Success Story from Poland Tirana, 25th of May, 2016

2 From ’paper based’ banking industry to cashless economy.

Mission 3  We are the leading provider of services in the domestic market for payment clearing and a major service provider in the area of payment support.  We maintain the leadership position by taking care of the highest security standards, quality and innovativeness of the services offered and the ability to flexibly and rapidly adapt cost- competitive solutions to our clients' requirements. „We provide secure and innovative payment clearing services”

 Processing payments - over 1,7 bln transactions  Income - ca. 28,5 mln EUR  Net profit - ca. 8,5 mln EUR)  Employment – ca. 350 persons  Reliability of Elixir system - 1  KIR is a joint-stock company  KIR belongs to National Bank of Poland (~35% shares), commercial banks and Polish Bank Association KIR in figures

 November establishment of KIR  April the beginning of its operations - Sybir system  April Elixir system launch  April Imbir launch  March Szafir launch  March Euro Elixir system launch  September SWIFT Service Bureau launch  March Ognivo launch  October Paybynet launch  January Euro Elixir (SEPA CT) system launch  September Bilix (Invoobill) launch  June settlement switch to TARGET2  November the first EACHA connection  June Express Elixir system launch  September start of P2P mobile payments based on Express Elixir system History 5

6 Clearing systems Settlemnt systems SYBIR Launch SYBIR Launch SORB Launch SORB Launch SORBNET launch (SORB  SORBNET) SORBNET launch (SORB  SORBNET) SORBNET2 launch (SORBNET  SORBNET2) SORBNET2 launch (SORBNET  SORBNET2) launch Elixir end of migration SYBIR  Elixir launch Express Elixir

Polish Payment System general overview 7 National Bank of Poland Retail (Multilateral Net Settlement) Krajowa Izba Rozliczeniowa S.A. Large-value (RTGS) EUR TARGET 2 – NBP PLN SORBNET 2 Elixir Express Elixir Euro Elixir

KIR portfolio KIR clearing services: standard - in zloty & in euro, real-time payments Direct Internet payments Clearing services support Electronic signature and data manangement Clearing of card transactions

 Elixir, launched in 1994, is the first Polish fully electronic system for interbank settlements operating in zloty. It is essential to the functioning of the Polish banking sector.  With three sessions a day, enabling fund transfers within several hours only, Elixir was launched as one of Europe’s fastest settlement systems. Elixir – standard settlement system 9 Elixir is classified by National Bank of Poland as the Systematically Important Payment System – SIPS Settlement finality mechanism

 Euro Elixir is a modern and universal interbank clearing system which allows to process transactions in euro on the pan-European scale.  The service was created to meet the challenges resulting from the integration of the European payment systems.  Settlement finality mechanism Euro Elixir settles interbank transactions in euro 10

 Euro Elixir enables processing of national and cross-border payments within the same day (D).  The system is fully compliant with the EU standards. It operates within the integrated infrastructure of the single payments area - SEPA.  The efficient and reliable transaction clearing while keeping highest security standards is enhanced by the cooperation with foreign settlement institutions:  European ACH Association (EACHA)  Europan Clearing Cooperative (ECC) Euro Elixir settles interbank transactions in euro 11

 direct participation in the TARGET2 system – involves opening of a sub-account in the TARGET2 system for the purposes of settlement of own clearings and providing the Clearing House with own clearing balance for the settlement.  indirect participation in the TARGET2 system – involves opening of a sub-account in intermediary bank (the so-called settlement bank, which is a direct participant in the TARGET2 system) for the purposes of settlement of the indirect participant's clearing balance. Being a direct participant in the TARGET2 system or operating on the TARGET2 platform is not mandatory in order to participate in the Euro Elixir system 12 KIR in TARGET2 Euro Elixir enables two methods of settlement in TARGET2:

Express Elixir characteristics  24 / 7 / 365 operating mode  Settlement in seconds  Based on deposit model - escrow account provided by National Bank of Poland  High single transaction value limit (25k eur), no volume limit (B2B advantage) Real-time payments 13 Express Elixir was launched in June as the 1st system of this kind in Poland and 2nd in Europe

