GO

In your view, which of the following initiatives will have the greatest impact on the European payments market? This poll is closed.

 

EPC Newsletter
Issue 24 - October 2014

The next generation edition

Asking whether SEPA’s mission has been accomplished, Joanna Wright of Fundtech recently observed in gtnews: “The introduction and expansion of the internet, social media, mobile communications and smart phones, and new payment providers (…) have all changed the way consumers, corporates and banks conduct business. SEPA’s mission needs to reflect this today, and change continues into the future.” (For more market feedback on possible next steps, refer to the article ‘SEPA Migration (Euro Area) Round Up: the Transition has been a Success Throughout the Region’.)

On that note, this edition of the EPC Newsletter addresses, among others, the following topics:

With migration to harmonised SEPA payment schemes in the euro area complete, the European Payments Council (EPC) resolved to adapt its current structure to further enhance governance and stakeholder involvement. EPC Chair Javier Santamaría introduces the new EPC governance model.

The European Commission will continue to play a principal role in the SEPA process going forward. We take a closer look at President Juncker’s vision for the European Union (EU) internal market and Economic and Monetary Union.

According to the Commission’s ‘Digital Agenda for Europe’, eID and electronic trust services are central building blocks of the digital single market. Our commentator provides an overview of the key provisions included with the new ‘Regulation on electronic identification and trust services for electronic transactions in the internal market’, and reflects on its possible effects for the European payments industry. 

The authors of the article ‘Tensions in Cyberspace: Competing Priorities and Legislative Initiatives in the Online Payments World’ discuss the interaction of key pieces of EU payments legislation that were recently adopted or are now in the pipeline, including the proposed revised Payment Services Directive (PSD2). They consider, in particular, aspects relevant to the security of online payments.

The European Court of Justice has recently ruled that interchange fees are permitted if they provide benefits to merchants. Concluding the regulatory round up, our guest contributor analyses the implications of the Court’s decision for interchange fees in Europe.

Last but not least, we provide an overview of the modifications to the next generations SEPA Credit Transfer and SEPA Direct Debit Rulebooks.

Please recommend the EPC Newsletter to your colleagues – a free subscription can be obtained by clicking here. The next issue will be published in January 2015.

EPC Latest News

European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder InvolvementThe new EPC governance model will become operational in the first quarter of 2015

31.10.14 By Javier Santamaría

With migration to harmonised SEPA payment schemes in the euro area complete, the European Payments Council (EPC) resolved in October 2014 to adapt its current structure to further enhance governance and stakeholder involvement. The primary objective of this process is to ensure that the EPC continues to be best equipped to perform its main task, i.e. to manage the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes, in an efficient and transparent manner. With this objective in mind, the EPC will create several new bodies responsible for managing the administration and evolution of the SCT and SDD Schemes. The EPC carries out the scheme management function subject to legal and regulatory conditions defined by the European Union (EU) authorities. In this article, EPC Chair Javier Santamaría introduces the new EPC governance model. He emphasises that the EPC remains committed to contributing to safe, reliable, efficient, convenient, economically balanced and sustainable payments, which meet the needs of payment service users and support the goals of competitiveness and innovation in an integrated European economy. Considering that the EU authorities driving the SEPA process have clarified that migration to harmonised SEPA payment schemes does not conclude this EU integration project, the adjusted EPC structure will also facilitate developing positions on behalf of EPC members, representing payment service providers, vis-à-vis the EU institutions, public authorities, international organisations, and the general public on European payment issues as well as on policies, legislation and regulations impacting payments. The new EPC governance model will become operational in the first quarter of 2015. SEPA remains a work in progress. The EPC is ready and looks forward to making the next steps in the SEPA process in close dialogue with all stakeholders.

Key Information in this Article

This article provides an overview of key features of the legal and organisational structure of the EPC and introduces new bodies to be integrated into the EPC governance model. These new bodies are highlighted in this information box.

Representation of EPC members:

  • General Assembly: represents all EPC members. The General Assembly elects the members of the EPC Board.
  • EPC Board: has the powers necessary to accomplish the purpose and mission of the EPC, except for the powers that are specifically granted to other bodies of the EPC (e.g. the General Assembly) by law or the Charter.

