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BGC Bankgirocentralen Impact from SEPA on BGC Presentation, by Mats Walln Domestic ACHs in SEPA at Magyar Nemzeti Bank conference 2005-10-21 2005-10-24 Agenda 1. Introduction BGC company information The Bankgiro

  1. BGC – Bankgirocentralen Impact from SEPA on BGC Presentation, by Mats Wallén ”Domestic ACHs in SEPA” at Magyar Nemzeti Bank conference 2005-10-21 2005-10-24

  2. Agenda 1. Introduction � BGC company information � The Bankgiro system and products 2. Other considerations � Euro referendum � Bankgiro euro functionality 3. Trends that influence Sweden � A changing European payments market 4. BGCs strategy 5. Summary 2005-10-24

  3. BGC - The Swedish Automated Clearing House Key facts Key facts � Established 1959 � Established 1959 � BGC is owned by SEB, SHB, FSB, Nordea, Danske Bank, � BGC is owned by SEB, SHB, FSB, Nordea, Danske Bank, SkandiaBanken, LF Bank and Kaupthing Bank SkandiaBanken, LF Bank and Kaupthing Bank � Approx. 435 employees at the Stockholm office. � Approx. 435 employees at the Stockholm office. � Turnover of MSEK 850 in 2004 (approx. 92 MEUR) � Turnover of MSEK 850 in 2004 (approx. 92 MEUR) 2005-10-24

  4. BGC - The Swedish Automated Clearing House Products and service offering Products and service offering Main business, Bankgiro system � Main business, Bankgiro system � a scheme for processing payments � � a scheme for processing payments 18 participating banks � 18 participating banks � BGC offers � BGC offers � payment and business transaction information services � payment and business transaction information services � solutions for secure digital identification � solutions for secure digital identification � � electronic invoice � electronic invoice Our products enable � Our products enable � � secure and efficient business transactions; � secure and efficient business transactions; � for our clients Swedish banks, enterprises and public institutions � for our clients Swedish banks, enterprises and public institutions 2005-10-24

  5. Transaction flow in Bankgirot Invoice 2/4. 8. 1. Payment Processing Remittance initiation, B2B advice Customer Supplier 5. Debit (1. Altenative Bankgirot advice + payment 7. Details for transaction initiation) C2B, credit book entry 6. Clearing position report SMEs and settlement details 3. Debet 6b 7b. Credit book authorisation Settlement entry 3b. Debit book entry Payer’s Receiver’s (supplier’s) (customer’s) bank bank Central bank 2005-10-24

  6. Features of the Bankgirot system Supports direct submission from payers and BGC � submits electronic credit advices to the payees High level of automation for payers and payees and � the participating banks (End-to-End STP) Same day payments (main cycle over night) � Supports portable accounts. Giro numbers can be � re-linked overnight to a bank account with a bank selected by the customer. Facilitates flexibility to change bank relationship Several giro numbers can be linked to one bank � account. Simplifies liquidity planning BGC is compliant with the SIPS 10 Core principles � Payment products in SEK and EUR (from 1999) � 2005-10-24

  7. Supports fast retail payments with settlement at the Central Bank BGCs clearing and settlement system process 28 daily settlements 11.26 11.27 12.00 12.30 13.00 � 14 related to the Bankgiro system SEK EUR SEK EUR SEK 11.25 11.00 SEK 13.05 � 4 related to DCL (account to account SEK SEK 13.26 EUR 10.30 transactions) 09.06 SEK 13.25 EUR SEK 15.26 � 10 related to other transaction flows SEK 09.05 SEK 08.31 15.20 SEK SEK 15.27 � ATM transactions, Cash handling (coins EUR 08.21 SEK 15.30 08.20 and notes), Card transactions (Europay), SEK SEK 16.20 07.15 SEK SEK National debt office payments, Dividend 07.30 16.00 SEK SEK payments for Swedish shareholders through the national CSD (VPC) � Settlements both in SEK and EUR 2005-10-24

