently, the percentage offline is in

some cases above 30% percent. Everyone

wants faster and cheaper payments. But

there are no silver bullet solutions – developments

will always take time to ensure that

the process is robust.”

Checkout design

At the checkout, speed is crucial. Dr Bartelt:

“Smart merchants like discounters are now

often faster with cards than handling cash

payments. However, for many, there is still a

psychological barrier when it comes to making

a complete transition. In the Netherlands,

some retailers are taking a smart approach

with card-only lanes. France and the

Netherlands now also have self-administered

checkouts, although this technology is

still in the experimental stages. This is also

primarily a trade-off between speed and

risk, and so far merchants have been choosing

risk over speed. This is slightly outside our

scope as a bank, as there is still a way to go

in the design of checkouts.”

Speed with a purpose

When speed and security are weighed up

against each other, settlement naturally

also plays an important role. While in the

Netherlands processing is virtually continuous

because payments are settled at least

every half hour (parcel settlement) between

a few dominant players, in Germany – with

a much larger number of banks – they are

processed bilaterally between banks via

‘garage clearing’. Dr Bartelt: “Continuous

settlement is possible, but expensive. But

it is also a common misconception that

quick means secure. If a payment takes a

day longer, but there is a guarantee that

it will arrive, people are prepared to wait.

That’s why, as a bank, you have to carefully

establish the wishes of the client in relation

to what they are willing to pay. Speed is

expensive, and not always necessary. As a

bank we can, for instance, provide considerable

added value in the client’s reconciliation

process. But if a merchant asks for speed

without utilising it, it is of no benefit. In many

cases, the processes underlying the payment

process are what makes it complex. At DZ

BANK, we set our clients up with an interesting

tool. We manage all their cash, giving

them a single combined transfer, along with

the information they need to reconcile each

individual checkout payment.”


35

Some stores of the retail

chain Albert Heijn, which

operates within Ahold,

offer a solution that

includes self scanning

and self-check outs, in

addition to the standard

way of payment with

cash and cards. Customers

can take a scanner

from the shelve, scan the

barcodes on the products

themselves, and then

pay for their shopping at

an unmanned payment

terminal.

Preserving compatibility with legacy

processes

Another example is the manner in which DZ

BANK offers its B2B e-invoicing service, the

‘VR-RechnungsService’. Dr Bartelt: “While it is

considerably advanced, we have placed the

emphasis on user-friendliness and compatibility

with legacy processes. For instance,

an invoice can also be ‘printed’ electronically

without any paper being required. This

is done by using the VR-Rechungsservice

printer driver from Microsoft Word or another

word processor. Alternatively, a client can

use our cost efficient Mailing solutions /

lettershop processes to produce actual paper

invoices for customers who do not yet have

the technology required for e invoicing and

also save money. At the same time we also

add other modules for reconciliation and so

forth which add further capabilities around

the payment / invoicing process for a corporate

customer. This way, we allow clients to

adjust to this innovation gradually. There are

no magic solutions – it is for the most part

a question of finding out what buttons you

need to push to optimise the process for the

client. You can only do this by working alongside

your client as a cooperative partner.”

Next generation of payment solutions

Contactless payment

cards significantly reduce

your transaction times,

while you directly collect

payments from the user’s

bank account. To manage

your contactless payments,

Equens provides

a complete service which

includes issuance of

customised cards, and full

account management.

Read more on

www.equens.com/

contactless

Biometric services are

enjoying rapid acceptance

by consumers who value

their unparalleled ease of

use. Moreover, Equens

high-speed processing

services and ultra-high

standards in terms of

reliability, security and

privacy protection ensure

fast and secure treatment

of personal data.

Read more on

www.equens.com/

biometrics


The future of

EU card processing

In mid 2004 PSE Consulting

interviewed executives from

20 banks and 11 card processors

and delivered a report

on ‘The future of EU card

processing’ which attempted

to forecast how the EU’s

processing market would

shape up by 2010. Six years

on we can look back and

assess the prescience of the

study’s conclusions. We also

look forward to how the

market might evolve in the

next five years. Has there

been significant change

Is even more radical transformation

expected in the

future


37

revisited

In 2004 plans for SEPA were just emerging.

Banks and processors were cautiously

optimistic that many of the barriers to entry

in the fragmented EU markets would be

removed by the end of 2010. There were

high hopes of common systems, common

platforms, convergence of card and electronic

systems and many more aspirations.

