dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Instant payments from the Polish perspective Jakub Górka Meeting of the Payment Systems Market Expert Group European Commission, Brussels, 28 April 2015

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Poland – quick facts Second country in Europe (after UK) to implement instant/faster payments, In Poland there are two real- or near-real-time payment systems processing payment transactions one by one (the Express Elixir and the BlueCash system). Operated by KIR (Polish ACH)Operated by Blue Media (payment institution) Launched in June 2012 (licensed in 2011)Launched in Nov (licensed in 2011) Credit transfers in PLN 24/7/365 in XML format Single trx value limit – around EURSingle trx value limit – around EUR Participants: 11 banksServiced banks: 26 (for outgoing transfers), about (for incoming transfers) Settlement in central bank's moneySettlement in commercial bank's money Prefunded deposit modelModel: network of Blue Media accounts Cost to users per trx – about 2.5 EURCost to users per trx – about 1.25 EUR

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department 2014 Q4 Source: National Bank of Poland data

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Number of executed orders Payment system2014 Q3Change2014 Q4 Express Elixir266k+24.5%332k Blue Cash407k+14.3%465k Elixir395m+6.6%421m SORBNET2841k+5.6%889k EuroElixir4.1m+5.2%4.3m TARGET2-NBP341k+1.1%345k Value of executed orders (in EUR) Payment system2014 Q3Change2014 Q4 Express Elixir*275m+31.8%375m Blue Cash*78m+18.6%93m Elixir*253b+6.2%269b SORBNET2*4220b+2,0%4307b EuroElixir5.7b+7.8%6.1b TARGET2-NBP46.9b-1.8%46.0b * converted at the exchange rate EUR/PLN = 4.00 Source: National Bank of Poland data

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Costs and benefits of instant payment Payment segments targeted by instant payments All segments (B2B, B2G, C2B, C2G, C2C, etc.) but especially consumer segments (including mobile payments) and B2B Costs of instant payments Setup, maintaining and R&D costs for operators, integration and usage costs for PSPs, costs for PSUs Benefits of instant payments For PSUs: faster settlement of obligations, reduced float, service available 24/7, possibility to pay in the very last moment for taxes and credits avoiding penalties, instant delivery of liquidity in contingency situations, instant payments for goods and services = instant settlement = possible instant shipping in remote transactions (no credit counterparty risk for sellers) For PSPs and system operators: new revenue streams, possibility to offer new products and be more competitive, brand strengthening General systemic benefits More competition and innovation on the market, increase in velocity of money = decreased balances, less outstanding money value, better liquidity management = rise in the overall payment systems efficiency

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Model: prepaidModel: postpaid AL NBP Express Elixir settlement account manages internal accounts of participating banks funds deposited by banks to the central system's account in advance, no collateral needed, no credit risk involved (transactions executed when funds suffice), processing and settling of payers' orders one by one on the real-time basis, system scalable with already high capacity

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Costs of instant payment systems Faster Payment System: – £200mln ($307mln) to install and operate the FPS for the initial contract period of seven years (2008–2015), – investment costs of up to £50 million ($77 million) for each participating bank to connect to the FPS (max times 12 banks = £600 million ($922 million) Source: Claire Greene, Marc Rysman, Scott Schuh, and Oz Shy, Costs and Benefits of Building Faster Payment Systems: The U.K. Experience and Implications for the United States, "Current Policy Perspectives" No. 14-5, February Express Elixir BlueCash up to € several million for setting-up, maintaining and integrating with banks for each system

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Supply side of the payments market Mobile wallet Electronic money Bank account Payment card Non-bank and bank PSPs – creating the level-playing field Key issues: IBAN/IPANs, access to incumbent systemically important payment systems, right to open accounts at the central bank, TPPs, PIS, AIS – first step to make bank accounts accessible, Next step – new payment instruments linked to mobile wallets facilitating seamless one- click/one tap instant payments in physical, e-, m-, u-commerce, Challenge: innovation vs security, one-click/touch-buy vs SCA and STA

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Conclusions Desired direction Instant payments are not a chimera but a useful or even a necessary and inevitable step forward, Efforts should be taken to make the systems interoperable on the Paneuropean basis (formats of payment messages, clearing and settlement mechanisms, etc.), The competition between PSPs will drive the prices of instant payments down for PSUs, End-to-end STP and the SEPA need instant payments, Regulators should consider requiring transfer of funds in t+0 instead of t+1 mode (PSD3?).

dr Jakub Górka, University of Warsaw, Faculty of Management, Banking and Money Markets Department Thank you for your attention dr Jakub Górka Websites: ; s: ;