at a rate seldom seen in other industries. when reducing costs instead of building up new operations, it is imperative to outsource all such activities where there are more efficient service providers available. information technology and payment processing in particular is just such an example. it is here where the benefits of scale can be brought on. according to a bank of finland study of a few years ago, doubling the scale of payment processing activities brings down the average unit cost of transactions by almost 60 per cent. 3 outsourcing has implications for competition and competitive strategy. the more common systems there are in use, the less important role these systems have in terms of mutual competition. we have seen how it infrastructure and payment processing have become increasingly commoditised and outsourced and the importance of these scale - intensive activities for competitive strategies diminishes. illustrative examples include the dutch ideal online payment – solution, which is jointly used by several major banks in the netherlands, and crosskey solutions, which has provided a retail banking solution to several rather small and recently established nordic banks. tarkka, juha : approaches to deposit pricing, a study in the determination of deposit interest rates and bank service charges ; bank of finland studies e : 2, helsinki 1995. kauko, karlo : pankkien kustannustehokkuus : havaintoja suomesta ( bank cost efficiency ; observations with finnish data, available in finnish ) bank of finland financial markets department working paper 1 / 2006 morttinen, leena : rahoitusjarjestelman vakaus ja tehokkuuden mittaaminen ; ( financial stability and measuring of efficiency, available in finnish ) bank of finland financial markets department working paper 1 / 2006. khiaonarong, tanai, payment systems efficiency, policy approaches, and the role of the central bank. bank of finland discussion papers 1 / 2003. banks can better refocus on other things : collecting and acquiring customer information and local conditions – especially on the credit side of the retail banking market. 4 recent problems with schematic credit scoring systems have certainly reminded the banks of the value of real customer information and better selection of customers. whenever one discusses the future, it has to be borne in mind that we live in a highly uncertain world ; economic, political and technological factors may or may not develop the way we have been led to expect. however, there is one future development both banks and other

just say that it would be a great setback if the financial crisis we have experienced would lead to a refragmentation of the international banking market in general and the postponement of the emerging international retail banking market in particular. it is a task for policy makers to ensure that the crisis management measures and revised regulations support the continued international integration of banking services, instead of reversing the process. part of the way forward is the work towards increased cooperation in financial supervision, which is on both the eu and the global agenda, now even more prominently than before the crisis. the authorities should, while focusing on cooperation in the field of better prudential regulation and supervision, not forget the parallel goal of a more unified, convenient and efficient international payment infrastructure. future competition now, we have three factors contributing to more competition among retail banks when running their businesses and payment services in particular ; the financial market turmoil and its impacts leading to tight profitability, the new ways of doing business with a threat of new potential entrants growing competition, and, finally, the new technologies which allow bank customers to bypass old payment methods. although it is the case that payment processing should standardise and become commoditised, and although transparency of pricing is important for customers, we should not expect retail banking as a whole to become an arms ’ length mass industry in the future. the customer relationship is still the ultimate source of value for banks – perhaps even increasingly so when factors such as distance and market fragmentation fade and cannot be used as engines of market power. the value of relationship information became clear when some years ago some new companies – entirely outside the financial sector, such as telecommunications companies – thought about entering the banking business. the business looked very attractive. telecommunications operators were presented with new possibilities through fast growing internet and mobile phone business. client bases were exploding and new potential business undertakings proliferating. there were even ideas that telecom companies could take care of retail bank clients, if not establishing a bank of their own, then through the use of their web sites and online shops, which would house several service providers. these schemes did not carry the day. relinquishing their client information to the hands of an outside company would have meant that the respective banks would have given away one of their main assets. through multichannel client service, including internet online services and mobile banking services, we enter a new world. there banks take more and more care of customers ’ management of finances and in much wider