SEPA scheme management:

  • Scheme Participants Assembly: is composed of all payment service providers (PSPs) that have formally adhered to the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes. It regularly receives information from the Scheme Management Board and endorses the nomination of candidates for the scheme participants’ seats on the Scheme Management Board.
  • Scheme Management Board: is responsible for performing the administration and evolution of the SCT and SDD Schemes. The Scheme Management Board regularly reports to the EPC Board.
  • Compliance and Adherence Committee, Appeals Committee, and Scheme Evolution and Maintenance Working Group: support the Scheme Management Board.

Dialogue with payment service users and technology and service providers:

  • Scheme End-User Forum: dialogue with representatives of payment service users to date takes place in the EPC’s Customer Stakeholder Forum founded in 2007. This cooperation will be further enhanced and formalised with the creation of the new Scheme End-User Forum.
  • Scheme Technical Forum: to strengthen the dialogue between the EPC as the SCT and SDD scheme manager and the SEPA-compliant clearing and settlement mechanisms (CSMs), the ‘EPC Clearing and Settlement Forum’ was created in 2011. The scope of the new Scheme Technical Forum will be expanded to allow the dialogue with CSMs as well as representatives of technology and service providers.
  • The Scheme End-User Forum and Scheme Technical Forum are expected to be constituted in the course of the first half of 2015 once amended SEPA Scheme Management Internal Rules (subject to public consultation) take effect.

Independent members of scheme management bodies:

Three independent members, (including its Chair), will sit on the Scheme Management Board. The Compliance and Adherence Committee and the Appeals Committee will each include two independent members. Independent members are not employed or otherwise affiliated with a scheme participant; a PSP community represented in the EPC; other service providers or a payment services user group or user association.

The EPC launched a call for independent candidates on 16 October 2014. Applications are invited by 12 November 2014. For details, refer to the ‘related links’ underneath this article.

Read more

SEPA Credit Transfer (SCT) & SEPA Direct Debit (SDD)

SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, RespectivelyBased on feedback received during the 2014 public consultation on changes to the rulebooks, the EPC resolved to update the release schedule applicable to the next rulebooks generations

31.10.14 By Jean-Yves Jacquelin

Since the launch of the SEPA Credit Transfer (SCT) Scheme in 2008 and the SEPA Direct Debit (SDD) Schemes in 2009, the European Payments Council (EPC) has generally published updated versions of the rulebooks and associated implementation guidelines once annually in November to take effect in November of the next year. Following a three-month public consultation on possible modifications to the rulebooks carried out between 19 May and 15 August 2014, the EPC will publish the SCT Rulebook version 8.0, SDD Core Rulebook version 8.0 and SDD Business to Business (B2B) Rulebook version 6.0 and associated implementation guidelines in November 2014. These rulebook versions will then take effect in November 2015. Based on the feedback received during the 2014 public consultation, the EPC resolved to include changes related to the SDD Core Scheme standard time cycle and the use of sequence types in both SDD Schemes in a further iteration of the SDD Rulebooks, i.e. the SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0. To give stakeholders ample time to implement the main changes related to the standard time cycle and use of sequence types, the SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0 will be published together with the associated implementation guidelines already in January 2015 to take effect in November 2016. Given that the SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0 will be published already in January 2015, the EPC resolved that there will be no further scheme change cycle in 2015. In this article, Jean-Yves Jacquelin provides an overview of the modifications to the next generations SCT and SDD Rulebooks.

