remained calm. the external value of the markka fluctuated to some extent but on the whole remained relatively stable. as the year progressed, the long - term interest rate moved considerably closer to the comparable german rate, and by the final months of the year the differential had stabilized at about ½ percentage point. one significant development in 1996 was the continued strengthening of the banks and the termination of a period of several years of negative financial results. the aggregate result turned positive largely because of reduced loan losses and lower cost levels. nonetheless, domestic banks'profitability and capital adequacy have still not reached levels that can be considered good by international standards. improved economic balance and steady economic policy enabled the bank of finland to make a proposal in october to the government concerning the joining of the markka to the eu's exchange rate mechanism ( erm ). the proposal was approved and negotiations with other eu countries led to an agreed ecu central rate for the markka of fim 5. 80661, corresponding to a central rate against the deutschemark of fim 3. 04. the agreed markka exchange rate configuration vis - a - vis major erm currencies corresponds to the average level of recent years. after italy joined the erm in november, the markka's ecu central rate became fim 5. 85424. bilateral central rates against other erm currencies were not affected. finland's purpose in joining the erm was to ensure its eligibility to be among the first group of countries to move into stage three of emu. according to the text of the maastricht treaty, the exchange rate convergence criterion requires exchange rate stability for two years prior to the examination and participation in the erm. it now appears that the final decision on eligibility for stage three of emu is slated for spring 1998. as the bank of finland reaffirmed in connection with the erm linkup, the monetary policy objective remains that of keeping the inflation rate at about 2 per cent, which accords with the major eu countries. although the inflation objective is consistent with the stable exchange rate objective, in the event of a disturbance, erm participation would imply precedence of the exchange rate objective. the erm's wide ( ± 15 per cent ) fluctuation margins provide a good buffer against speculative activity, but clearly the need to meet the emu exchange rate criterion and to maintain economic balance requires a much more stable course for exchange rates. continuing

erkki liikanen : electronic and mobile payments – moving towards a cashless society? speech by mr erkki liikanen, governor of the bank of finland, at the european parliamentary financial services forum, brussels, 1 april 2008. the slides ( ppt ) can be found on the bank of finland ’ s website. * * * introduction the move to a cashless society has been a topic of discussion for a long time. first, in the 1960s and 1970s plastic debit and credit cards were expected to take the place of cash. and then in the 1980s and 1990s the implementation of chip cards and, e - money was to replace cash. but still, cash remains popular and its market share has fallen only gradually over the years. will we see a major difference next decade? i want to put this question to the panel today. i start by analysing some statistical trends. then i shall review the possibilities that the new technology offers and look at some use - cases for mobile payment services. i also want to highlight the need for strong data security and customer identification. finally i shall wrap up with some comments on the change process and its incentives in payment services. statistical developments statistical data shows that there has been clear growth in non - cash payments within the eu15 area over the years. the strongest growth has been in card payments, on average 12 % annually over the last few years. the use of payment instruments varies considerably within the eu15. ( eu15 figures are used in order to harmonise the chart's information ). in high usage countries such as the nordic countries ( denmark, finland and sweden ), the average number of card transactions per person is 130 - 150 transactions per year. in low usage countries ( austria, germany, greece, italy and spain ) figures are below 40 transactions per inhabitant per year. ( the figures for austria and germany would be a little higher if card - based direct debit transactions were included. ). card payments are the most important instrument to replace the use of cash. we can see a correlation between atm withdrawals and card payments. when the number of card payments per inhabitant increases to over 70 annual card transactions per person, the number the number of atm transactions starts to decrease. several countries below this card usage level still show increasing atm usage, when customers move from branch teller withdrawals to atm withdrawals. there is no accurate statistical data on cash withdrawals at branch level or cash payments at merchants. anec