In some areas these ambitions have been

achieved, e.g. in the processing world. In

other, markets remain fragmented, processors

continue to operate to national standards

and – although the number of processed SEPA

transactions is growing – the concept of a real

common SEPA processing is still in the future.

Consolidation continues

Six years ago there was almost unanimous

agreement that the number of processors

would shrink radically by 2010. Several of

those interviewed optimistically predicted a

reduction to 20 to 30 from the then 80 to 100

players. Since 2004 there has been a first

wave of mergers & acquisitions (M&As)

which still continues. Looking forward it is

difficult to predict the outcome of the second

round of M&As and rationalisation. There are

still nine interbank owned card processing

companies operating independently, plus

five merged or co-operative entities. However

many of these have been given licence

to commercialise and offer their services

across the broader European market. The

effect has been to increase competition particularly

in the Benelux and the Nordic region.

Whilst M&A has delivered some commercial

benefits so far economies of scale have been

slow to emerge. Processors are adapting

their processing centres or are struggling to

develop a multi-country pan-EU platform.

Other players are believed to be bringing

harmonised product and common process

to market during this year.

Solutions for Europe’s cards business

Despite pressure from the European Central

Bank, the European Commission and other

key stakeholders, the EPC still struggles to

deliver solutions for Europe’s cards business.

This proves to be a hard nut to crack.

However the EPC has been highly successful

in delivering SEPA for electronic payments.

The SEPA Card Framework, with hindsight

now appears to be a diversion which has had

little effect in removing the barriers to entry

across Europe’s cards processing markets.

However the good news is there is general

consensus that the SEPA POS Standards will

be effective although implementation is

some five to seven years away.

Six years ago there was much discussion

over the opportunities for the processing

sector to deliver card business solutions to

multi-country banking. At that time there

were several multi-country processing

solutions in the development pipeline. In

the generality, few of these initiatives have

resulted in deliverable workable systems.

In addition, banks who originally believed

they could outsource the multi-country

harmonisation problem have rethought their

strategies. Some have reverted to in-house

development; others have built their own

internal processing operations. There is some

evidence that 2004’s optimism has not been

realised because quite a few processors

have struggled to find the investment, skills

and resources to build the complex systems

required.

Regulatory intervention and

outsourcing

In 2004 bankers, and to a lesser degree

processors, perceived regulatory intervention

as one of the most important drivers

for change. How right they were! But few

anticipated that intervention and regulation

would focus on the wholesale and investment

banking sectors and not so much on

retail! However there remains the threat of

intervention to mandate SEPA, force scheme

and processor separation and remove country

barriers to entry.

In the middle of the last decade banks were

sceptical about the potential of outsourcing,

Peter Jones is the founder

of PSE Consulting, a leading

European payment business

and technology consulting

organisation.

however over the past six years the growth

in outsourcing services has continued at a

steady pace. More particularly in the last

two years, as a result of the recession, the

number of RFI’s/RFP’s issued has accelerated

rapidly. However there is a general perception

that the easiest card business outsourcing

contracts have been won over the

past 20 years. The next phase will be more

difficult: it will require significant bespoke

development and a capability to manage

major projects rather than simple migrations.

To be successful in delivering complex solutions

the larger part of the processing sector

needs to make the turn from supplier to

collaborative partner with great understanding

of the needs of their customers and their

markets.

Future drivers for change

Looking ahead to the next five years are the

2004 drivers for change about to change

Undoubtedly the most important change

has been the rapid growth of acquiring as a

major revenue generator for processors. PSE

Consulting’s forecast is that if RBS Worldpay

is sold to a non-bank then almost 45% of EU

acquiring will have been transferred to the

processing and non-bank sectors. A second

driver for change is the need to achieve real

scale and for the merged card and electronic

processors (e.g. Equens, SIA-SSB) to develop

components of a common card and electronic

platform within the next seven years.

A third important new driver is the demand

by banks and other players for JVs and alliances.

These will continue to grow significantly.

A fourth driver is an increased focus in

serving the merchant community and meeting

their needs directly rather than through

banks. A fifth driver is further consolidation,

mergers and acquisitions. Potentially the target

of 20 to 30 processors may be achieved

by 2015!


new

combinations

Innovations are not

necessarily based on the

results of cutting-edge

fundamental research.

This is particularly true

for innovations in highvolume

applications,

such as payments. In

such environments,

opportunities lie in the

discovery of new combinations

of familiar and

accepted technologies

and applications. In this

article some recent

examples.

Social network as

a payment channel

In March of this year, Hyves – with eight

million customers the largest social

network in the Netherlands – introduced

Hyves Afrekenen (Hyves Payment). This

allows friends to make easy mobile

payments without using cash.