Key Information in this Article The evolution of the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes, as set out in the SCT and SDD Rulebooks, reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization (ISO). Modifications to be included with the next generations of the SCT and SDD Rulebooks reflect the feedback received from stakeholders during the 2014 public consultation. The release schedule for updated versions of the SCT and SDD Rulebooks is as follows: The SCT Rulebook version 8.0, SDD Core Rulebook version 8.0 and SDD Business to Business (B2B) Rulebook version 6.0 will be published in the fourth week of November 2014 to take effect on 22 November 2015. Main change to be included with the SDD Core Rulebook version 8.0 and the SDD B2B Rulebook version 6.0: the wording in section 4.1 (‘The Mandate’) in the SDD Core Rulebook version 8.0 and SDD B2B Rulebook version 6.0 will be amended to read as follows: “Alternatively, the mandate may be an electronic document which is signed using a legally binding method of signature.” An overview of other changes to be introduced with the SCT Rulebook version 8.0, SDD Core Rulebook version 8.0 and SDD B2B Rulebook version 6.0 is provided in the table (Figure 1) in this article. The SCT Rulebook version 8.0, SDD Core Rulebook version 8.0 and SDD B2B Rulebook version 6.0 will be further amended during 2015 to include updated Scheme Management Internal Rules (SMIRs). Changes to the SMIRs have no operational impact whatsoever. The SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0 will be published in January 2015 to take effect in November 2016. Main change to be included with the SDD Core Rulebook version 9.0: as of the effective date of November 2016 of the SDD Core Rulebook version 9.0, all collections presented for the first time, on a recurrent basis or as a one-off collection can be presented up to D-1 inter-bank business day (D-1). This change does not impact the creditor as the creditor can continue to use the currently applicable SDD Core collection presentation timelines after November 2016. Main change to be included with the SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0: the current requirement to use the sequence type ‘FRST’ in a first of a recurrent series of collections is no longer mandatory as of the effective date of November 2016 of the SDD Core Rulebook version 9.0 and SDD B2B Rulebook version 7.0 (i.e. a first collection can be used in the same way as a subsequent collection with the sequence type ‘RCUR’). This change does not impact the creditor side as the creditor can continue to provide the sequence type ‘FRST’ after November 2016 (no reject rule for data element ‘FRST’). (Note: there will be no further update of the SCT Rulebook in 2015, i.e. the SCT Rulebook version 8.0 to be published in November 2014 will remain effective until November 2017.) The next scheme change management cycle will roll out in 2016 / 2017: as a result of the updated release schedule for next generations of the rulebooks detailed above, there will be no further scheme change cycle in 2015. This means that the period for stakeholders to submit suggestions for additional changes to the rulebooks is open and will end on 31 December 2015. These suggestions will then be considered with regard to the rulebook versions to be published in 2016 to take effect in 2017. This article also addresses the way forward with regard to the following suggestions for changes to the rulebooks submitted with the 2014 public consultation, which were not supported by a majority of contributors to the consultation. These include:
  • The suggestion to make additional customer-to-customer information available outside the payment message providing storage location in the message was not supported.
  • The suggestion that scheme participants, i.e. payment service providers that have formally adhered to the schemes, should accept the customer-to-bank (C2B) messages based on the EPC data set described in its C2B implementation guidelines as a minimum requirement was not supported.
The European Payments Council (EPC) will address these items in further dialogue with all stakeholders going forward with a view to agree a solution satisfactory to all parties. The links to the reports detailing the outcome of the 2014 public consultation and new rulebook versions will be added with the ‘related links’ included at the end of this article once published.

Read more

SEPA Case Studies

SEPA Migration (Euro Area) Round Up: the Transition has been a Success Throughout the RegionMarket participants comment on the 1 August 2014 deadline and next steps in the SEPA process

31.10.14 By Etienne Goosse

On 1 August 2014, the European Central Bank (ECB) pointed out that with migration to SEPA Credit Transfer and SEPA Direct Debit complete, “every month more than 2 billion payments will now flow across the euro area in new standardised formats.” The ECB added: “The Eurosystem, which consists of the ECB and the national central banks of euro area Member States, has monitored the migration to and implementation of SEPA from its inception, facilitating open dialogue between all parties (banks, corporates, consumers, public authorities, governments and SMEs). This approach has contributed to the successful completion of SEPA for credit transfers and direct debits in the euro area, constituting one of the largest financial integration projects in the world.” Also on 1 August 2014, Michel Barnier, Vice-President of the European Commission concluded: “Completing the migration of payments to SEPA today is a real success.” Market participants across the euro area confirmed that the transition went very smoothly. EuroTreasurer, for example, commented: “There have been no public complaints about problems with SEPA transactions, and banks and corporate treasurers that EuroTreasurer has been in contact with did not report any difficulties due to the deadline.” In this article, Etienne Goosse provides a round up of market reactions commenting on the successful transition in the euro area and possible next steps to bring about ‘SEPA 2.0’.

Key Information in this Article This article provides details on the successful SEPA migration in the euro area including comments from market observers on possible next steps to bring about ‘SEPA 2.0’.

