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Situation with card payments in baltics and nordics 2010
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Situation with card payments in baltics and nordics 2010

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  • 1. Acquiring in the Nordics and Baltic Rim Markets Mikael Möller CEO Swedbank Card Services Head of Acquiring Riga, Latvia November 25th 2010
  • 2. Swedbanks acquiring business• Overall market leader – Sweden +55% – Norway – challenger – Denmark – new entrant – Estonia +60% – Latvia +40% – Lithuania +35%• Approximately 150,000 terminals connected• 6th largest VISA & MasterCard acquirer in Europe – 1.2 billion transactions in acquiring• Large client accounts with some of the leading retailers in the region© Swedbank Group Cards 2
  • 3. Swedbank Group – a large player on theEuropean Card market© Swedbank Group Cards 3 Source: VISA/MasterCard
  • 4. Overall market development 2010-2015 Market Restructure & Change OBJECTIVES • One Agenda • One Organization Consolidation 2010-2011 • Minimize Redundancies OBJECTIVES • Best Practice Implemented Optimization 2010-2012 • Scale efficiency fully realized • Critical knowledge secured and shared OBJECTIVES • Enhanced product offering Innovation 2010 => • Strengthen market position & secure role in value chain Business Case Realization© Swedbank Group Cards 4
  • 5. The market characteristics in broad strokes • Pankkikortti being phased out • Luottokunta infrastructure • 90% BankAxept & acquiring monopoly • BBS infrastructure • Standardized market "monopoly" • Multilateral interchange • Standardized market • Luottokunta set-up is • World class card unique, cross subsidization usage is a market barrier • Multilateral interchange• 90% Dankort• PBS infrastructure & • "100%" Visa/MCacquiring "monopoly" • Swedbank & CEKAB• Standardized market dominant acquisition points• Multilateral • Bank common standardsinterchange • Bilateral interchange• Legal regulations oncard business Cards are pre-dominant… © Swedbank Group Cards 5
  • 6. POS and ATM transactions 2010 55 mill pos October 9 mill ATM October •3,7 mill Debitcards inc. Independent Savingsbanks •Usage in POS has increased 9 % compared to 2009 •ATM usage decreased -10 % compared to 2009 •POSfactor = 15 (POS transactions per card and month)© Swedbank Group Cards 6
  • 7. POS and ATM usage 2010 Transaction value POS 17 bill SEK October ATM 8 bill SEK October •POS trans. value increased 5 % compared to 2009 •ATM trans. value decreased -8 % compared to 2009 •68 % trans. value on Swedbank debitcards are POS© Swedbank Group Cards 7
  • 8. The market characteristics in broad strokes • "100%" Visa/MC/AmEx •Terminal’s connected to Swedbanki or PKK • NETS as common gateway to Visa & MC • standardized market – one protocol for all banks and merchants • "100%" Visa/MC/AmEx •Terminals connected to Swedbank or FDL • BABS & First Data as Gateway’s to Visa & MC • Unstandardized market as multiple protocols used • "100%" Visa/MC/AmEx • First Data monopoly until 2010 • From 2010 Swedbank started connecting terminals to own host • Market liberalisation – Point, Hansab etc.. 75% of transactions in cash • Multi-Bank solutions = on-us acquiring • Multiple protocols in use Cash is still king… © Swedbank Group Cards 8
  • 9. European payments landscape© Swedbank Group Cards 10 9
  • 10. Trends and challenges in the region Infrastructure control & "lock in effect" Domestic technical Increased competition standards moving in to new markets Mergers & acquisitions Competitive authorities dont engage Bundling of business areas to gain advantage Product offerings vary vastly between markets Technical & monopoly positions used to prevent market entry Cross border solutions in focusDomestic cards will stay… Price pressure Harmonization & internationalizationPSPs and processors expanding & integrating© Swedbank Group Cards 10
  • 11. Combining current state and futureprogress….. A quest for the wholly grail or a truth that will appear?!© Swedbank Group Cards 11
  • 12. The ambition of a Single €uro Payment Area (SEPA) The objective is to create a market for card payments without commercial, technical or practical barriers to competition and promoting full interoperability through the processing chain.• Integrated market – erasing country boundaries  A holistic grasp of your international business• Removal of all technical, legal and commercial barriers  Freedom of choice• Increased & effective competition  Increased services at a commercial price Significant savings, benefits to all stakeholders and a wider EU economy© Swedbank Group Cards 12
  • 13. New rules, new opportunities…. Competition Transparent pricing • Easier access to other markets Interoperability • Free choice of supplier • Competition on quality and price • Increased focus on value added services and tailored solutions • A catalyst for change…. Unbundling Reach ability Time is the critical factor…© Swedbank Group Cards 13
  • 14. External challenges influencing thebusiness going forwardScale benefits will drive consolidation through mergers/acquisitionsespecially in acquiring and processingNew payment technologies will be costly since payment is infra heavyFraud escalation will demand investment and risk profit & reputationCommercialisation of the payments value chain middle men reducethe possibility to earn profitThe global slump and financial crisis will impact Cards in 2010– 2011 in several ways putting pressure on the revenue streamsThe regulatory environment demands change in inter-bankbusiness model and risks depriving good part of revenue.Managing change to PSD will be a critical activity.The creation of EU payments market will bring in x-bordercompetition and demand investment in new technical standards © Swedbank Group Cards 14
  • 15. External challenges influencing thebusiness going forwardScale benefits will drive consolidation through mergers/acquisitionsespecially in acquiring and processing Focus areas for the future: •Optimize product offerings bringing value to the customersNew payment technologies will be costly since payment is infra heavy •Retain business focus and profitableFraud escalation will demand investment and risk profit & reputation growth, scale is the key •Consolidate processing overCommercialisation of the payments value chain middle men reduce geographical areas to remain competitivethe possibility to earn profit •Move towards international standards and eliminating unique domesticThe global slump and financial crisis will impact Cards in 2010 standards– 2011 in several ways putting pressure on the revenue streams •Optimize sourcing of 3rd party relationshipsThe regulatory environment demands change in inter-bankbusiness model and risks depriving good part of revenue. •Invest in competenceManaging change to PSD will be a critical activity. •Innovation powerThe creation of EU payments market will bring in x-border •Master change processes with focus oncompetition and demand investment in new technical standards regulatory demands © Swedbank Group Cards 14
  • 16. Opportunities!• Low value payments – to win war on cash• Mobile• Internet – for purchases, as a sales channel and to create customer loyalty• Customer processes – good service is hard to find (and for our competitors to create)• Customer value management (both issuing and acquiring)• Loyalty programs and benefits© Swedbank Group Cards 15
  • 17. Similar challenges throughout the region… “Sow” “Grow” “Harvest” “Plow” Consolidate Optimize Innovate Harvest Today1980 1990 2000 2010 2015 Managing change is the basis going forward, despite which path you chose! © Swedbank Group Cards 16
  • 18. Similar challenges throughout the region… ??? “Sow” “Grow” “Harvest” “Plow” Consolidate Optimize Innovate Harvest Today1980 1990 2000 2010 2015 Managing change is the basis going forward, despite which path you chose! © Swedbank Group Cards 16
  • 19. In summary• Vast market pre-requisites• Extremely complex industry dynamics worldwide• Limited resources and capabilities• Many opportunities arising ahead where guidance is the key• A unique set of events converging to force change “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Charles Darwin© Swedbank Group Cards 17
  • 20. ”Everything should be made as simple as possible, but not simpler.” A. Einstein Thank You! © Swedbank Group Cards 18