SEPA Boosting Electronic Invoicing towards millions of Internet Banking users Christian Luyten

1. SEPA Boosting Electronic Invoicing towards millions of Internet Banking users Christian Luyten Sales Manager, Isabel NV/SA

2. What business am I in ? • Objectives of the Sender • I want to get paid ! • I know I have to send Invoices, make it easy for me • Objectives of the Receiver • I know I will receive invoices and I know I have to pay • Make this easy for me

3. Today’s BTB Invoice & Payment process flow Outbound - Supplier Inbound - Customer Draw up invoice Follow-up unpaid Solve issues Manage disputes Treasury impact Reconcile Prepare Send Archive Process (key-in) Make payment Manage disputes Handling Scan Archive Validate Relies heavily upon human interaction • Slow, resource consuming process • Many risks for errors • Effort does not always justify the gain • Troubles the relationship between customer and supplier

4. Cost of Outbound Invoice Average invoicing cost for a Supplier = € 8 € 8 € 2 € 6 € 2.4 € 4 € 0.8 € 0.8 € 2 € 0.5 € 1.2 0 € 0.3 Archive Treasury losses Collection Reminders Calculation Accounting Print/Send Issues Source : Arthur D. Litlle

5. Cost of Inbound Invoice Average invoice processing cost for a Customer = € 13.8 € 15 € 1.8 € 12 € 1.5 € 2.8 € 9 € 5.4 € 6 € 3 € 1.4 0 € 0.9 Archive Issues Validation Payments Reminders Handling Accounting Source : Arthur D. Litlle

6. How did we get there ? Paper Based Process Reconciliation Process Electronic Process

7. Proposals from EC and European Central Bank “Due to capacity restrictions in paper-based and early electronic payment systems, the data content attached to payments was considerable restricted. Invoice data was transported separately between supplier and customer. Today, storage and communication capacity costs have reached such low levels, that the invoice can be easily attached to the payment information and thereby completely new benefits can be achieved.” Harry Leinonen, December 9 2005 in “SEPA incentives” by European Commission, Internal Markets and Affairs DG. “For corporate customers access to modern payment services are key. They need support for an automated end-to-end, straight-through processing of payment information, as well as support for electronic invoices. Therefore, I would recommend the EPC to establish a process for defining SEPA standards for value-added services as well, such as e-invoicing in collaboration with customers.” The Lisbon Agenda – what can banks contribute? Speech by Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB IFB seminar "The Future of Payment Systems in Europe“ Lisbon, 23 February 2006

8. The integrated approach Document – Salary Month 2005 Integrate Invoice and Payment in Electronic Payment Channels : Internet Banking

9. How will SEPA help to make this happen ? • SEPA introduces changes • IBAN & BIC • New DOM : New formats & new rules • SEPA might reduce functionality • Will VCS-OGM (Overschrijving met Gestructureerde Mededeling – Virement à Communication Structurée) still exist ? • SEPA is a Risk & and an Opportunity • A Risk that Billers and Customers get confused • An Opportunity to improve

10. The Doom Scenario • IBAN & BIC • Banks & Billers have to changes all payment forms • Consumers get confused by new forms and by longer Bank Account Numbers and additional BIC codes • Increase of late payments, wrong payments, incomplete payments, no payments • Negative impact on Treasury of Billers • Interruption of service to customers • Negative impact on customer–supplier relationships • New DOM • Customers don’t take the time to close new agreements • Customers use systematically their 30-day right to refuse a payment • Negative impact on cash positions of Billers • No more VCS-OGM • Reconciliation cost for Billers explode

11. Electronic Payment Initiation - ePI • Standard defined by European Central Bank • Is delivered directly in the Internet Banking application • Customer can approve with a simple click • ePI contains all the required references for automatic reconciliation by the Biller

12. Why customers will adopt • Ease-of-use • No need to subscribe or enroll, nor to learn new tools or procedures • One-click Payment • One-click Direct Debit • Increased customer service by detailed invoice documentation • Companies can import data in their ccounting software or ERP system • Convenience • One single environment for payment and invoice • ‘Look-and-feel’ of traditional paper-based invoice • 24/7 access to payment & invoice details • Control • Customer still decides if, how and when • Eliminate risks caused by late payment (fines, service interruption) • Trust • Guarantees concerning availability, security and confidentiality • Bank is being perceived as the best channel to handle financial transaction

13. Main Benefits for the Billers • Reduced operational cost of sending invoices • Save on printers, papers, envelopes, stamps, handle… • Quality delivery : less duplicates, less reminders • Improved Treasury • Immediate delivery : Payment term starts sooner • Quality payment including references : Better reconciliation • Easy Direct Debit : Protect and extend Direct Debit usage • Easy to Pay : Faster payment • Control : Faster approvement

14. C O N C L U S I O N