1. Latest innovations in the Nordic Market Moderator: Harry Leinonen, Bank of Finland Speakers: Olli Kähkönen, EBA CLEARING Juha Risikko, Nordea Bank Finland Markus Kortmann, Nokia Jukka M. Heikkinen, Metsä Group Financial Services Prof. Tomi Dahlberg, Helsinki School of Economics

2. Moderator view on payment innovation Harry Leinonen Advisor to the Board, Bank of Finland

3. Nordic development focus Interbank efficiency Straight-through-processing Efficient addressing space Employment of efficient network technology Customer-to-bank efficiency Electronic network interface Solid identification and security solutions Efficient integration support –References for automatic reconciliation –Common message standards –Expanded message content and e-invoicing –Electronic statement of accounts –Direct accounting (general ledger) interfaces

4. How to find winning and surviving development designs How to filter out the lasting beneficial proposals? How to involve the own organisation in developments? How to build up a co-operation push in the industry? How to involve customers and other market players? Co-operation is essential for payment service development among service providers between customers and service providers

5. Developments follow in general an S-shaped curve Can we affect the steepness of the development pattern? How to speed up the development process? Penetration rate Time The ‛magic’ 80%

6. Operator view on payment innovation Olli Kähkönen, Member of the Board, EBA CLEARING, (Nordea Bank Finland)

7. SEPA, in full 4-corner or in interbank space? Connectivity Protocol in C2B, B2C Syntax Protocol in C2B, B2C Data Context in C2B STP Measures at Beneficiary Single Account for the whole of Europe SellerBuyer Buyer’s BankSeller’s Bank

8. Reachability to 92.93% 112 Direct Participants 4,150 Indirect Participants 31 SEPA Countries 35 Country Codes Additional Optional Services Night Settlement 10 Occurances for Creditor References Bilateral Clearing, subject to volume growth. Reachability in SEPA

9. Bank view on payment innovation Juha Risikko, Senior Manager, Channels, Nordea Bank Finland

10. Mobile device will play a big role in banking, payments and security 1.SMS alerts lead the change from self-services to proactive services: new revenues, improved control & improved security 2.Mobile Internet Banking is becoming another core banking channel. Driving forces are improved usability and rich set of services 3.Customers prefer mobile integrated end-user authentication due to usability issues 4.Mobile contact less payments open an interesting opportunity for further cash replacement – business models, not the technology, will define the success

11. Corporate view on Payment Innovation Markus Kortmann, Manager, Cash Management, Nokia Finance

12. Formats & Connectivity Payment format ISO 20022 –Worldwide format – not just Europe Bank statement in XML –One format to replace MT 940, BAI, MultiCash, TITO –Common transaction codes –Unified usage of the transaction codes SWIFT – SCORE –Common connectivity –Allow none listed companies

13. Straight Through Processing STP vs. real STP –Currently seen as transaction from payer and his bank/to payee bank account –Real STP is from clearing payers AP to clearing payee’s AR Common identifier –Local solutions in place (e.g. Finland, Norway, Switzerland) Invoice level Invoicing company driven –RosettaNet Unique Remittance identifier (URI) Payer driven

14. Corporate view on payment innovation Jukka M Heikkinen Vice President, Metsä Group Financial Services

15. How can banks gain a competitive edge with customer loyalty? Banks can gain a competitive edge providing new services to their customers Matching Information – payment advice –Enable shared services for customer payments –Utilisation of standardised transaction codes –ERP systems linked to bank cash management systems to get real STP Liquidity Management tools –Tools to operate cash pools forecasting – web based tools to subsidiaries and business units to give and monitor cash flow information Cost monitoring and interest calculation Cash flow statistics Long term forecasting for budgeting and risk management Developing new technology more closely with the customers –XML payment format –XML account statement –Electronic invoicing –ERP connectivity

16. Consumer and SME view on payment innovation Tomi Dahlberg, visiting professor of ISS Helsinki School of Economics

17. Necessary technologies, competencies, market needs, stakeholder interest, regulation and efforts have existed for a long time - why does it take such a long time for dominant designs to emerge? –It is necessary to understand how innovative systemic (IT-enabled) service markets emerge and develop towards dominant designs In other words –What factors and dynamics between factors impact the development of such markets during the so-called era of ferment (developments prior the emergence of dominant designs) and are they positive or negative? About the development in the Nordic Payment Services Market (1)

18. The Emergence and Scope of the Market (Payment Services Market) Institutional Factors Interested Organisations / Key Market Actors Economic/Business Factors Technology Factors What is needed to reach a so-called dominant design for a particular payment services market?

19. Supporting, complementary factors and competencies Technology basis: broadband networks and PC penetration, mobile handset and network penetration, messaging and messaging cultures, advanced POS-terminals, internet and electronic banking, E-billing and E-invoicing with its long history Institutional, economic, market actor factors: strong market participants with determination to promote innovative payment services, strong electronic payment and Internet banking culture, economic savings Institutional factors: strong regulatory support Market participants: consumer and SME curiosity Inhibiting factors Adverse market dynamics between key industry actors –Divergent, rivaling interests and priorities – unclear value offerings –Alternative asset strengths – limited value offerings where an entire process is not taken care of, e.g. marketing role of billing and invoices –Short history of deep multi-industry cooperation – e.g. financial institution vs. telecom operator and other similar antagonisms from time to time Supporting and inhibiting factors for the emergence of dominant designs

20. What else is needed for consumers and SMEs to adopt payment services innovations? In modern history innovations have diffused during tens of years (30-50) Necessities –Reliability, security and trust –Concrete positive benefits –Ease to use Behavioural drivers and inhibitors –Start with high compatibility with growth into more innovative services –Dissatisfaction with current situation a strong driver – is it felt? –Consumers and SMEs have all the time more behavioural intentions than they are able to implement – user studies provide systematically too optimistic results –Wide applicability of a service augmented with specific services (e.g. mobile payments to pay for public transportation, parking) About the development in the Nordic Payment Services Market (2)