1. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Electronic and mobile payments – moving towards a cashless society? 1 April 2008 Governor Erkki Liikanen EPFSF & EIF Joint Dinner

2. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Use of cashless payment instruments within EU15, number of transactions Card payments are growing rapidly

3. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Number of card payments per inhabitant, 1994–2006 Good growth but big variations, the Nordic countries are leaders in card usage

4. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Use of cash and ATMs decreases when card payments increase After about 70 card transactions/inhabitant/year, ATM usage decreases

5. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Number of electronic transactions per capita and automation level (e-trans./total trans.), 2002-2006 Strong growth but large variations in national e-payment levels

6. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Mobile phones contain everything needed for paying  Versatile communication capabilities –Long-distance communication –Complete internet access –Near-field-communication (RFID, Blue Tooth, Infrared) –Camera scans & photos  Easy to use and familiar user interface –Quality colour screen –Secure PIN pad –Proper keyboards  Advanced processing capabilities –Processing power –Large data storage –Security module –Encryption processors Everyone has a miniature PC in their pocket

7. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Will cards be digitalised and stored in mobile phone?  A mobile phone could store many cards and select the correct card based on parameters and learning  Easier to provide and update cards completely remotely over the air  Back-ups safely in the network and down- loadable in case of hardware failures Select - VISA - MC (Firm) - Credit

8. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Push & Go / Tap-to-pay  Check and accept payment just by tapping  Make person-to-person payments  Phone can also contain ticket info –Bus, train, flight, parking… –Theater, sport event, concert…  Automated payment data exchange between point-of-sale and mobile phone using RFID (Radio Frequency Identification) Real-time card or bank account debit for presented payment proposals with just one click or click+PIN

9. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Well-known risks of Internet  Distribution of viruses and spyware  Trojan horses (‘Man in the middle’) can seize control of the PC and e-identity –read and change keyboard input –change screen output –change file content –change sent transactions and information Customers will need hardware-protected keyboards, screens, storage and security processors. Mobile phones can be the security solution

10. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND The trunk network of identification service providers A common secure ID service could be based 0n functions within the SIM card of mobile phones Customers need to identify themselves to several e-service providers. There will be several e-ID providers in the open global e-world.

11. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Mobile phones could become general authentication devices  Mobile phones can use the SIMs (Subscriber Identity Module) for general authentication (access control, e-signatures, identification etc)  Which will be the preferred technical solution? TELCO-, bank- or handset provider-based development?  Could it be based on joint cooperation among all stakeholders incl. authorities? Authenticate Deal 2665 Enter PIN * * * * *

12. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Registration domain Validation domain Government selected CA eGovern ment service2 12 Source © Copyright Valimo Wireless Case: Mobile Signature Ecosystem in Turkey Turkcell: business mgr + invoicing eGovernment service1 Online Bank1 Online Bank2 Corporate service1 E-Güven: the Trust Center, CA, issuer of quality certificates, legal validity Turkish state: The catalyst for creating digital signature infrastructure Flexible business model: mobile signature as a cost or a revenue source for the service provider

13. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Development incentives and disincentives Forces pushing for change Strive for higher productivity Sufficient competition Examples in other industries Customer demand Authority actions Forces maintaining ’status quo’ Legacy investments Monopolistic structures Non-transparent pricing Coordination problems Regulatory requirements New dominant payment technology Old dominant payment technology

14. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Based on Finnish experiences, payment developments are relatively slow and follow a s-shaped diffusion curve The technology is available for a cashless society, but the diffusion process will still require a lot of efforts

15. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Paradox: But cash issuance has increased rapidly in the euro area and also in Finland!

16. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Migration of euro banknotes has increased heavily due to common cash area and large part of the banknotes issued from Finland are used outside Finland

17. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND Only within a couple of years ATM withdrawals of euro banknotes have been slowing down