Clear2Pay appeals for dialog on Internet payments technology, anticipates European Union's 'no slippage' decision on cross-border transaction fees

Summary

Clear2Pay, a vendor of software and solutions for Internet payments to financial institutions, forecasts a significant market opportunity for Internet payments technology following the European Parliament's November 15 decision to oblige banks to reduce cross-border payments to the level of a domestic transfer. The Parliament's decision highlights banks' maturing needs to strengthen their role in delivering accessible, reasonably-priced payments services to their customers over the Internet.


UPDATE - 27 November 2001 - On 25 November, the European Council of Ministers ratified the European Parliament's decision on parity between cross-border and domestic credit transfers. The legislation differs from the European Commission's proposal in that:
the deadline for compliance has been set for July 1st 2001, not March 1st 2001
the threshold to which the new rules will apply will be lower than the Commission had suggested - EUR 12,500 instead of EUR50,000 - at least for the first few years
the new regulation will not cover checks.
The shifting of the deadline by four months gives banks some 'breathing space', yet the need for faster, lower cost ways of managing cross-border payments - addressed by the Clear2Pay platform - remains critical.
Zaventem (Brussels), Belgium, 22 November 2001 - On Thursday 15 November 2001, Members of the European Parliament in Strasbourg approved a August 2OO1 European Commission proposal (COM(2001) 439 - C5-0379/2001 - 2001/0174(COD)) on cross-border transaction fees within the European Union. The decision is likely to be ratified by the European Council of Ministers on November 24. The decision means that banks across the European Union will be obliged to significantly reduce the fees they charge to customers for handling cross-border payments. Under the regulation, banks will be forced - by March 1 2002 - to ensure parity in pricing between domestic and cross-border electronic payments within the Eurozone.
Clear2Pay, a vendor of software and services to facilitate financial institutions' delivery of Internet-based payments, believes the decision will serve to catalyze banks' current investments in Internet payments technology.

"The European Commission's studies have shown that a single cross-border transfer in Europe can cost the consumer as much as a bottle of Champagne, with the average lying somewhere between 17 and 22 euros," says Michel Akkermans, CEO and Chairman of Clear2Pay. "This issue is not restricted to Europe: a typical solution for funds transfer to more exotic countries can cost much more, at 42 dollars for a 500 dollar payment. These are headline-grabbing figures, but they obscure the fact that financial institutions are currently at the forefront of initiatives to make cross-border payments faster, less costly and more user-friendly."

"The tendency in press reports has been to demonize banks," explains Michel Akkermans. "Clear2Pay advocates a more balanced view. Financial institutions are keen to introduce interoperable technology to process cross-border transfers in a way that is secure, cost-effective and profitable. This is a monumental project and requires reconciliation among national banking infrastructures, domestic payments processors and existing payments networks. While there is much talk of disintermediation in the industry, banks are the best organizations to do this as they have a robust historical record and a unique, regulated status as custodians and movers of money."

In recent years European banks have needed to deal with a number of priority issues relating to their retail business, such as the transition to the euro, mergers and acquisitions, not to mention branch concentration and internal restructuring. These have, understandably, been high on the agenda of banks.

The European Union's hard-ball approach will come as a shock to many financial institutions. The European financial industry had previously proposed to introduce a multilateral interchange fee (MIF) within the Eurozone, set at 3 euros. This was originally set to coincide with the introduction of the physical euro currency on January 1 2002. Introduction deadlines on the MIF have been subject to significant slippage: the European Central Bank's most recent terminology referred to 'a reasonable time horizon'. The November 15 decision has brought the deadline abruptly into the present. Banks now have four months to comply or face legal action from the EU's lawyers.

"The European Parliament's decision is interesting in that it effectively forces banks to move much, much faster down a track where they were already heading," continues Akkermans. "The TARGET, EURO 1 and STEP 1 systems have already done much to improve the way high value transactions are managed within the Eurozone. The use of widely-available technology to encourage smoother, end-to-end processing of payments - the Internet being the best example - is a natural progression."

Cross-border payments currently account for a relatively low level of payments business within the EU: 125,000 transactions per day, as opposed to 25O million domestic transfers per day. High cross-border transaction processing costs are incurred by non-standardized and inefficient customer interfaces, and a low degree of automation in banks' internal systems. In addition, formats within a bank are rarely compatible with the formats used by banks in another country. Customers do not always supply data in full, meaning that many cross-border payment orders have to be rectified by the banks at significant extra cost. Under the new European regulation, banks face the prospect of losing money on every cross-border transaction they make.

"Clear2Pay has been looking closely at solutions to ease the process for European banks, and our platform focuses on facilitating low-cost Internet payments," explains Akkermans. "Ease-of-use, multilingual software, compliance with standards, relationships with major European payments processors, internet technology and the multilateral netting of transactions... these are objectives that are shared by Clear2Pay, European regulators and European banks. Given that the European Parliament has just sidelined the carrot and applied the stick, technology vendors and banks must engage in dialog on the best way forward. It's time to turn obligation into opportunity."

More information on the European Parliament's decision can be found on its website at www.europarl.eu.int.

About Michel Akkermans

Michel Akkermans is Chairman and CEO of Clear2Pay, a clearing service that enables financial institutions to add payment certainty to e-commerce transactions. An e-finance pioneer, Michel founded FICS in 1989, a software provider in the field of online banking and regulatory financial reporting. Under his leadership, FICS grew to employ over 700 employees worldwide and achieve revenues of over USD 70 million. In 1999 FICS, together with Edify and Vertical One, merged with Security First Technologies, to create the global market leader in Internet banking - S1 Corporation, where until November 2000 Michel assumed the role of Chairman. Michel's new venture reflects his understanding of e-finance is one seen through banks' eyes, not that of the 'disintermediator' or the technologist. Michel also holds several directorships in various financial technology companies.


About Clear2Pay

Clear2Pay is an innovative e-finance company focused on delivering a globally applicable solution for secure, timely electronic payments. The company has filed a US and European patent for its Clear2Pay system, a payments clearing and settlement technology. Following a capital increase, Clear2Pay is developing a full-blown version of its technology, with input from financial institutions and payments processors. The company's focus is to reduce inter-bank transaction processing costs and facilitate banks' provision of electronic payments. Early applications of the technology will provide Internet-based electronic payments with related netting and settlement functions within major financial institutions and banking consortia. Clear2Pay's CEO and Chairman is Michel Akkermans, a thought-leader in the banking industry and former Chairman of S1 Corporation. Clear2Pay's co-founder is Jürgen Ingels, an investment manager at one of Europe's largest banks, and the inventor of the Clear2Pay system. Jürgen is a board member of several business-to-business technology companies in Europe and the US. Clear2Pay's employees are drawn from an established network of e-finance professionals. The company is headquartered in Brussels, Belgium. More information is available on Clear2Pay's website at http://www.clear2pay.com.


About Big Bang Ventures

Big Bang Ventures invests in early-stage ICT companies. The fund typically invests EUR 0.5 to 1.5 million in companies focused on Internet technology, networking infrastructure and solutions and enterprise software. In addition, Big Bang provides hands-on assistance with business strategy and planning, competitive positioning, sales and marketing strategy, corporate structuring, HR and financing rounds. The fund limits its investments to five companies per year. More information is available on Big Bang Ventures' website at http://www.bbv.be.


Contacts

Kimball Felix
Marketing and Communications
Clear2Pay
Zikkelstraat 64 rue de la Faucille
1970 Wezembeek-Oppem
Belgium
T: +32 2 759 94 96
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