IPSO 14th September, 2006

1
Global Payments Forum Limerick 14th September
Presentation by Stewart MacKinnon Chief
Executive Irish Payment Services Organisation

• IPSO 14th September, 2006

2
Who are IPSO?

• The Irish Payment Services Organisation, (IPSO)
  is the
• representative, strategic and technical support
  body for the
• Irish payments industry.
• There are currently four autonomous payment
  system
• companies within IPSO-
• Irish Paper Clearing Company Ltd (IPCC)
• Irish Retail Electronic Payments Clearing Company
  Ltd (IRECC)
• Irish Realtime Interbank Settlement Company Ltd
  (IRIS)
• Laser Card Services Ltd
• All four operate under the umbrella of IPSO, and
  are
• responsible for their own operating rules,
  settlement
• procedures, standards and access criteria. Each
  has its
• own Board of Directors.

3
Who are IPSO? (2)

• The Clearing Companies are regulated by the
  Central Bank
• and Financial Services Authority of Ireland
  (CBFSAI).
• Each member of a Clearing Company has a right to
• membership of IPSO and to representation on the
  IPSO
• Board.

4
IPSO Role and Function

• Providing strategic leadership and direction to
  the industry
• Developing best practice guidelines for the
  payment schemes e.g. risk management,
  constitution, rules etc.
• Articulating the common voice of the payments
  industry
• Providing central programme management for
  industry initiatives
• Facilitating the sharing of non-competitive
  information about the industry
• Managing pan-industry issues such as systemic
  risk, crisis management
• Monitoring and promoting industry standards and
  facilitating system innovation

5
IPSO Board

• Strategic decision-taking body for the industry
• Sets and promulgates strategic direction of
  industry
• 14 person Board
• 9 banking Directors
• 4 wholly-independent Directors, including the
  independent Chairman
• CEO
• CBFSAI as regulator also sits on the Board

6
Recent Achievements

• New Governance model, with openness and
  transparency
• Successful programme management of migration to
  CHIP and PIN
• Faster payments next day value for electronic
  payments
• Creation of Safecard and management of card fraud
  
• Engagement with the Competition Authority in
  relation to Competition Study and implementation
  of its recommendations e.g. Business Account
  Switching Code
• Overhaul of Direct Debit Scheme e.g. introduction
  of DD Guarantee and Originator Plus

7
Key Programmes of Work

• National Payments Implementation Programme
• Implementation of Single Euro Payments Area
  (SEPA) delivery of Irelands National Plan
• Communications Strategic Action Plan
• Lobbying on legislative / regulatory issues e.g.
  stamp duty, Section 149 etc.
• Final implementation of Competition Authoritys
  recommendations
• Cost / Benefit Analysis of Cheque Truncation /
  Cheque Elimination

8
National Payment Implementation Programme (NPIP)
(1)

• NPIP is the migration from costly inefficient
  payment methods to effective electronic means
• NPIP to ensure also universal access to
  electronic payments
• Ireland is heavily reliant on paper and cash and
  is far behind other EU countries
• Research indicates that the cost to an economy of
  using cash equates to 1 of GDP. In Ireland,
  that equates to 1,500m per annum
• This significant sum could be released into the
  economy each year to be more productively engaged
  

9
National Payment Implementation Programme (NPIP)
(2)

• Over reliance on cash and paper payment methods
  also costs the Irish economy and society heavily
  in terms of money laundering, tax evasion, fraud
  and crime
• Most importantly, it is also costing Ireland in
  relation to our national competitiveness
• Finland has the most advanced electronic payment
  systems in the EU, and is also the most
  competitive country in Europe. This is not
  coincidental
• The war on cash and paper reliance has begun,
  with the aim for cheques to be significantly
  reduced by 2011

10
National Payment Implementation Programme (NPIP)
(3)

• Following the publication of their Study, IPSO
  have being working very closely with the
  Competition Authority to build a rapport and
  strive to respond fully to all recommendations
  made to IPSO
• IPSO see Credit Unions as a vital part in the
  NPIP chain, in particular with respect to
  Universal Access
• 25 of the Irish population do not have a current
  account. However, those in this percentage may
  have Credit Union or An Post savings accounts

11
SEPA (1)

• SEPA is largely a programme about the
  electronification of payments across 29 European
  countries
• European Payments Council (EPC) is the decision
  making body managing this programme across some
  8,000 banks, on a voluntary basis. Stewart
  MacKinnon is the Irish representative to EPC
• Key driver of payments development over next five
  years
• Three key developments
• Pan European direct debit
• Pan European credit transfer
• New framework for cards improving acceptance of
  individual country cards in all SEPA countries
• From 1st January 2008 these products must be made
  available to customers by all banks

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SEPA (2)

• By end of 2010, it is envisaged that the momentum
  created by the new products / system will be
  irreversible
• Fully integrated market will exist
• National payment systems will be decommissioned
• Industry can only deliver if appropriate
  linkages, clearing systems, settlement systems
  and legal structures are in place
• IPSO and member banks fully engaged in that
  process
• IPSOs role will change
• Cost of infrastructural change estimated at 8
  billion for European banks

13
SEPA (3)

• Loss of revenue for banks estimated at 29
  billion
• Likely to see major shake-up in industry, with
  some banks exiting the payments business
• Customer will see easier and cheaper cross-border
  transactions
• Use of BIC and IBAN format for domestic payments
  (2009?)
• Increased use of the giro, less reliance on
  cheques
• Cheque is a problem for us no pan-European
  future for cheque
• Window of opportunity to 2010 to get rid of the
  cheque and begin the war on cash

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Key Industry Priorities (i)

• IPSO and its member banks must bring about a step
  change in payment behaviour
• The big 10 areas of focus in a five year window
  of opportunity are-
• The IPSO Vision to 2012
• Develop and have adopted a revenue neutral,
  pro-efficiency alternative to stamp duty on cards
• Options being developed jointly by IPSO and
  member banks

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Key Industry Priorities (ii)

• Significantly reduce cheque usage by businesses
• positive incentives by banks to encourage
  migration
• have stamp duty penalties placed only on cheques
  (?)
• engage with large paper issuers / polluter pays
  concept
• Deliver an inter-bank, real-time electronic
  payment scheme for internet and telephone
  payments
• Successfully programme manage SEPA and ensure
  delivery of compliant payment products by banks
  on time and to targeted quality
• Set up a central cheque processing utility to
  efficiently process / truncate cheque rump
• Influence the urgent development of electronic
  payment services for Social Welfare / PMG

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Key Industry Priorities (iii)

• Encourage, in the cooperative space, the
  development of micro-payment schemes and e- and
  m-payment schemes
• Touch cards, mobile payments to displace
  proportion of cash payments
• Foster the early development of universal access
  to electronics to those who do not have payment
  accounts
• Drive debit card as preferred solution at POS /
  promote cash back
• Maximise electronic and on-line bill payment
  service opportunities / consider Value Added
  Services such as e-invoicing / reconciliation
• Industry promotion and advertising
• Incentives to migrate
• Develop VAS