Corporate expectations for electronic payment solutions Moderator

Corporate expectations for electronic payment solutions Moderator: • Claus F. Hilles, EBA CLEARING Speakers: • Petri Aalto, Pohjola Bank • Marc Braet, SWIFT • Mervi Mäkelä, Finnair

Corporate expectations for electronic payment solutions Mervi Mäkelä, Director, Cash Management, Finnair

Trends in payment automation & new banking services needed • • E-Invoices automated ‛Order to Pay’-process automated settlement reconciliation on-line banking even in B 2 B Finnair Group: global retailer, sales in 34 countries, total 2. 2 billion € in 2007, 10, 000 empl. , national carrier, state ownership 55. 8 %, listed in Helsinki Stock Exchange since 1989, ‛Art of flying’ since 1923

Finnair networking • First interface between banks & Finnair in 1985 Today banks are linking companies with • customers • vendors • employees • shareholders

Finnair networking Shareholders Banks Vendors Finnair bank accounts Customers Credit card companies Employees E-Procurement Invoice Processing Multibank connection SAP Financials Travel & Expense Management SAP HR Treasury Sales System Planning tool SAP Financials & systems linking with SAP Financials

A message to banks: how to help companies in payment automation • to transport – receive and to forward – accounting information between companies; payment reference, information on bank statement • To speed up payments; charge transactions fees, no bank float • to develop on-line banking, even B 2 B

Networking in euro area: B 2 B & B 2 C on-line payments, Order = Settlement > less invoices Vendors companies 25 million E-Invoices, invoice-standards Buyers companies 25 million on-line payments > less credit card transactions XML + ISO standards on-line payments Consumers > 300 millions Banks 8, 000 Credit card companies

Finnair straight-through process Settlement + payment reference VENDORS E-Invoice paper invoice Operator Receiving e-Invoices E-Invoice Process SAP Fico E-Archive Scanning FINNAIR ‛MAX {e-Invoices}’ now 28% of domestic invoices are e-Invoices, 60% in 2009 FUTURE: MIN {e-Invoices} ‛Order = Settlement = Accounting’ on-line payments for B 2 B Bank connection

• SEPA – Banking industry is investing 10 billion euros to our common payment language & grammar and products, this will be a huge benefit to us all; to consumers, to companies and eventually to banks • SEPA & Finnair – Three payment file formats of today to XML during 2009 -2010 (no benefit if a quick replacing) – No impact on bank account structure – Euro area outgoing payments already centralised, and cross border euros BIC/IBAN • Benefits to Finnair – Faster payment traffic – A lot of competition, possibly even lower transaction fees… – On-line banking, chip cards • Waiting for new common products…. Thank you!

Corporate expectations for electronic payment solutions A Bank’s perspective Petri Aalto, Pohjola Bank plc

Corporate expectations for electronic payment solutions Agenda • Current status of SEPA migration • Corporate expectations; remember the service level • Additional benefits and SEPA enablers for corporate customers • Conclusions

Current status of SEPA migration • National Migration plans published • SEPA Credit Transfer successfully launched at January 28 th 2008 • Over 4, 300 banks have signed the EPC SEPA Credit Transfer Adherence Agreement • Close follow-up of SEPA implementation and progress in the member countries • European and National Stakeholder Forums established • Dialogue among consumers, corporate customers and public sector has started • Migration Period and SEPA End Date are under discussion • The SEPA End Date: is it coming too soon?

Corporate expectations; remember the service level • Maintain the good national payment service level • Enable continued development of better services – Automated reconciliation of incoming payments – Integration beyond the payment transaction level, e. g. e. Invoicing • Final goal: full STP end-to-end • No change for the sake of change – Services must improve if and when technology changes

Additional benefits and SEPA enablers for corporate customers • Structured Creditor Reference • Globally standardised remittance information will bring added value for corporate customers with cross-border invoicing • Invoice number and customer’s identification number are generally used as part of the Creditor Reference • Creditor Reference Number is key element in reconciliation and making internal processes efficient