  • Congratulations are in order for everybody on the demand and supply sides: according to the quantitative SEPA indicators published by the European Central Bank (ECB), the share of SEPA Credit Transfer (SCT) transactions amounted to 99.4 percent in August 2014. Furthermore, the share of SEPA Direct Debit (SDD) transactions had reached 99.9 percent.
  • The positive impacts of SEPA as identified so far by early adopters on the demand side who did not stop at compliance, but focused on generating efficiencies: streamlined internal processes, reduced costs, centralised cash management and improved liquidity management, efficiency and integration of the payment business, implementation of the ISO 20022 message standards and a simplified process for the collection of direct debits.
  • The integration of the euro payments market remains a work in progress: SEPA is “more than just credit transfers and direct debits. It is also about card payments and might also cover internet and mobile payments. It will contribute to the further harmonisation of retail payments in the internal market”, Vice-President of the European Commission Michel Barnier reiterated on 1 August 2014.
Sources cited in this article are included in the ‘related links’ at the end of the article.

Read more

Legal and Regulatory Issues

The European Court of Justice Has Ruled that Interchange Fees Are Permitted if They Provide Benefits to Merchants. What are the Implications of the MasterCard Judgment for Interchange Fees in Europe?The Court leaves an unresolved question: what are the permitted multilateral interchange fee levels?

31.10.14 By Andrea De Matteis

In September 2014, the Court of Justice of the European Union (EU), commonly referenced as the European Court of Justice (ECJ), ruled on the legality of MasterCard’s multilateral interchange fees (MIFs) that applied in December 2007 to cross-border card-based transactions in the European Economic Area (EEA) (intra-EEA cross-border MIFs). This long-awaited judgment continues a saga that began 22 years ago, when MasterCard (formerly Europay) spontaneously notified the European Commission of its intra-EEA cross-border MIFs, and merchants associations (British Retail Consortium and EuroCommerce) made their first complaints. With its MasterCard judgment, the ECJ has finally ruled that MIFs may be permitted only when they produce sufficient and proven benefits for merchants. In other words, MIFs will continue to be allowed if they are set at levels that are considered beneficial for merchants. The ECJ leaves an unresolved question: what are the permitted MIF levels? The ECJ has not provided any guidance on the methodology that MasterCard and other payment schemes should follow in order to set their MIFs at levels that are permitted. The levels of 0.2 percent of the value of the transaction for debit cards and 0.3 percent for credit cards – which the European Commission proposed with its draft Regulation on interchange fees for card-based payment transactions tabled in July 2013 – are not legitimised by the ECJ nor by any comprehensive study conducted so far. Nor does the ECJ suggest that interchange fees should be regulated. Andrea De Matteis, an antitrust and e-payments lawyer, shares his views on the ECJ judgment and its implications for interchange fees in Europe. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.

Key Information in this Article The European Court of Justice (ECJ) has ruled in the MasterCard judgment that multilateral interchange fees (MIFs) may be permitted only when they produce sufficient and proven benefits for merchants. In reaching these conclusions, the ECJ considered essentially three questions:

  1. Were the intra-European Economic Area (EEA) cross-border MIFs agreed upon by competitors? The ECJ found that, in December 2007, MasterCard intra-EEA cross-border MIFs were in fact not set by MasterCard independently, but by competing undertakings (the banks) through a so-called association of undertakings (MasterCard itself).
  2. Did the intra-EEA cross-border MIFs restrict competition or were they objectively necessary for the functioning of the MasterCard scheme? The finding that MasterCard intra-EEA cross-border MIFs were in fact set by competing undertakings led the ECJ to apply the European Union (EU) competition rules on agreements between competitors and qualify the intra-EEA cross-border MIFs as restrictions of competition.
  3. Could intra-EEA cross-border MIFs be exempt from the application of the competition rules on the basis of efficiencies? The ECJ confirmed that MasterCard’s intra-EEA cross-border MIFs in force in December 2007 could not be exempt from the application of the competition rules on the basis of efficiencies.
The author points out that, in light of the ECJ ruling, MIFs will continue to be allowed if they do not exceed certain levels. The ECJ however, leaves an unresolved question: what are the permitted MIF levels? Implications with regard to the proposed new Regulation on interchange fees for card-based payment transactions (IF Regulation), introduced by the European Commission in July 2013: The draft IF Regulation proposes to cap MIFs at the levels of 0.2 percent of the value of the transaction for debit cards and 0.3 percent for credit cards. These levels are not legitimised by the ECJ nor by any comprehensive study conducted so far. Nor does the ECJ suggest that interchange fees should be regulated through legislation. This author argues that the preliminary findings, published by the Commission in February 2014, gathered with the so-called ‘merchant indifference test’ are incomplete. Consequently, at present the Commission does not possess the necessary data to identify the MIFs permitted levels under the competition rules nor those that would be permitted under any legislative intervention. This, he concludes, is a fundamental flaw in the pursuit of antitrust enforcement by the Commission and national competition authorities. It is possible, therefore, that pending the approval of the IF Regulation by the EU co-legislators, national competition authorities, regulators or judges could apply higher levels if the evidence in that particular country shows that merchants will receive sufficient benefit from such higher levels.

