CBA Devises Bank Revenue Loss Calculator To Coincide With Forthcoming EU Cross-Border Rules

End-to-End International Payment Processing STP Software Developer Alerts
Banks To Financial Shortfall

CBA, Europe's leading developer of Java-based software for bank
international payment End-to-End Straight Through Processing, has devised an
equation that demonstrates to banks the potential loss of revenue that their
businesses will suffer as a result of forthcoming EU regulations.

According to the Cross-Border Credit Transfers Directive 97/5/EC and later
Regulations, as from July 2003 banks will have to cap international payment
processing fees at the same level as domestic payments. In practice, this
means that average revenues per international transaction will fall from 24
Euros down to 2 Euros or less. The CBA calculation represents an easy to use
method for banks to assess their likely revenue shortfalls, once the
regulations come into effect.

Current bank international payment processing revenue is represented by the
calculation (Cn x T) - O = P

However, in July 2003, EU legislation will require that Cn = Ce

Therefore, as from that date, banks will experience a significant reduction
in revenue, represented by a new calculation (Cn - Ce ) x T = L

The result is a new net revenue calculation, for Cross Border Transactions
as shown by (Ce x T) - O x (1 - R)=P

Definitions:

Cn = Charge made now for Cross Border Payments
Ce = Charge made Domestic Payments
T = Number of Cross Border Transactions
O = Processing costs for this banking activity
R = Percentage reduction in processing costs (typically 90%+ required)
P = Processing revenue
L = Loss of revenue

According to Odd Tuftin, CBA's R&D Director, 'Far too many banks are still
unaware of the impact that the impending EU legislation will have on their
businesses. International payment processing revenue is set to be slashed by
up to 96%, and banking institutions are leaving themselves precious little
time to adapt to this new business model. Our simple calculation is designed
to highlight the loss of bottom line revenue and profit that they will
suffer, unless they adopt new STP-based working practices,' he said.

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