Retail cross-border infrastructures to support international remittances Get connected to the future Remittances and financial inclusion and the role of Postal organisations

Henrik Parl Managing Director

Sydney, October 2006

Sydney, October 2006 1 59 connections in 49 countries

AF Afghanistan International Bank IL Postal Company AL Posta Shqiptare sh.a. IS * Póstgíró AT * BAWAG P.S.K. IT * Poste Italiane AU ANZ Bank IT Banca Popolare di Sondrio BA Nova Banka JP , Postal Savings Business BE * Financial Post Headquarters BG Finance Engineering JP American Express Bank BR Empresa Brasileira de Correios e KR Post Telégrafos - ECT LU * EPT Luxembourg CA National Bank of Canada LV Latvia Post CA Canada Post Corporation MA Banque Centrale Populaire CH * PostFinance/Swiss Post MA Barid Al Maghrib CV Cape Verde Post MN XacBank CN Post NL * ING/Postbank CS Postal Savings Bank NO ING/Postbank (EUR & NOK transfers) CZ CSOB PH Philippine Postal Corporation DE * Deutsche Postbank PL ING/Bank Sląski DK Sydbank PL Polish Post EG CIB (Egypt) S.A.E. PT * CTT Correios de ES BBVA RO Banc Post ES Correos y Telegrafos RO Posta Romana FI ING/Postbank (EUR transfers) SE ING/Postbank (EUR & SEK transfers) FR * La Banque Postale SI Postna Banka Slovenije GB * Alliance & Leicester Commercial Bank SK Postova Banka plc SN Postefinances GB Visa TG Societe des Postes du Togo GR Hellenic Post TH Post Co GR EFG Eurobank Ergasias TR Turkish Post HR Croatia Post TN La Poste Tunisienne HU Magyar Posta USA Deutsche Bank IE * An Post USA Federal Reserve Bank

* Shareholder Sydney, October 2006 2 Monthly transactions

2.500.000

2.000.000

1.500.000

1.000.000

500.000

0

3 8 9 0 5 99 ast 199 1994 1995 1996 1997 1 199 200 2001 2002 2003 2004 200 c re o

2006 f

Sydney, October 2006 3 EUROGIRO products

•Payment transfers – standard (max. 3 days) and urgent • to accounts with members • to accounts with 3rd banks

• Cash payments (Money orders) – Standard – Two-day product; Eurogiro-TMO® – Western Union urgent cash – COD – Cash on delivery – Cheque payments

• Bulk and pension payments

Sydney, October 2006 4 Eurogiro – providing connectivity Gateway of business opportunities for Eurogiro members:

The Eurogiro SWIFTNet Closed User Group - Exchange transactions in FileAct format with any SWIFTNet member and any Eurogiro member on the same system; - Access from SWIFT system to (postal) members with ELS systems and access from ELS system to (banking) members with SWIFT system

Eurogiro Select solution - Access for non-banks through dedicated network

The Eurogiro/Visa solution - Receive payments from Visa card holders; additional volume and revenue to the Eurogiro members

WSBI (Savingsbanks) co-operation on remittances

Sydney, October 2006 5 Eurogiro – providing connectivity (cont.)

The FED-Eurogiro Partnership - Incoming traffic (from potentially any US bank) with fee and foreign exchange income - Live in pilot phase.

Eurogiro/Postal org. – The Tele Money Order (TMO) - New revised two-day cash product mixing Track & Trace techniques and Eurogiro bulking principles - Can be exchanged electronically between the UPU/IFS network and the Eurogiro network

Eurogiro/Western Union – Urgent Cash - Support from Eurogiro of the Urgent Cash product of Western Union - Option to connect to Western Union through the Eurogiro ELS interface - Nearly 30 Eurogiro members as Western Union agents and strong volume growth

Multilateral settlement: ESSP and USSP

Sydney, October 2006 6 Products Eurogiro’s unique Connectivity concept for Money Credit interoperability, i.e. Orders transfers combining different Eurogiro SWIFT CUG layers such as products, connectivity, Card Direct alliances and regions Dedicated Payments debits links

Regions Alliances & Members

Banks Postal

Alliances Non- Fin.Inst.

