The Single Euro Payments Area

De Nederlandsche Bank Eurosysteem

The Single Euro Payments Area

Michael van Doeveren Conference Financial Sector of Macedonia on Payments and Securities Settlement Systems

Ohrid 25 June 2008

De Nederlandsche Bank


Agenda

What is SEPA? Why SEPA? How to realise SEPA? Impact of SEPA Uncertainty, concerns and benefits Migration Closing remarks


What happened before…..

Interaction public sector and banks:

1990 EC paper ´Making payments in the internal market´ 1992 EC paper ´Easier Cross Border Payments – breaking the barriers´ 1997 EC Directive cross border payments 1999 ECB ´Improving cross border retail payment services´ 1999 introduction euro 2001 Bolkestein regulation (2560/2001) 2001 ECB ´Towards an integrated infrastructure for credit transfers in euro´ 2002 introduction euro coins and banknotes 2002 start EPC 2005 EC concept Payment Services Directive 2006 EPC agreement SEPA Rulebooks and Frameworks

… 2008-2010 SEPA…and going on


What is SEPA?

Single EuroPayments Area



What is SEPA?

Political vision:The euro area will be an internal ´domestic´ market for retail payments generate scale economies and promoting competition

Concretely:European payment instruments for both cross-border and domestic payments in euro: credit transfers, direct debit and cards


Why SEPA?

European Politics Improvement European economy: Lisbon agenda

Economics Internal market: volume and competition

Banks To prevent ‘further regulation’ after Regulation

2560/2001 Especially Cross-border banks can profit from new

market circumstances


The European payment market - currently

Frankrijk

Consu-menten

Bedrij-ven Winkeliers

Bank A Bank B Bank C

Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip

Belangrijkste marktpartijen en betaalmiddelen:

Afnemers van betaaldiensten:

Aanbieders van betaaldiensten:

Verwerker van betaaltransacties:

Beheer van betaalmerken

Overige processoren

Nederland

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Italië

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Spanje

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Portugal

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Oostenrijk

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Griekenland

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Duitsland

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Finland

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Ierland

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

België

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Luxemburg

Consu-menten



Interpay

Currence:

Incasso

PIN

Acceptgiro

Chipknip






Overige processoren

Belgium

IrelandGreece

FranceAustria

Italy Luxembourg

Netherlands Germany Spain


The European payment market – future (SEPA)

Consu-mers

Companies (incl

government)

Retail


PEACH

Manager (SME)

Credit Transfer

Direct Debit

Main market participants and payment products:

Users of payment services:

Providers of payment services:

Payment transactions processor:

Management entity for payment products

ACH Bilateral

Mastercard

VISA

Euro Alliance

?


How to realise SEPA?

Self-regulation: European Payment Council of banks develops standards and products

Payment Services Directive: legal harmonisation


EPC Technical harmonisation

Two kinds of agreements in EPC:

1. About interbank processing: Credit transfer rulebook Direct debit rulebook

2. Restructuring of the market: SEPA Cards-framework (SCF) Clearing & Settlement Framework SECA


EPC Roadmap 2004-2010

Three phases

1. 2004-2006 Design and preparation (EPC)

2. 2006-2008 Implementation and organisation

3. 2008-2010 Dual period of gradual migration


SEPA Programme

Design & preparation

Implementation & deployment

Co-existence & gradual migration

Programme activities

2

Milestones

- SEPA instruments available in market - Critical mass migrated/SEPA irreversible subject to the commitment of all stakeholders

12

1

Design & specification

implementation

pilots

national migration

early adopters

programme management, planning, communication, monitoring

launch


Milestones

Credit transfer and Direct debit European Rulebooks are the basis for products of

the banks Framework for clearing and settlement Credit transfers from 28 January 2008 on Direct debit from end 2009 on

Cards SEPA Cards Framework After 2010 only SEPA-cards


Role public sector

SEPA is a project banks: self-regulation via EPC

However… European Commission

Payment Services Directives Public users are the early adopters

Eurosystem: catalyst role 5th Progress report July 2007


Legal harmonization: Payment Services Directive Content:

Proportional supervisory regime for non-bank payment service providers

Transparency requirementsRules about the relationship of the payment service provider and user


Role of NCBs

To ensure a smooth migration to SEPASelf-regulation: banks are in the leadPolicy development and monitoring in the

EurosystemMonitoring national implementationOrganizing stakeholder involvement (e.i.

Consulting group SEPA NL)Analysis, communication and planning


Trends in payments in the EU


Non SEPA Compliant instruments

9%

SEPA Credit Transfers29%

SEPA Cards36%

SEPA Direct Debits26%

Potential for SEPA compliancy NL


Impact of of SEPA

Consumers Use IBAN and BIC Use of cards in the whole SEPA area

Firms (private and public) Easier cash-management and administration Standard formats (ISO 20022 XML) Use of IBAN and BIC Centralisation of accounts and direct debits

Retailers More choise: terminal, acceptance of brands, acquiring

Banks Change of markets, new products, new systems


Hurdles!

Uncertainties: No concrete products offered! Legal framework in preparation

Concerns: User adoption of SEPA products Price development (cards!) Maintaining existing efficiencies Continuity of payments


Benefits of SEPA

Efficiency, level playing field and transparency lead to cost benefits for society in the long run

Reduction costs for average user of payment services in Europe

Comfort/User-friendliness

Innovation


Migration

Aim: a smooth migration to SEPATo organise nationallyMarket drivenSpeed can differ between countriesStakeholder involvement and communication are

important tools for success


Transition plan of the Netherlands

Objective: an orderly and efficiently change over from domestic payments to SEPA

Scope: all existing payment instruments Consequences and choices for different

stakeholders Market driven migration Identifying barriers and changes Mid 2009 evaluation of the migration and

choice about phasing out domestic instruments


Points of concern SEPA National Forum on the Payment System

Price developments Range of options open to consumers and retailers,

caterers and other regarding debit card brands User-friendliness of migration to IBAN and BIC Safety of SEPA direct debit Prolongation of direct debit contracts and mandates Standardisation in the Bank-client domain Interbank Swich support service Dispute handling Accessibility of the noncash payment system Consultation process


Fifth SEPA progress report Eurosystem July 2007 (messages)

Complete Clarity needed on all features of SEPA Direct Debit by December 2007

Further card standardisation is vital Need for one additional European Debit card scheme Co-branding can help card schemes to gain the time

needed for the development of a long-term strategy Infrastructures should comply with SEPA-compliance

criteria Security of SEPA payment instruments needs to

receive more attention Reachability is the key


Closing remarks

The first phase of SEPA (SCT) was introduced succesfully on 28 January 2008

SEPA will transform the European landscape SEPA is good and has benefits for all users! But cost come first… Implementation and transition will be planned

carefully User involvement has to be stimulated SEPA is the start for new developments: e-invoicing,

e- and m-payments etcetera

Documents

The Single Euro Payments Area