Read more

Legal and Regulatory Issues

Tensions in Cyberspace: Competing Priorities and Legislative Initiatives in the Online Payments WorldWill the EU legal framework aimed at ensuring secure online payments amount to a series of harmonious provisions, or result in an uneasy compromise?

31.10.14 By Dermot Turing, Simon Crown and Maria Troullinou

As consumers turn to the e-commerce market, so do online fraudsters – and the European Commission is not about to sit and watch. Among the relevant legislative initiatives, the Commission has put forward a draft Directive to ensure a high common level of network and information security across the Union (the Cyber-security Directive). Accordingly, European Union (EU) market operators, including credit institutions and critical financial services infrastructure entities, will have to abide by security requirements (including incident reporting obligations) and to ensure service continuity. Specifically, the Cyber-security Directive defines a "market operator" as "an operator of infrastructure that are essential for the maintenance of vital economic and societal activities in the fields of energy, transport, banking, financial market infrastructures, internet exchange points, food supply chain and health, and the disruption or destruction of which would have a significant impact in a Member State as a result of the failure to maintain those functions". Not all of the Cyber-security Directive provisions apply to all aspects of a "market operator's" business – some of the Article 14 obligations for example only apply to "core services" provided by market operators, which term is in turn not defined. In order to add teeth to its proposals, the Cyber-security Directive contains enforcement provisions which empower competent authorities to request market operators to provide information relating to their security measures for accessing their networks. In this article, looking at the various initiatives emanating from the EU, Dermot Turing, Simon Crown and Maria Troullinou consider and discuss their interaction and the tensions that arise.

Key Information in this Article The Cyber-security Directive is aimed at promoting online security through a combination of voluntary and regulatory measures. The issue of security of online payments is also relevant to other key pieces of payments legislation that are currently in the pipeline or were recently adopted. Tensions exist between security on the one hand and the promotion of competition, technological neutrality and access on the other. It remains to be seen whether, once all of the relevant legislative proposals have progressed through the European legislative pipeline, the end result will be a series of harmonious provisions, or whether the underlying tensions will result in an uneasy compromise.

Read more

SEPA for Cash

ATMIA and EPC Publish a Manual on Best Practices in ATM Cash Replenishment in EuropeCreating a more efficient and less costly cash handling process

31.10.14 By Leonor Machado

One crucial objective of the SEPA initiative should be to encourage a shift from cash to electronic payments. Yet, while cash accounts for a falling proportion of retail payments, it still remains the predominant payment method in Europe. This doesn’t come without its challenges, however. Studies over the years have shown that the social cost of cash remains considerable. In October 2012, the European Central Bank (ECB) released the report 'The Social and Private Costs of Retail Payment Instruments'. The objective of this study was "to enhance the general understanding of the social and private costs of different retail payment instruments from a European perspective, with the aim of helping policy-makers, banks and retailers promote efficient payments." The ECB report analyses the social and private costs of making retail payments in 13 European countries and discovers that they are substantial, amounting to around 45 billion euros. Due to the relatively high usage of cash, it accounts for nearly half of the total social costs. Taking all of the above points into consideration, it seems apt to explore ways that stakeholders can collectively create a more efficient and less costly cash handling process. With this in mind, the European Payments Council (EPC) has joined forces with the ATM Industry Association (ATMIA) to devote a manual to ‘Best Practices in ATM Cash Replenishment in Europe’ under the premise that optimising the cash cycle must involve optimising the main distribution channel for giving people access to cash, the automated teller machine (ATM). In this article, Leonor Machado seeks to introduce the main ideas and objectives of the manual which was published in October 2014.