SEEBACH • SEEBACH = SEPA + EBA + PE-ACH • Finnish Banking Community approached EBA in 2006 • Drivers for the project are – utilise the night time processing capacity – improves liquidity management and customer service: incoming payments and liquidity is available from the beginning of the day • Win-Win for both customers and banks

Nov 2008 2009 Delivery 1 SEEBACH Jan 2008 Delivery 2 Delivery 3 Data elements Settlement mode Settlement cycles File exchange SEEBACH data elements Gross Net EURO 1/STEP 1 TARGET 2 2 settlements 7: 30 & 14: 00 CET Day-time settlements 7: 30 & 14: 00 CET Multilateral Night-time settlement 1: 30 CET Multilateral Bilateral

Conclusions • There is room for value-added services on top of the standard SEPA Credit Transfer • Full STP end-to-end is key success factor and prerequisite for corporate customers • SEEBACH project ensures additional benefits for moving to SEPA • Structured Creditor Reference is a powerful tool to improve efficiency and STP • Start moving to SEPA to avoid last minute rush and shortage of delivery capacity in the market

SWIFT for Corporates: Current situation & key developments Marc Braet Head of Northern Europe SWIFT

What is SWIFT? • A co-operative organisation serving the financial services industry • A provider of highly secure financial messaging services • The financial standardisation body

Typical corporate-to-bank messaging landscape – Today’s situation Corporate VAN Accounts payable Accounts receivable host to host X Leased line e-banking Y Treasury Internet Other e-banking Z PSTN “fax-banking”

SWIFT: A secure, standardised global single window to the financial industry Corporate Accounts payable Accounts receivable SWIFTNet Treasury Single gateway Other KEY BENEFITS: • • Lower costs/STP Better funds visibility Control/security/reliabil ity Compliance

Corporates on SWIFT – where do we stand today # registered corporate entities 282 Geographical split 305 181 Asia Pacific Americas 9% 22% 108 69% 55 2004 2005 2006 2007 Q 1 2008 EMEA

Corporate entities on SWIFT Examples of users which joined recently Large • North America Google, Pay. Pal, Ebay, Delphi, IBM, UPS, Chevron • Europe STMicroelectronics, Telefonica, Tesco, Air France, Nokia, Siemens, Iberdrola, Deutsche Telekom, Ingram-Micro, Johnson & Johnson • Asia Matsushita, Petronas, Samsung, China Petroleum Finance Company Limited But also “mid-size” • • Decathlon Autostrade Alten Belcorp Also suited to corporates with only domestic traffic and/or a few banks

Bank adoption: on the rise • Already more than 830 banks currently interacting with corporates … • From 98 countries! • New programme in place to support banks in offering their services over SWIFTNet

Typical implementation FIN (individual messages) Payments (MT 101), statements (MT 940/2) and FX confirmations (MT 3 xx) Treasury Workstation ERP(s) ERP Payment factory/ middleware SWIFTNet infrastructure File. Act (File transfer) Transport any format; payments files, i. DOC, ISO 20022, ACHs, BAI formats, …

Going forward: Delivering value to all users Standards • • Back-office integration • Broader set of services • • • XML ISO 20022, Bank Mandates, Bank contract SWIFT as key corporate-to-bank standard setter Enablement of key vendors Certification programme Low-value payments, Securities, Trade, Exception & Investigation, SWIFTNet Mail Personal digital signature

Two ways to connect to SWIFT • Direct Connectivity: – SWIFT Interface platform – Alliance Lite NEW • Indirect connectivity – Member Concentrator model – Service Bureau

Alliance Lite: what is it? • • A new hassle-free way for customers to connect to SWIFT Accessible in a secure way Over the Internet Targeted at new low volume customers

Alliance Lite SWIFTNet Customer SWIFTNet • • Easy In business in days Full SWIFTNet access Standard desktop Secure Manual operations Automated operations SWIFT Internet Alliance Lite Customer Manual Auto General Availability: October 2008

‘Lite’ footprint Lite³ ‘Lite’ total cost of ownership ‘Lite’ on-boarding