v1 21/02/06 sepa impacts and opportunities ifb seminar lisbon, 23 february 2006
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TRANSCRIPT
IFB Seminar Lisbon Feb 20062V1 21/02/06
“Politics is the art of looking for trouble,
finding it whether it exists or not,
diagnosing it incorrectly and applying
the wrong remedy”
Sir Ernest Bevin, 1930
IFB Seminar Lisbon Feb 20063V1 21/02/06
Agenda
• Review of SEPA/NLF Features
• Banks – Perspective and Impacts
• Consumers – New Propositions
• Corporates – New Propositions
• Merchants – Impacts/Benefits
• Card / ACH Schemes – Impacts / Opportunities
• Interbank / Commercial Processors – Impacts / Opportunities
• Sector Suppliers – Impacts / Opportunities
IFB Seminar Lisbon Feb 20064V1 21/02/06
The SEPA / NLF Headline Features
Removal of national boundaries – SEPA zone becomes “domestic market”
One ‘replacement’ common ACH scheme
“Adaptation” for card schemes
Separation of “schemes” from “delivery systems”
Common standards for all payment instruments interoperability
Removal of barriers, inhibitors and harmonisation of process
Displacement of cash to cards
Enhanced competition between national payment markets by opening up markets
Simplified and fully harmonised information and rules on contract terms and provisions
Displacement of divergent national rules, customs and practices
Legal harmonisation of payment settlement
Increased market transparency for both providers and users
Common rules for execution times, value dates and refunds
Standardised rights and obligations for providers and users of payment services
EPC - SEPA EC - New Legal Framework
IFB Seminar Lisbon Feb 20065V1 21/02/06
SEPA - European Banks Perspective
Large are supportive - perceive substantial benefit
Banking Associations and Savings/ Co-op banks cautious but supportive
New ACH scheme and governance well advanced
SCF to be issued – detail/standards – end 2006
Worried over competitive disadvantages unless participate
Unsure how and when all SEPA can be delivered
IFB Seminar Lisbon Feb 20066V1 21/02/06
SEPA – European Banks Perspective – cont’d
Increased competition – any bank can sell in “SEPA domestic markets”
Price transparency, lower cost products encourages switching
Increased regulatory burden and new mandated rules add to operational costs
Lower revenue streams from many forms of payment and potentially much lower card revenues
Substantial costs – business case not clear
Some major concerns and issues to be resolvedSome major concerns and issues to be resolved
IFB Seminar Lisbon Feb 20067V1 21/02/06
SEPA – Macro Bank Positive Impacts
New open market – develop new propositions/products
New SEPA products have a potential market of 400m+ customers
Single payments platform can serve the whole of Europe
Easier cross-border M&A and lower costs of market entry
Open market for ACH and cards issuing/acquiring and processing
Simplified and common scheme rules
Open membership of all schemes (ACH/Cards) in all countries
Greater competition lower costs in supplier and processor markets
SEPA delivers many benefits – but new strategies neededSEPA delivers many benefits – but new strategies needed
IFB Seminar Lisbon Feb 20068V1 21/02/06
SEPA – Typical Bank Strategies - PSE Feedback
New competitive offers to retain existing customers – defend new competitors
Reposition card account with ICS brands
Leverage SEPA – development of new “SEPA” propositions:
new account products
multi country workers products
high net worth – cross border home owners/tourists
new large corporate products
cross border trading – small corporate products
online/e-banking
Develop white label payment processing services for smaller banks
Build new processing platforms – replace old
Become acquirers and offer services across SEPA
Plus implementation of SEPA infrastructure changesPlus implementation of SEPA infrastructure changes
IFB Seminar Lisbon Feb 20069V1 21/02/06
A New Interpretation of SEPA
SEPA
• Cards
• SDD
• SCT
• Cash
New Legal Framework+
The Single Euro(pean) Payment Account
Offer
=
IFB Seminar Lisbon Feb 200611V1 21/02/06
1 29=Product Feature Consumer Benefit
Bank 29 Nations reach - no matter size
Account Home account portable – usable in all EU nations
Payment Card Local card accepted everywhere – displaces cash – common EMV experience
Credit Transfer Common SLA’s in all markets – improved service
Direct Debit Faster service plus automated mandates
Cross Border Transfer From home account – no deductions – 2-5 day process
Transparency All fees clearly stated
Redress Process Common EU wide legal framework
The Single European Payment AccountConsumer Proposition
Powerful offer - attractive to both domestic customers and those working abroadPowerful offer - attractive to both domestic customers and those working abroad
IFB Seminar Lisbon Feb 200612V1 21/02/06
The Single European Payment AccountCorporate Proposition
Powerful Offer - attractive to utilities, major/small corporates, public bodiesPowerful Offer - attractive to utilities, major/small corporates, public bodies
1 29=Product Feature Corporate Benefit
Bank Single domestic relationship for all nations – lower costs
Account All 29 nations reach – domestic account
Legal Framework Common framework, reduces risk, improves certainty
