Harry Leinonen, Advisor to the Board, Bank of Finland

Extract from: "Current developments and future trends in EU Payment System, SEPA now and in future"

[…] When we come to SEPA I think the main benefit will be the increased competition. In this audience it seems that corporate customers are the majority: You will see changes over the year. You can really compare the services of banks and you can start to use cross-border banks. There will be a good change in this area in the future.

What you will also be seeing already from this year onwards is that the payment execution will be faster, both inside Germany and in the whole of Europe. Everything should go in one day from November 2009 onward. That’s according to the Payment Service Directive. If the banks don’t agree with something it might be slower. But I don’t know why they would do that. And there will be also faster express giros.

The really big benefits that we will get from SEPA are in the new standards. We will have common interbank standards, we will have common customer standards. And the common country-level overheads will decrease when you use more common systems and common services. And you will therefore be able to integrate your systems better with the banks directly. And the sooner we get the SEPA working between customers and banks the faster we will get these benefits.

Therefore, there is a very topical discussion just now about when there should be an end date for the old legacy systems in the countries. If we could put an end date, some customers would turn faster to using the SEPA systems. And the cost would then go down because banks don’t have to have legacy systems and the SEPA for a long time parallel to each other. The European Commission made a consultancy on these end date issues and the majority of all these that answered were in favor of having some kind of regulation for the end date.

It will be interesting to see whether there will be some kind of regulation. It will be discussed in December 2009. And after that we know more of what the different Ministers of Finance think about this issue. But if there is an end date, I am sure it will be further down the line in 2013 or 2014. It will not be for next year.

Customers generally have a strong interest in what is called eSEPA, electronic SEPA. It means that you integrate into the banks and send everything in electronic format. We would have interface standards. You would use common standards which are based on something that the software houses provided to you. They would make only one payment module and it would work in the whole Euro area. You would not have different systems for different countries as you have today.

When you look at the electronification level that we have in Europe today, again Finland and the Netherlands are coming up really high. Germany has a high automation level but the number of electronic transactions per inhabitant is low. There is clearly room for more development in that area to get away from papers to electronic interfaces.

When you create standards, you have two areas in banking: those between banks and those between customer and banks. In order to get big benefits, you have to get the “customer to bank” part to work and the “bank to bank” part to transfer all the information that customers need between them for efficient payment management. The common standards are the basis for having a good e-payment area and get efficiency out of payment systems. That means that we have to have a large number of standards.

In domestic countries which are very electronic, like the Nordic countries, we all these standards available have for the payers. Whenever a payer wants to send a credit transfer, direct debit or wants to accept e-invoices, he will be able to send that information directly to the bank. He will also receive all the information regarding e-invoices, card payments and statement of accounts from the banks. The statement of accounts in Finland can be directly put into the receivable systems and into the general ledger and used as such by all companies in Finland. That is exactly what they are doing.

On the payee’s side, you have the same situation. You will get a lot of information from the bank. You will send a lot of information to the bank. All of these should have common standards in the future. This is the real basis for the efficiency in payments. And that has also been the efficiency in all the other industries. For instance, when you are flying with any airplane in Europe today, you will get an electronic ticket. All the airplanes in Europe are based on the electronic ticketing system. This provides good benefits for the companies. Without the standards behind it, it would not work.

So, these common standards which we are getting now within SEPA are really the basis for all the benefits that we want and will receive.