FreningsSparbanken Kjell Hedman Group EVP and Head of Payments - - PowerPoint PPT Presentation

FöreningsSparbanken

Kjell Hedman

Group EVP and Head of Payments business area

1

Payments

• growth and opportunities

2

The payment area

• Card issuing
• Clearing card transactions
• National and international payments
• Transaction accounts, transfers, payroll systems,etc.
• Clearing, cash settlement
• Information services (e-billing, e-payrolls, etc.)
• Identification services

3

Payments by the numbers

• 100 products
• 130 million incoming/outgoing supplier payments
• 24 million payroll deposits
• 80 million giro payments
• 300 million acquired transactions
• payment relationships with 2,000 foreign banks,
• f which 300 are extensive
• Cash settlements averaging SEK 200 billion / day
• 330 employees

4

FöreningsSparbanken’s ambitions in the payment area

• To be a leading provider of competitive payment

products

• To maintain a market-leading position in all product

areas

• Position FSPA and partly owned/ independent

savings banks as the best “payment bank” in their markets

5

52 17 55 67 40 50 10 20 30 40 50 60 70 80

Bank cards Credit cards Merchant acquring Municipal market Giropayments privat Salary payments

Our market position is unique

%

Market shares FöreningsSparbanken

6

• No. of cards in issue, purchases

and acquiring

500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 3 500 000 4 000 000 4 500 000 5 000 000 Q3- 99 Q4- 99 Q1- 00 Q2- 00 Q3- 00 Q4- 00 Q1- 01 Q2- 01 Q3- 01 Q4- 01 Q1- 02 Q2- 02 Q3- 02 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 FöreningsSparbanken Hansabank Purchases, thousands acquiring, thousands

• No. of cards

Transactions, thousands

7

Business model - cards

Förenings- Sparbanken bank/credit cards etc. Förenings- Sparbanken acquiring (BABS) VISA MasterCard etc. Cardholder pays annual flat fees

Other acquirers

• SEB, Nordea, etc.
• Foreign acquirers

Internal InterChange External IC

Other card issuers

• SEB, Nordea, etc.
• Foreign issuers

External IC Merchant pays Service Commission

8

Payment commissions

• 400
• 200

200 400 600 800 Q1 99 Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02

Payment commission income Payment commission expenses Net payment commission income

9

• Major investments in ITsystems
• Extensive work involving documentation,

standardization, regulation, etc.

• Sales are dependent on changes in consumer

behaviour

• Sales often require investments on the

customer’s behalf

Payments are a long-term business

10

The market is constantly changing

• From cash/ATM to cards
• From paper to electronic
• PostGiro (Nordea) / BankGiro
• More international Private and Corporate
• New payment methods are being established (e.g.

e-cards)

• EU directives
• Posten (the Swedish Post) / e-mailboxes

11

Political decisions affecting payments

From July 1, 2002 - no longer permitted to charge more for ATM withdrawals abroad. Estimated impact

• n profit: SEK -45 million per year.

From July 1, 2002 - agreement with EU Commission and VISA on gradually reduced interchange for VISA

• cards. Estimated impact on profit: SEK -16 million per

year. From July 1, 2003 - parity between domestic and cross-border payments to EU states. Estimated impact on profit: SEK -40 million per year. Total of approx. SEK 100 million in lower profit per year due to political decisions.

12

Purchasing factor - cards

4,06 4,25 4,87 5,9 6,85

1 2 3 4 5 6 7 8

1998 1999 2000 2001 2002E

Number of payments per card, customer and month is rapidly increasing

13

• 100%
• 90%
• 80%
• 70%
• 60%
• 50%
• 40%
• 30%
• 20%
• 10%

0% 10%

Teller ATM Giro Internet Card Autogiro

Big difference in transaction cost by payment method

14

To maintain a strong market position requires

• Increased focus on traditional payment and salary

account transactions

• Structural measures in IT
• Internationalization of cards and acquiring
• Investments in information services: e-billing,

e-payrolls, e-documents…

• Investment in electronic ID and electronic

signatures, e-commerce/online payments.

15

How can we further raise profitability?

• We have to go from

– cash/ATM to cards (from cost to revenue) – paper to Internet (lower cost) – giro to autogiro (direct debet)

• Use new products

– from traditional payment products to e-billing

16

How can we further raise profitability?

• Utilize card infrastructure for traditional payments -

person-to-person payments with VISAcards

• Outsourcing or product alliances in narrow product

lines

• Introduce EMV standard in card area - from

magnetic strip to chip - introduce multi-functionality and reduce fraud

• Extend infrastructure investments by sharing

processing with a partner

17

What growth factors do we see ahead?

• Increased purchasing factor
• More cards per customer
• Internationalization of cards and transaction

acquiring

• Secure online payment solutions
• Information services - e-documents, e-billing,

e-payroll statements

• Electronic signatures for secure identification

between parties

18

• Acquisition of significant interest in a

technology/service provider in card clearing

• Incorporation of BABS and shared processing

with one or more parties

• Offer to share IT processing of debit and credit

cards with other parties

• Acquisition opportunities are constantly being

evaluated, to meet the demands of major customers for cross-border services

Growth strategy for the card business?

19

Growth strategy for traditional payments?

• Outsourcing or production alliances for foreign products
• Process and further develop information services

together with partners

• Implement ID service in our own bank and gain

external market share (for eg Nat’l Tax Board)

• Introduce card payments directly between our customers
• Utilize card infrastructure for traditional payments -

person-to-person payments with VISAcards

20

We have already accomplished a great deal

5 10 15 20 25

ATM withdrawals Card purchases January 2000 - September 2002

Transactions, milions

21

Rapid changeover from paper giro to Internet payments

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1998 1999 2000 2001 2002-06-31 Internet Giro

Share

22 20 000 40 000 60 000 80 000 100 000 500 1 000 1 500 2 000 2 500 120 000 1998 1999 2000 2001 3 000

In In society society

In the bank In the bank

The amount of cash handled by the bank is decreasing

23

Rapid decrease in cash transactions

2 4 6 8 10 12 14 16 18 Cash out Cash in 1999 2000 2001 Millions

24

Summary

• Focus on market shares/position in the Swedish

payment market, especially in traditional payments and salary accounts

• Increase the pace to eliminate cash
• Prioritize conversion from paper payments to

electronic payments

• Gain market share in debit cards in Sweden
• Find economies of scale through internationalization
• Establish information and ID business