Sydney, October 2006 7 Number of migrants will be growing in the next decades

World Population 9,000 MM 2050 230 World Population 6,057 MM CAGR 0.5 % 2000 175 (2.6 %) (2.9 %) World Population 4,825 MM CAGR 3.5 % 1985 105 (2.2 %) World Pop. 4,066 MM CAGR 2.2 % 1975 84(2.1 %) World Pop. 3,333 MM CAGR 1.1 % 1965 75 (2.3 %)

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Non Migrants Migrants

Source: UN Population Division (2002), IOM (2000), MPRP calculations

Sydney, October 2006 8 European Population Development up to 2050

800 700 600 500 over 60 Years in 400 20-59 Years 0-19 Mio. 300 Years 200 100 0 2015 2020 2025 2040 2010 2030 2035 2000 2005 2045 2050

Source Western Union

Sydney, October 2006 9 More than 30 MM Asians living outside their country of origin

4,520,000 8,150,000 10,870,000

8,000,000

1,150,000

Source: EUROSTAT, INEC, UN Statistics

Sydney, October 2006 10 Intra Asian Migration

1,330,000 JAPAN China Philippines Thailand

10,870,000 350,000 HONG KONG Philippines Thailand Indonesia 3,530,000 India MALAYSIA China Indonesia Philippines Thailand 875,000 1,150,000 Bangladesh SINGAPORE AUSTRALIA India Indonesia China Malaysia Vietnam China Hong Kong India Philippines Philipppines Source: EUROSTAT, INEC, UN Statistics Thailand Sydney, October 2006 Malaysia 11 The remittance market

• Estimated at 200-300 billion dollars

• Growth expectations +10%

• Nearly 200 million migrants

• 500 million people dependant on remittances

• Money Transfer companies market share of about 20%

• 25-40% of remittances are via informal channels

Sydney, October 2006 12 Overall challenges for remittance market

• Low competition in medium/small remittance corridors resulting in high fees

• Access to rural areas and support of cash payments and longer term access to financial services

•Compliance

• Large informal market giving compliance issues and lack of statistics

• Lack of business case for financial organizations due to fragmented market

Sydney, October 2006 13 Learning curve

Functionality Key features Institutional: Value Added Postal Services Partnership with Virtual Mobile Operator (VMO) the private and financial sector Distribution Mortgages/SME Loans/ Multichannel, with Investment Funds direct marketing

Debt/Credit Cards (possibly micro loans) Products Full range of standard products Savings Accounts

Customers: Current Accounts/Payroll Services/Internet Access For all; focus on domestic International Remittances consumers, SMEs and utilities/employers Current situation/Cash Transactions at Post Counter Time / Product Life Cycle

Sydney, October 2006 14 Untapped Potential; Reform Challenges

To include postal networks as infrastructure in inclusive financial sector development reform programs are needed

Post/ Government prerequisites • Cross-sectoral Policy co-ordination Regulatory framework • Transparency and sustainability; separate management and accounting for postal and financial services • Corporate Governance and accountability • Commercialization/ Public-Private Partnerships • Capacity Building • Technology

Sydney, October 2006 15 Postal Organisations are very suitable

• Postal organisations are very suited to serve the remittance market:

- Network (660,000 outlets) in 180 countries - Offer financial services in about 150 countries - Often located in rural areas - Immigrants are welcome - Products & standards (TMO) - Existing systems (IFS, Eurogiro, Western Union etc.) - Can handle cash and small amounts - Strong global brand

Postal organisations are in a unique position to serve remittance needs and to enable financial inclusion.

Sydney, October 2006 16 Eurogiro’s remittance value proposition

• Access for financial institutions and payment service providers • Postal member’s traditional role of providing access (accounts, cards or cash) to immigrants, i.e. financial inclusion • Eurogiro interoperability • Eurogiro provides a low cost link between the banking world and the postal world by combining cash, account and card services • Eurogiro connectivity solutions include from ‘state of the art’ banking solutions (SWIFT Closed User Group) to windows/pc-based solutions • Eurogiro has developed more and more into a multilateral setup for payments and settlement

Sydney, October 2006 17 Key issues as identified in BIS/World Bank report

9 General principle 1: Transparency & consumer protection 9 General principle 2: Improved payment systems 9 General principle 3: Regulatory framework 9 General principle 4: Market conditions and access 9 General principle 5: Governance and risk management

Sydney, October 2006 18 Key recommendations • Harmonised regulation for postal operators with other payment institutions • Open and fair access to domestic and other infrastructures to payment providers such as postal organisations • Balanced regulation and compliance standards that are adequate for small amounts to encourage migration to formal channels • Support existing electronic solutions instead of paper • Co-ordination OFAC/FATF and support these • Support common standards as requirements for interoperability and lower costs

Sydney, October 2006 19 Any Questions?

Get connected to the future

Sydney, October 2006 20