Key Information in this Article A manual on ‘Best Practices in ATM Cash Replenishment in Europe’ has been published by the ATM Industry Association (ATMIA) and the European Payments Council (EPC) which endeavours to:
  • Highlight that professionals in the cash value chain hold a shared responsibility to continuously review processes and methods in order to ensure this payment method is provided in a cost effective manner, delivering the service to the level of quality expected by consumers.
  • Provide a useful resource for any stakeholders engaged in the debate around cash payments and their role in the wider payments landscape and touch on future considerations.
  • Produce a comprehensive and ‘best-of-breed’ overview of best practice in terms of how to manage cash through its main distribution channel, the ATM.
  • Evaluate the pros and cons of various replenishment models with a view to identifying best practice.
The manual is the result of a multi-stakeholder project involving ATMIA, the European Intelligent Cash Protection Association (EURIPCA) and the EPC. The overall goal is to enhance and reduce the costs of the ATM replenishment process and staff training. The link to the manual is included in the ‘related links’ at the end of this article.

Read more

SEPA Credit Transfer (SCT) & SEPA Direct Debit (SDD)

Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit Addressed by the New Euro Retail Payments Board (ERPB) Chaired by the European Central BankThe ERPB represents the demand and supply sides of the payments market with participation of national central banks

31.10.14 By Jean-Yves Jacquelin and Francis De Roeck

The European Payments Council (EPC) has frequently pointed out that SEPA compliance requirements that must be met by payment service users and providers are determined by the European Union (EU) institutions. These are the European Commission, the European Parliament, the Council of the EU representing EU governments and the European Central Bank (ECB). The European Commission and the ECB, respectively, have established several dedicated bodies to facilitate the dialogue on the SEPA process with market participants representing various stakeholder groups. The dialogue taking place within these bodies also addresses – and, consequently, impacts – the evolution of the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes managed by the EPC. In this article, Jean-Yves Jacquelin and Francis De Roeck offer a brief recap of the roles performed by various actors at the European level with regard to the SEPA payment schemes. They also describe work items initiated by the Euro Retail Payments Board (ERPB), chaired by the ECB, related to SCT and SDD. Created in December 2013, the ERPB will “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the EU”. Following the first meeting of the ERPB in May 2014, the ERPB working group on SCT and SDD post-migration issues and the ERPB working group on pan-European electronic mandate solutions were established. The ERPB members also discussed the principles outlined in a note prepared by a multi-stakeholder task force that had analysed the feasibility of an alternative direct debit scheme in SEPA that did not include the unconditional right to refunds. (The information in this article was previously published with the EPC Blog of 28 August 2014.)

Key Information in this Article Members of the Euro Retail Payments Board (ERPB) represent the demand and supply sides of the payments market. The European Payments Council (EPC) is a member of the ERPB. European Union (EU) national central banks also participate in the ERPB. The ERPB is chaired by the European Central Bank (ECB). The European Commission acts as an observer. ERPB working group on SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) post-migration issues The working group is planning to address the following topics, among others: varying national implementations, additional optional services (AOS) and their effect on interoperability, various barriers (related to business rules) to the cross-border use of SDD, accessibility (ability to use a single payment account in the euro area), reachability of payment service providers for SCT and SDD, the continued use of conversion services, the use and validation of creditor identifier for SDD and implementation of R-transactions. (Possible exceptions to the normal execution of a direct debit collection include refunds, returns, rejects, refusals and reversals, commonly referenced as ‘R-transactions’ and described in detail in the SDD Rulebooks.) The working group is co-chaired by the EPC and the European Association of Corporate Treasurers (EACT) / BusinessEurope. ERPB working group on pan-European electronic mandate solutions The working group is expected to put forward high level recommendations to address legal, technical or any other issues which prevent pan-European e-mandate solutions from emerging and being used. It will gather and analyse information from market participants (payment service providers and users, on both the creditor and the debtor side) for their considerations on using or not using electronic mandates both in the national and cross-border context for SDD. Following this fact-finding exercise, it will assess the issues in relation to their effect on the functioning of SEPA. The working group is co-chaired by the EPC and E-commerce Europe. Alternative SDD scheme that does not include the unconditional right to refunds The ERPB members discussed the principles outlined in a note prepared by a multi-stakeholder task force that had analysed the feasibility of an alternative direct debit scheme in SEPA that did not include the unconditional right to refunds. Although the representative of consumers stressed the importance of the unconditional right to refunds for payers, the members of the ERPB agreed that – if permitted under EU law – such a scheme could be launched provided that seven principles, (detailed in this article), outlined by the task force would be observed. Sources cited and documentation published by the ECB following the first meeting of the ERPB in May 2014 relevant to SCT and SDD are included in the ‘related links’ at the end of this article.

