1. 1 st ATHENS DIGITAL PAYMENTS SUMMIT Digital Payments and the Banking Industry Challenge E.K. Gatzonas Bank of Greece 30 September 2015

2. 2 …rapid developments in digital technology and its extensive impact on financial products and services: “digital disruption”  …cuts across educational or wealth segments of the population.  …presents challenges and opportunities for service providers, financial institutions and the authorities themselves.  …Momentum for non-cash payments is positive.  Private and public sector to alter behavioral patterns.

3. 3  …a similar digital disruption has also been taking place in Greece  …but not as a result of a typical technological innovation.  Instead, it was the result of a regulatory intervention for the control of capital movements and restrictions on cash withdrawals since July 2015. Ex ante and ex post considerations….

4. 4 4. Digital payment challenges and the role of the Bank of Greece… 1. Access to banking services and the prevailing culture of payments… 2. The “cash-only” preference and the value of heralding structural changes in payment means 3. The cost of cash vs non-cash payments

5. 5 1. Access to banking services and the prevailing culture of payments…

6. 6

7. 7 …noticeable avoidance of E-banking and e- commerce in Greece: Eurostat on the use of internet banking:  Half of EU’s or euro area’s population…  …but only 17% of the population in Greece …apart from generalized financial uncertainty, there is an excessive desire for anonymity, or even tax avoidance 1. Access to banking services and the prevailing culture of payments…

8. 8 2. The “cash-only” preference and the value of heralding structural changes in payment means The July 2015 regulatory controls on cash availability came with a "silver lining“:  The mix of payment means was dramatically altered in favor of pre-existing e-money and e- Banking alternatives. Heralding the ill-based motives of cash payments: Academic researchers and practitioners (IOBE, ELTRUN)…

9. 9 Capitalizing upon the shift towards the e- payments regime:  all banks ‘uplift’ their e-banking infrastructure  one is to utilize its branching network to provide free Wi-Fi HotSpot-types of coverage of the national territory  others, make normative public interventions, highlighting benefits of digital payments to prevent tax avoidance/evasion. 2. The “cash-only” preference and the value of heralding structural changes in payment means

10. 10 3. The cost of cash vs non-cash payments The contrast has been analyzed by the ECB, for both private and social cost:  average private cost of cash payments is 1.1% of GDP.  When adjusting for cash-per-capita in Greece (4,440 vs 2,080 for average of the euro area), the cost of holding, storing and using physical currency may reach a hefty 4 billion euro per annum…

11. 11 … adding the cost of cash usage to society: - maintaining and securing storage facilities - shipping currency around, in a safe and timely manner, …leads to a unit social cost estimated at 2.3% per transaction - substantially higher than the comparable cost of a credit transfer. 3. The cost of cash vs non-cash payments

12. 12  Handling confidence and trust  E-fraud challenges and security concerns  Regulatory risks and challenges: ► EU's 'Digital Single Market' project (DSM) and ‘e-Invoicing’ ► MoU-August 2015 4. Digital payment challenges and the role of the Bank of Greece…

13. 13 In the context of the “Digital Single Market” project, EC documented a striking difference:..bank customers in Greece “prefer conducting their transactions in person”, or “ask a real person about it”. GreeceEU 53%26% 4. Digital payment challenges and the role of the Bank of Greece…

14. 14 …preferences not justified by fraud statistics 4. Digital payment challenges and the role of the Bank of Greece…

15. 15 …nor justified by the dynamics of fraud 4. Digital payment challenges and the role of the Bank of Greece…

16. 16.. The challenge for the banking community and regulators is to monitor and ‘see’ that such behavioral gaps are narrowed. The Bank of Greece,  is supportive of digital payment innovations with a "Pareto optimality” content.  stands ready to praise the leaders and stigmatize the lagers 4. Digital payment challenges and the role of the Bank of Greece…

17. 17 In this context, the Government, the private sector and the Bank of Greece are to see that:  pan-European legislative initiatives such as the D.S.M., e-invoicing, as well as  the August 2015 MoU prescription for clean and cashless transactions,..are the catalysts for change. Our role again: praise the leaders and stigmatize the lagers 4. Digital payment challenges and the role of the Bank of Greece…

18. 1 st ATHENS DIGITAL PAYMENTS SUMMIT Digital Payments and the Banking Industry Challenge E.K. Gatzonas Bank of Greece 30 September 2015