Hyves Afrekenen is supported by

Rabobank’s MiniTix, for which processing

is handled by Equens. This system is

already being used for Rabo SMS Betalen

(Rabo Text Payment), MyOrder and

Cashless betalen (Cashless Payment). The

maximum amount that can be transferred

is €150. No account numbers or calculators

are required for transactions; payments

are free of charge and verification

is handled via SMS.

Mobile phones are

also for making

calls

The number of new features in modern

smart phones such as the iPhone continues

to increase way beyond expectation.

They vary from heartbeat registration to

route planning or a map of constellations

visible in the sky where the user is

located.

In addition, mobile phones have acquired

a solid position as a means of payment.

Among other things, they can be used for

payment authorisations at the POS or

submitting the location for paid parking.

An interesting aspect of the latter feature

is that payment occurs per minute, since

overcharging for parking is a familiar

complaint.

30% of hotel and catering businesses in

the Netherlands are now ready for mobile

ordering and payments. Furthermore,

Hyves Afrekenen can already be used at

thirteen cinemas and restaurants in 21

cities, including the various establishments

at the beach in Noordwijk. Soon,

New York Pizza will be joining.


lead to

innovations

Energy and money

as communicating

vessels

Paying by being

yourself

E-payments – Old

wine in new bottles

Energy consumption – electricity in

particular – and bank accounts are like

communicating vessels. This is true for all

businesses, such as nurseries. As a result

of combined electricity and heat production

and power storage, these businesses

frequently have excess power that can be

supplied back to the national grid, for

which they receive financial compensation.

This is partly a result of a seemingly

insignificant innovation in power meters,

which now allow reverse counting. A

similar development is to be expected in

the event of an increase in the use of

hybrid cars, allowing the power generated

to be returned via the charging stations.

The end result will be that users have a

choice between fossil fuel and electricity.

Money and credits are measuring units in

an enclosed marketplace, based on

periodic final settlement after clearing.

In some environments, paying requires

more convenience and speed than in

other. The reasons for this may vary

considerably with on the one side retailers

who want maximum speed at their

check-outs, and joggers or consumers on

the beach and in discotheques on the

other. Obviously, the ultimate in convenience

would be that you don’t have to

remember to take your purse or wallet

with cards at all! Just walk into a shop or

order at a counter, get what you want,

and pay only by being recognised. Thanks

to the rapid development of biometric

technologies, this future is not very far

away. People can be recognised for

instance by their fingerprints, finger veins,

palm veins, 2D/3D facial recognition, iris

scans, DNA and even body odour. Several

successful initiatives and pilots have been

carried out in and outside Europe, and

some systems are already up and

running.

In the context of IT, electronic transfer is

an age-old concept. This is also true for

electronic credit card payments at web

shops. But the continued existence of

electronic payments from the trusted

bank environment requires a Columbus

character to slap the egg upright on the

table. In some countries this role is played

by (cooperating) banks. Their eggs have

names like Pay OnLine and BPay in

Australia, eDankort in Denmark, giropay

in Germany, iDEAL in the Netherlands, EPS

in Austria, and PostFinance e-Payment

in Switzerland. There is a future for e-

payments, because customers continue

to trust their bank despite the bank crisis.


Come and share insights at Sibos

See you in Amsterdam!

Each year Sibos brings together the financial industry;

Each year Sibos brings together the the financial industry;

this year in Amsterdam. For us this edition of Sibos is

this year in in Amsterdam. For For us us this edition of of Sibos is is is

special, as we have deeply-rooted experience and

special, as as we we have deeply-rooted experience and

many clients in the Netherlands. And abroad. We

many clients in in the the Netherlands. And abroad. We We

will make sure to provide an insightful and variable

will will make sure to to provide an an insightful and variable

programme. In the essence, Sibos is a networking

programme. In In the the essence, Sibos is is is a a networking

event. We clearly acknowledge this and will provide

event. We We clearly acknowledge this and will will provide

nothing

equals

a unique meeting platform. Would you like to discuss

a a unique meeting platform. Would you like to to discuss

business and share insights with us and other

business and share insights with us us and other

delegates from the financial industry You are more

delegates from the the financial industry You are are more

than welcome to visit our booth and join our

than welcome to to visit our our booth and join our our

programme. We look forward to meeting you in

programme. We We look forward to to meeting you in in

Amsterdam. Together we can shape the future of

Amsterdam. Together we we can shape the the future of of

our industry. www.equens.com

our our industry. www.equens.com

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