Read more

Focus: On Integration and Innovation

The New European Commission: a Closer Look at President Juncker´s Vision for the EU Internal Market and Economic and Monetary UnionThe European Commission will continue to play a principal role in the SEPA process going forward

31.10.14 By Etienne Goosse

The new European Commission led by President Jean-Claude Juncker takes office on 1 November 2014 for a five-year term. The right to organise the work of the European Commission is the prerogative of its President. In the Juncker Commission, there will be six Vice-Presidents in addition to the High Representative of the Union for Foreign Affairs and Security Policy. President Juncker also appointed a new First Vice President in charge of, inter alia, Better Regulation, tasked to ensure the compliance of European Union (EU) proposals “with the principles of subsidiarity and proportionality, and working with the European Parliament and the Council [of the EU] to remove unnecessary ‘red tape´ at both European and national level.” Vice-Presidents will steer and coordinate the work of project teams supported by Commissioners responsible for specific portfolios. According to information made available by the European Commission, a “Commissioner will depend on the support of a Vice-President to bring a new initiative into the Commission Work Programme or on to the College Agenda. At the same time, a Vice-President will depend on his or her project team Commissioners´ contributions to successfully complete the project assigned to him or her”. The European Commission is a principal driver of the SEPA process aimed at furthering the integration of the internal market and strengthening the Economic and Monetary Union. In this article, Etienne Goosse takes a first look at the following projects of the incoming Juncker Commission, which can be expected to impact the further integration of the euro payments market: ‘A Deeper and Fairer Economic and Monetary Union´; ‘A New Boost for Jobs, Growth and Investment´ and ‘A Connected Digital Single Market´. (This article expands on information first published with the EPC Blog of 23 October 2014.)

Key Information in this Article Details on the responsibilities of the European Commission and the process of its appointment are set out in Article 17 of the consolidated version of the Treaty on European Union. Jean-Claude Juncker, President of the new European Commission, is responsible for organising the work of the Commission, and allocating portfolios to individual Commissioners. Frans Timmermans,First Vice-President in charge of Better Regulation, Inter-institutional Relations, the Rule of Law, and the Charter of Fundamental Rights, is tasked to ensure the compliance of European Union (EU) proposals with the principles of subsidiarity and proportionality. In particular, the principle of subsidiarity determines when the EU is competent to legislate. In the new European Commission, Vice-Presidents will lead, among others, the following project teams:
  • Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, leads the project team ‘A Deeper and Fairer Economic and Monetary Union´.
  • Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness, leads the project team ‘A New Boost for Jobs, Growth and Investment´.
  • Andrus Ansip, Vice-President for the Digital Single Market, leads the project team ‘A Connected Digital Single Market´.
The following new European Commissioners, among others, will support the above mentioned project teams:
  • Elżbieta Bieńkowska, Commissioner for Internal Market, Industry, Entrepreneurship and SMEs.
  • Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
  • Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union.
  • Günther Oettinger, Commissioner for Digital Economy and Society.
  • Margrethe Vestager, Commissioner for Competition.
President Juncker stressed that “coordinating, presenting and implementing initiatives to enhance the convergence of economic, fiscal and labour market policies between the Member States that share the euro” is a principal objective of the new European Commission. The Commission will therefore, continue to play a principal role in the further integration of the euro payments market. The European Payments Council (EPC), (which is not part of the EU institutional framework), suggests that possible duplication of efforts aimed at bringing about ‘SEPA 2.0´ by the Euro Retail Payments Board chaired by the European Central Bank, the Commission and other regulatory bodies be avoided. The EPC looks forward to the continued dialogue with all stakeholders on the most appropriate next steps to ensure an efficient and secure SEPA landscape that responds to market needs.

