1. Get connected to the future 1World Bank payment system conference, Washington, 29 May 2007 Trade offs in Payment Systems Henrik Parl Washington, 29 May 2007 Cooperation versus competition

2. World Bank payment system conference, Washington, 29 May 20072 Key message It is virtually impossible to provide a global bank and remittance payment solution without a cooperative approach. Co-competition is the key to success Commercial interest must be the key driver for system interoperability, not technology. Key ingredients: – Commercial framework – Products & standards – Reach

3. World Bank payment system conference, Washington, 29 May 20073 * Shareholder 60 connections in 49 countries ALPosta Shqiptare sh.a. AT *BAWAG P.S.K. AUANZ Bank BANova Banka BE *Financial Post BGBulgarian Posts BGFinance Engineering BREmpresa Brasileira de Correios e Telégrafos - ECT CANational Bank of Canada CACanada Post Corporation CH *PostFinance/Swiss Post CVCape Verde Post CNChina Post CZCSOB DE *Deutsche Postbank DKSydbank EGCIB (Egypt) S.A.E. ESBBVA ESCorreos y Telegrafos FIING/Postbank (EUR transfers) FR *La Banque Postale GB *Alliance & Leicester Commercial Bank plc GBVisa GRHellenic Post GREFG Eurobank Ergasias HRCroatia Post HUMagyar Posta IE *An Post ILIsrael Postal Company IS *Póstgíró IT *Poste Italiane ITBanca Popolare di Sondrio JPJapan Post, Postal Savings Business Headquarters KRKorea Post LU *EPT Luxembourg LVLatvia Post MABanque Centrale Populaire MABarid Al Maghrib MNXacBank NL *ING/Postbank NOING/Postbank (EUR & NOK transfers) NZANZ National Bank PHPhilippine Postal Corporation PLING/Bank Sląski PLPolish Post PT *CTT Correios de Portugal ROBanc Post ROPosta Romana RSPostal Savings Bank SEING/Postbank (EUR & SEK transfers) SIPostna Banka Slovenije SKPostova Banka SNPostefinances TGSociete des Postes du Togo THThailand Post Co TRTurkish Post TNLa Poste Tunisienne USAmerican Express Bank USDeutsche Bank USFederal Reserve Bank

4. World Bank payment system conference, Washington, 29 May 20074 Monthly transactions

5. World Bank payment system conference, Washington, 29 May 20075 The new Eurogiro mission Connectivity Dedicated links SWIFT CUG Eurogiro Eurogiro is a commercial company that actively promotes and catalyzes bilateral and multilateral business opportunities among its Alliances & Members Banks Postal Non- Fin.Inst. Alliances Regions Products Card Payments Credit transfers Money Orders Direct debits customers in retail financial services and wholesale banking worldwide with the aim to constantly add business value to the whole Eurogiro community

6. World Bank payment system conference, Washington, 29 May 20076 Eurogiro – providing interoperability Gateway of business opportunities for Eurogiro members: The Eurogiro SWIFTNet Closed User Group -Exchange transactions in FileAct format with any SWIFTNet member and any Eurogiro member on the same system; -Access from SWIFT system to (postal) members with ELS systems and access from ELS system to (banking) members with SWIFT system Eurogiro Select solution -Access for non-banks through dedicated network The Eurogiro/Visa solution -Receive payments from Visa card holders; additional volume and revenue to the Eurogiro members WSBI (Savingsbanks) co-operation on remittances

7. World Bank payment system conference, Washington, 29 May 20077 Eurogiro – providing connectivity (cont.) The FED-Eurogiro Partnership -Incoming traffic (from potentially any US bank) with fee and foreign exchange income -Live in pilot phase. Eurogiro/Postal org. – The Eurogiro Cash International (ECI) -New revised two-day cash product mixing Track & Trace techniques and Eurogiro bulking principles -Can be exchanged electronically between the UPU/IFS network and the Eurogiro network Eurogiro/Western Union – Urgent Cash -Support from Eurogiro of the Urgent Cash product of Western Union -Option to connect to Western Union through the Eurogiro ELS interface -Nearly 30 Eurogiro members as Western Union agents and strong volume growth Multilateral settlement: ESSP and USSP

8. World Bank payment system conference, Washington, 29 May 20078 Example 1: Low cost connectivity of non-banks Host system Eurogiro network Modem PC terminals Prod. system Test system Cisco 1721 VPN encryption Hub Multitech Modem for remote configuration Normally disconnected! Printer Eurogiro delivery Member’s network ELS Application Installations CD ELS Ver. x.x

9. World Bank payment system conference, Washington, 29 May 20079 Example 2: linking postal and banking world Eurogiro is approved as a CUG administrator on SWIFTNet allowing SWIFT members to connect to Eurogiro using their SWIFTNet connection Eurogiro SWIFT Gateway SWIFTNet Eurogiro CUG Eurogiro Network

10. World Bank payment system conference, Washington, 29 May 200710 Valicert Eurogiro MemberFED ELS Example 3: Dedicated link to US ACH 103-10 Nacha 103-10 network Nacha Store Nacha files and transaction numbers Forward advices for reconciliation. The EFI will reconcile with the received Nacha files and send MT910 ELS returns MT011. ELS part of EFI will reconcile with sent MT103-10 Settlement Nacha There is a 1-to-1 relation between Nacha file and MT103-10

11. World Bank payment system conference, Washington, 29 May 200711 UK Sender German Bank UK Bank German Beneficiary Visa Direct EG Settlement Bank - ESSP 7 MT103-20 8 6 CFT Example 4: Links between card and bank world 14 AFT 3 AFT+CFT 5 CFT 2 Auth VisaNet Visa Direct Settlement Bank GB-GBP FR-EUR DE-EUR 9 MT202 10 MT910

12. World Bank payment system conference, Washington, 29 May 200712 Example 5: Links to remittance organisation Internet ELS WU database Eurogiro interface CSC Domestic PO e-banking customer Eurogiro PO PO PO PO Host ELS screens Local screens

13. World Bank payment system conference, Washington, 29 May 200713 Example 6: Settlement interoperability Member B Member A 2 Cover Message MT202 Debit advice MT900 3 D EUR/USD 1000 C EUR/USD 1000 ESSP/USSP A/C AA/C B Credit advice MT910 3 4 Statements of account MT950 4 1 EUR/USD payment instructions [Eurogiro Envelope, MT103]

14. World Bank payment system conference, Washington, 29 May 200714 Examples of key interoperability projects SEPA – Cards & ATM’s – Credit transfers – Direct debits Global Payment Framework (linking banks and ACH’s) Asian regional ACH SWIFT remittance standards project BIS/WB remittance standards

15. World Bank payment system conference, Washington, 29 May 200715 ‘Co-competition’ could be solution Co-operative space – Infrastructure & connectivity – Reach – Products & standards (WB/BIS) – Lobbying & compliance Competitive space – Customers and fees – Added value services – Branding No single organisation can cover first, intermediary and last mile for payments. With Co-competition can work together at the infrastructure level while still competing for the customer

16. Get connected to the future 16World Bank payment system conference, Washington, 29 May 2007 Any Questions