Credit Transfer Domestic and cross border - transparency of fees – IBAN/STP – better data
Direct Debit Domestic and cross border - standard scheme/SLA – reduces risk, improves cash flow
File One file submission/receipts – pooling and lower costs
Platform One delivery platform for all Europe – major savings
IFB Seminar Lisbon Feb 200613V1 21/02/06
SEPA – Merchant Impacts and Benefits
Migration from cash to payment cards – lower costs
Acceptance of all national debit cards
Consistent acceptance process – removal of multiple terminals, lower costs, mandated EMV
Lower cost terminals, switches and technology – common applications/standards
For large single delivery platform serves all EU
Common process for redress/exception items
M&A and consolidation in processor/vendor sector – lower prices
Growth of pan-EU acquirers increased choice, lower prices
Powerful Offer - largest merchants benefit mostPowerful Offer - largest merchants benefit most
IFB Seminar Lisbon Feb 200614V1 21/02/06
SEPA - International Card Schemes
Impacts
Separation of scheme from processing (see recent EC Incentives Paper)
Growth of debit market share
Loss of mandated use of networks (VisaNet /MCI Net)
Potential for reduced scheme revenues
New governance structures
Potential to undermine global frameworks
Opportunities
Creation of two new businesses, new revenue streams
Potential for new and value added processing products – multi brand
Potential for increased processing revenues
Move to full commercialisation
Greater focus on member service, standards, processes
Major Impacts – potential to radically change EU structure – overall positiveMajor Impacts – potential to radically change EU structure – overall positive
IFB Seminar Lisbon Feb 200615V1 21/02/06
SEPA - Domestic ACH Debit Card ATM Schemes
Impacts
Loss of national ACH schemes
Open membership – any bank/player
New SEPA scheme rule books/frameworks
Separation of schemes from processor
Migration of members to ICS/other debit
Reduced revenues / resources
Increased transparency and regulation
Survival in the new competitive SEPA domestic market
Migration to four party card model (Germany)
Opportunities
Potential to become pan-EU schemes
More efficient, lower cost operations, new products/services
Many threats and challenges – only strongest will surviveMany threats and challenges – only strongest will survive
IFB Seminar Lisbon Feb 200616V1 21/02/06
SEPA - Interbank Processors ACH’s / Cards / ATM
Impacts
Players in wider SEPA market
Potential for interbank processors M&A / sale /JV’s
Short time period to adapt / adjust
High cost SEPA implementation (new platforms needed?)
Members migration / in-house / new solutions
Opportunities
New opportunities as C.S.M.’s
Windfall revenues to members from privatisation / M&A
Win new markets, pan-EU clients
New alliances and partnerships for cards -(Berlin Group)
Improved efficiency, lower costs, increased competitiveness
New pan-EU products / services
Potential for card processors to merge with ACH processors
Many Opportunities - consolidation already taking placeMany Opportunities - consolidation already taking place
IFB Seminar Lisbon Feb 200617V1 21/02/06
SEPA – Commercial Processors Impacts and Benefits
Market consolidation through M&A already occurring
New customers and revenues as barriers removed
Single common platform results in lower processing cost
Growth of ISO/on-risk acquiring displacing banks
Major investments required to build/modify platforms to SEPA
New pan-EU products and services
Major consolidation already taking placeMajor consolidation already taking place
IFB Seminar Lisbon Feb 200618V1 21/02/06
SEPA - Impacts and BenefitsSupplier Sector
Few have SEPA strategies – many “vapourware” products
No business / technical specifications or standards yet - what has to be done?
Major opportunity for new software products and systems integration contracts
Lower cost common products – old multi country solutions become obsolete
Potential surge in demand for new switches, back office clearing / settlement platforms
Potential for interim interface adaptors / boxes
Increased M&A in supplier sector
Of €10bn cost – significant share to supplier sectorOf €10bn cost – significant share to supplier sector
IFB Seminar Lisbon Feb 200619V1 21/02/06
Very substantial impact on all players – already happening
SEPA + NLF will create open, competitive market, new standards and processes
All bank winners – because of 1 = 12/29 - potential to build compelling propositions – Single European Payments Account Offer
Major benefits for large merchants and corporates
For schemes, ICS potential winners; domestic debit schemes losers – ACH schemes disappear
M&A will rapidly consolidate interbank and commercial processor sector
Processors, suppliers, vendors – many new and lower cost products/services
SEPA Impacts - Summary and Conclusions
A major opportunity for all players – do not miss out!A major opportunity for all players – do not miss out!
IFB Seminar Lisbon Feb 200620V1 21/02/06
“Politics is not the art of the possible.
It consists of choosing between the
disastrous and the unpalatable”
J K Galbraith, 1969
IFB Seminar Lisbon Feb 200621V1 21/02/06
Peter Jones Managing Director
+44 (0) 20 8891 6244