1. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 1 FEDERATION BANCAIRE DE L'UNION EUROPEENNE BANKING FEDERATION OF THE EUROPEAN UNION BANKENVEREINIGUNG DER EUROPÄISCHEN UNION EUROPEAN SAVINGS BANKS GROUP GROUPEMENT EUROPEEN DES CAISSES D’EPARGNE UROPÄISCHE SPARKASSENVEREINIGUNG EUROPEAN ASSOCIATION OF COOPERATIVE BANKS GROUPEMENT EUROPEEN DES BANQUES COOPERATIVES EUROPÄISCHE VEREINIGUNG DER GENOSSENSCHAFTSBANKEN EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I Payment systems: efficiency and fairness Roadmap for the Single Euro Payment Area European Parliamentary Financial Services Forum Gerard Hartsink Chairman European Payments Council Brussels, January 27, 2004

2. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 2 Agenda ãLegal and economic landscape ãEPC governance framework ãProgress for retail payments ãProgress for large value payments ãConclusions

3. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 3 Legal Landscape ãRegulation 2560 (Dec 2001) on cross-border payments in Euro: ã Decision of the European Parliament and the EU Council ã Euroland = Domestic Concept ã Euro: reality for 305 million Europeans in 12 countries ã Cards: 1-7-2002; credit transfers 1-7-2003 ãCommission ãConsultative Communication December 2, 2003 « New Legal Framework for Payments in the Internal Market »

4. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 4 Cross-Border and Domestic Payment Transactions *Estimate based on 1999 figures, with a CAGR of 6% Source: EFMA; SWIFT; TARGET; ECB statistics; McKinsey analysis – EU 15, 2001 Others 1.7% Cash withdrawals Direct debits Domestic transactions* 15.5% 28.1% 13.7% 19.5% Cheques 21.4% Credit transfers Card payments Card payments are by far the most frequently used means of payment for cross-border transactions Cheques Cross-border transactions 0.3% Credit transfers Card payments 16.5% 83.2% 100% = 0.8 billion transactions 100% = 62.4 billion transactions

5. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 5 Retail Payments Transactions in the EU 15 (1) Note: 2001 figures, not including cash transactions Source: ECB Bluebook (Addendum, September 2003) * non Euro countries *** ***

6. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 6 Retail Payments Transactions in the EU 15 (2)

7. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 7 Retail Payments Transactions in the EU 15 (3)

8. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 8 EPC Governance Framework ãEPC vision ãEPC Charter principles ãEPC Council structure ãDialogue with other SEPA stakeholders

9. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 9 European Payments Council vision ã March 2002: SEPA Workshop ã White Paper: “Euroland: our Single Payment Area!” ã « We, the European banks and Credit Sector Associations, ã Share the common vision that Euroland payments are domestic payments, ã Join forces to implement this vision for the benefit of European customers, industry and banks, and accordingly, ã Launch our Single Payment Area » Major players of the European payments industry and a fair representation of smaller players (42 banks and 4 associations: EBF, EACB, ESBG, EBA)

10. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 10 Some principles of the approved EPC Charter ãThe EPC = the « decision making body for the European payments industry » ãMajor players of the payments industry with a fair representation of the smaller players ãProper representation of banks of 10 acceding countries ãThe European Credit, National Banking, and Payment Associations should all be embedded to guarantee a proper preparation and a timely implementation of decisions ãThe EPC will give the strategic guidance to the standards process executed by ECBS, SWIFT, card companies, etc.

11. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 11 Seat numbers could be adjusted through « wild » cards Market shares are validated by ESCB as TTP Council Structure: country dimension DRAFT

12. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 12 Dialogue with other SEPA Stakeholders (1) ãAuthorities ãEuropean Commission: PSMG meetings Bilateral meetings ãEuropean Parliament: EMAC hearings ãCentral banks (ECB and ESCB) ãCOGEPS meetings (co-operation model) ãRoles:  catalyst role  oversight role  regulator role  operator role (settlement services)

13. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 13 Relations with ECB (ESCB) ã “The Eurosystem very much welcomes the decisions taken and general commitments made by the EPC”* ã“In many cases the EPC has articulated political intentions, but concrete deadlines and milestones are still missing. The EPC needs to transform its objectives into a fully-fledged project with a sound plan and fixed deliverables. A convincing arrangement for the enforcement of EPC decisions needs to be developed and communicated to all banks and the general public.”* ãToday: SEPA indicators for design and for implementation available. * ECB: June 2003

14. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 14 Dialogue with other Stakeholders ã Banks’ customers - Treasurers: EACT (together with ECB) - Retailers: Eurocommerce - SME’s: UEAPME - Consumers: BEUC - Government treasurers: in pipeline ã Key messages:- What do you expect from SEPA? - What is our EPC vision? - What is your and our progress so far? - What are your top 10 concerns?

15. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 15 Progress for retail payments ãChallenges ãCredit Transfers ãDirect Debits ãInfrastructure(s) ãCards ãCash

16. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 16 Challenges for Retail Payments ã For existing (domestic) payment instruments: - optimising processes of (for) existing Euro payment instruments - removal legal (reporting) obstacles ã For new pan-Euro(pean) payment instruments: - commitment to change national payment habits of all stakeholders? -commitment on end-to-end standards? -uniform legal environment? -modernisation (simplification) regulatory framework for Euroland (Europe)?

17. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 17 Credit Transfers ãApproved recommendations: ã IBAN (International Bank Account Number) ã Credeuro resolution ã ICP (Interbank Convention on Payments) ã Cross border cheque recommendation (Dec 2003) ã FATF (Financial Action Task Force) recommendation 7 ãIn Pipeline: ã Recommendations on several standards ã Recommendations on mobile payments ãRemark: ã Implementation by banks and customers ã ECB report on standards: Q1/Q2, 2004

18. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 18 Direct Debits ãApproved recommendations: ã Pan-European Direct Debit scheme report (Dec 2003) ãIn Pipeline ã Final choice of model(s) ã Dialogue with stakeholders (also tax authorities) ãRemark: ã Landwell report 2003 ã New Legal Framework for Payments (Dec 2003) ã Governments: launching customers

19. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 19 ãPayment Systems ã require high initial investment ã their use is subject to large economies of scale effects ãNumber of existing systems great potential for efficiency gains Infrastructure: ECB position (1) Source: ECB

20. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 20 & Domestic payment areas Cross-border payments + Efficient domestic infrastructure Inefficient cross-border infrastructure Efficient pan-European infrastructure High volume Low cost + & High service level & Low prices  0-3 High volume Low cost + Low volume High cost + & Retail payments in euro Infrastructure: ECB position (2) Source: ECB Low service level & High prices  17-24 High service level & Low prices

21. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 21 Infrastructure: EPC position ãApproved recommendations: ã PE-ACH (pan-European Automatic Clearing House) concept ã PE-ACH governance guiding principles ã Receiver capability of all banks ãIn Pipeline: ã Implementation of receiver capability by all banks ãRemarks: ã PE-ACH = Step2 scheme of EBA Clearing Company ã EBA STEP2: More than 1,100 direct and indirect participants : Operational since Q3 2003

22. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 22 Cards ã Approved recommendations: ã 8 recommendations: standardisation, SEPA-compliant rules, legal obstacles, data collection, implementation, etc. ãRecommendation on fighting and preventing fraude (Dec 2003) ã In Pipeline: ã Dialogue with international and national schemes ã Remarks: ã EPC cards paper for the market (www.europeanpaymentscouncil.org) ã ECB card report: Q2, 2004

23. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 23 Cash ã Approved positions and recommendations: ã ECB (ESCB) is partner ã 9 Recommendations: joint cards and cash strategies, promotion electronic products, standardisation (equipment), legal obstacles, NCB functions, etc. ã Recommendation on cross border cash transportation (Dec 2003) ã Recommendation on NCB core functions (Dec 2003) ã In Pipeline: ã Inventory national cash schemes ãRemarks: ã Cash is most expensive payment instrument

24. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 24 Progress for large value payments ãTarget 1 ãTarget 2

25. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 25 NCB NCB NCB NCB NCB NCB NCB NCB NCB NCB NCB NCB NCB NCB ECB NCB NCB Target (today) TARGETInterlinkingNetwork ILC ILCILC Source: ECB

26. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 26 Target 2: ESCB approach ã October 24, 2002: ã Strategic Decision of Governance Council on ã Multi platform system ã System for large value Euro payments ã Core service with options for NCB to provide additional services ã Euro system wide price structure

27. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 27 Target 2: EPC approach ãCommon position on Target user requirements ãSingle integrated system ãCore functionalities ãCompliance with core principles BIS ãService level improvement ãTiming project deliverables ãDecisions ECB (ESCB) Q1 2004: Mono platform

28. EUROPEAN PAYMENTS COUNCIL Towards our Single Payment Area O O O O O O I I O I O I I O I O I O I 28 Conclusions ãThe EPC was able to re-establish the trust of the ECB and EC in the payments industry ãThe ECB and the EC and other stakeholders (Corporates, retailers) expect deliverables with concrete deadlines and milestones ãKey words for the future are: standardisation and consolidation for retail payment systems and for Target 2 ãGovernments should remove legal obstacles a.s.a.p. and should become the launching customers (e.g. tax) for the new payment instruments for Euroland