 Guaranteed clearing and no credit risk – with the use of the deposit model, implemented on the basis of a dedicated escrow account held by National Bank of Poland, Express Elixir gives the participating banks a guarantee of clearings.  Additional source of income – by the implementation of Express Elixir, the system of instant transfers, the bank expands its offer to include a modern service, which may become an additional source of income. Express Elixir 14

 Ognivo is an electronic information exchange platform built by KIR for the participants of our clearing systems and the entities cooperating with the banks with an objective to accelerate communication within secure network.  Ognivo allows to streamline the banks’ enquiries and manage complaints. It is composed of modules - new ones are launched to address the users’ needs.  Ognivo assists the bank clients in transferring of their accounts between the banks. It allows to accelerate and simplify the whole operation, safely exchanging all the necessary information between banks, upon the client’s disposition to close the account and transfer the data to another bank. Ognivo - advanced communication tool 15

 KIR facilitates access of Polish financial institutions and private enterprises to the global financial data transmission platform SWIFT.  SWIFT brings together over ten thousand financial market entities from over 200 countries and it processes about 20 million operations every day.  KIR offers mediation services within SWIFTNet network and provides technical support for Polish SWIFT users’ access infrastructure. KIR in the SWIFT network 16

 Paybynet executes online payments with no third party (intermediary) involvement.  Payment authorisation information is transmitted online - 24h a day and serves both the bank transfers and the card payments.  The functionality of the system is not limited to e- commerce. Paybynet is integrated with the Electronic Platform of Public Administration Services (ePUAP), being the only solution to enable online payments for administrative charges and generate electronic payment certificates. Paybynet – direct online payments system 17

 The electronic signature guarantees reliable personal identification and confirms data integrity.  Szafir has been used to ensure security and integrity of data processed in Elixir since the launch of the system.  Today, KIR provides e-signature to companies, institutions and individual persons that use it to sign invoices, agreements and other legally binding electronic documents. Szafir – electronic identity validation 18

 Invoobill is a tool allowing to pay the utilities bills (gas, electricity, phone) through the online banking. As it is integrated with the bank’s transaction system, the payment can be done with just one click.  Invoobill reminds its user of the payments due and as the recipient’s data is completed automatically. It is used by mass service providers: mobile network operators, digital television operators, water supply systems and energy companies. Invoobill – one click bill payment 19

kir.pl New projects: credit cards and mobile payments  In 2015 KIR implemented the new settlement system for clearing of the card payments. The system will settle card transactions in commercial outlets and ATMs made locally with the use of cards issued by banks operating in Poland.  KIR is also actively participating in building of the local mobile payments standard, initiated by 6 major banks in Poland. In this project, managed by Polski Standard Płatności (PSP), KIR is to service the payment settlement within the system.

Digital 21 Secure Paperless Cashless Effective Cost-competitive Innovative

 High security standards: e-signature, dedicated network, multi-level controls, SLA  Banks trust our services  Fast services – support for liquidity management  Paperless systems: fully electronic end-to-end transaction transfer  Credit Transfer (standard, tax, social insurance)  Direct Debit plus mandate service  Settlement  Services tailored to the needs of banks: multi-session, immediate payments in Polish zloty & euro Benefits for bank 22 Cost effective

 Ognivo – paperless exchange of information for banks with a wide range of services  SWIFT access  EBBP solution for e-invoicing  Internet payments  Card Payments  Legal simplifity  Links between services Benefits for bank 23 Common platform covers many needs of a bank in one point

 Innovative services – new services for bank’s customers = buliding customer loyalty  Express Elixir  Paybynet  Mobile payments  P2P payments  Ognivo Source of additional income for banks  Cooperation with public administration  Ognivo  Paybynet Linking banking business with administration needs Benefits for bank 24 Creating modern eletronic economy

The future: 25 Cashless economy?

Tomasz Jończyk