  8. Other BGC products � B2C Electronic invoicing � B2B Electronic invoicing � PKI Services (not only for financial services) � Service bureau for SWIFTNet � BGC also use SWIFTNet FileAct in the interaction with participating banks 2005-10-24

  9. Agenda 1. Introduction � BGC company information and general introduction to The Swedish payments market � The Bankgiro system and products 2. Other background information � Euro referendum � Bankgiro euro functionality 3. Trends that influence Sweden � A changing European payments market 4. BGCs strategy 5. Summary 2005-10-24

  10. Other background information � Majority voted against the introduction of euro � Great skepticism among the man on the street to EU and the Commission � On the other hand try to best in class to implement directives 2005-10-24

  11. Agenda 1. Introduction � BGC company information and general introduction to The Swedish payments market � The Bankgiro system and products 2. Other background information � Euro referendum � Bankgiro euro funtionality 3. Trends that influence Sweden � A changing European payments market 4. BGCs strategy 5. Summary 2005-10-24

  12. A changing European payments market Over arching Need for change pressure 1. Harmonizing of schemes Reduced costs 1. Harmonizing of schemes � New Legal Framework create one � New Legal Framework create one � To establish the harmonized framework for the harmonized framework for the vision of the internal European payment market European payment market market Govenment � Focus: one pressure market, price for the 2. Standards 2. Standards consumer � Need for standardization of formats � Need for standardization of formats and products and products � General business economical motive to achieve Market efficiency by scale which will give 3. Consistent infrastructure pressure 3. Consistent infrastructure lower costs � Pressure to reduce the number of � Pressure to reduce the number of infrastructure for transaction infrastructure for transaction processing. processing. 2005-10-24

  13. Trends that influence Sweden � Harmonization and adaptation of international standards in the domestic circuit � Banks see increased use of IBAN in cross-border transactions � No decision to natively handle IBAN in domestic systems (BG or DCL) � Discussions within the banks on impact from PEDD. Some international customers are starting asking for it 2005-10-24

  14. Electronic transactions continue to grow in Sweden Form payments Electronic payments 500 450 400 350 300 Million 250 200 150 100 50 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: BGC's statistics 2005-10-24

  15. Agenda 1. Introduction � BGC company information and general introduction to The Swedish payments market � The Bankgiro system and products 2. Other background information � Euro referendum � Bankgiro euro functionality 3. Trends that influence Sweden � A changing European payments market 4. BGCs strategy 5. Summary 2005-10-24

  16. Challenges on BGC Transactions cost will be lower in Euro-area 0,9 Average cost per Bg-transaction 0,8 (SEK) 0,7 Reduce 0,6 gap !! 0,5 0,4 0,3 Estimated processing cost within the Euro area (rich functionality) 0,2 Expected cost level for ACH with thin funtionality 0,1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 År 2005-10-24

  17. How to reduce the gap? Adapt knowledge and culture Face challenges from the Face challenges from the European market European market BGC vision Focused business development Focused business development Increase productivity and quality in the delivery Increase productivity and quality in the delivery Use partners to achieve flexibility and efficiency 2005-10-24

  18. Agenda Introduction � BGC company information and general introduction � to The Swedish payments market The Bankgiro system and products � Other background information � Euro referendum � Bankgiro euro functionality � Trends that influence Sweden � A changing European payments market � BGCs strategy � Summary � 2005-10-24

  19. Impact from SEPA on the Swedish market 2008 European products for cross- European products in domestic border payments system European products Domestic products 2003 2008 2010 The impact will be low as Euro is not the domestic currency The impact will be low as Euro is not the domestic currency 2005-10-24

  20. Summary � Reduce the gap � Focus on business development � Increase productivity and quality � Direct impact from SEPA will initially be low � Be the market leader for electronic invoicing in Sweden 2005-10-24

  21. Mats.wallen@bgc.se +46 8 725 66 45 Q & A 2005-10-24

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