Read more

Legal and Regulatory Issues

Next Step to Create the Digital Single Market: EU Lawmakers Adopt the New Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal MarketEuropean Union authorities seek to enhance trust in electronic transactions

31.10.14 By Gert Heynderickx

In June 2012, the European Commission published a proposal for a Regulation on electronic identification (eID) and trust services for electronic transactions in the internal market, based on the objectives identified by the Legislation Team (eIDAS) Task Force set up by the Commission. The European Union (EU) co-legislators, (i.e. the European Parliament and the Council of the EU representing EU governments), adopted the final version of the ‘Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC’ (the eIDAS Regulation) on 23 July 2014. It was published in the Official Journal of the EU on 28 August 2014 and entered into force on 17 September 2014. The eIDAS Regulation aims to enhance trust in and convenience of electronic transactions in the EU. It builds on – and replaces – the Directive 1999/93/EC of 13 December 1999 on a Community framework for electronic signatures (the eSignature Directive). According to the European Commission’s ‘Digital Agenda for Europe’, eID and electronic trust services “are key enablers for secure cross-border electronic transactions and central building blocks of the Digital Single Market”. In this article, Gert Heynderickx provides an overview of the key provisions included with the eIDAS Regulation and reflects on possible effects for the European payments industry.

Key Information in this Article Key provisions of the ‘Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC’ (the eIDAS Regulation) include:

  • The mutual recognition of electronic identification (eID) means issued in another Member State, provided that the eID scheme used for issuing means of identification has been notified to the European Commission.
  • The set-up of a European Union (EU) wide three level framework for eID assurance.
  • The introduction of three levels of electronic signatures (eSignatures), as well as other electronic trust services, including electronic seals, electronic time stamps, electronic documents, qualified electronic delivery services and website authentication. The Regulation establishes the principle that an electronic signature should not be denied legal effect on the grounds that it is in an electronic form or that it does not meet the requirements of the qualified electronic signature.
  • Security requirements apply to the providers of trust services, commensurate to the degree of risk inherent to their activity. EU Member States are also required to designate supervisory bodies for trust service providers.
It is expected that the eIDAS Regulation will generate new opportunities in the area of payments, for example by introducing different levels of eID assurance and eSignatures.

Read more

Opinion and Editorial

What Consumers and Online Retailers Want or Getting the Balance Right: Security and Simplicity in an Increasingly Mobile WorldA commentary on the complexity involved in securing electronic and mobile commerce payments

31.10.14 By Katja Lehr

Dialogue with stakeholders across SEPA frequently demonstrates that, even within specific customer segments (and among those representing their interests), there exist very different schools of thought as to which specific features should be included in a payment scheme or not. This also reflects the fact that payment service users are divided into payers and payees, (whose payment needs often differ). In this article, Katja Lehr, Director EU Core Payments Management at PayPal, illustrates the point. She offers an opinion on how to reconcile the ambition of online retailers to implement “the most efficient means of buying and selling” with adequate protection of consumers making payments in the digital world. Ms Lehr argues that SEPA Direct Debit (SDD) mandate requirements established with European Union law and included in the SDD Core Rulebook, which reflect requests from consumer organisations, would be too cumbersome for consumers and retailers active online. She also comments: “Not unrelated to the challenge of how to authorise a direct debit in a traceable but user friendly manner are the other two pain points for consumers in the electronic marketplace: the genuine consumer fear of fraud on the one hand, and the complexity involved in securing e- and m-commerce payments with multiple personal identification numbers, passcodes and procedures.” Considering a recently completed study carried out by PayPal across 15 major markets around the globe to identify consumers’ attitudes and needs towards payments, she advocates keeping it simple: “An email address or phone number, an amount, and the money is off! Behind the scenes, the best and ever evolving security technologies and customer service is available.” The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.

Key Information in this Article Fears of online fraud are the top barrier to paying via the internet or mobile device, according to a PayPal consumer study across 15 markets globally:

  • 62 percent of consumers who participated in the study recognised the need to improve security with fears of online fraud being the top barrier to paying via the internet or mobile device.
  • 45 percent of consumers worried about international purchases arriving.
  • 39 percent of consumers are annoyed by having to register before they buy.
On the authorisation of direct debits in the digital world: From a user experience perspective, the author argues, a solution which requires being re-routed from a merchant’s web-site is a substandard, slow and complicated experience, leading to drop offs of up to 50 percent. While such low conversion rates are not acceptable for merchants, such a cumbersome process is also not acceptable for consumers who are expecting a frictionless purchase experience. In addition, with the rise of mobile, which includes mobile phones but also tablets, a solution which re-routes the user to an online banking application where the usage of a paper, electronic or mobile transaction authorisation number (TAN) is needed to authorise a mandate, is not acceptable, because the usage of the same tool for receiving the m-TAN and instructing the transaction is not allowed or because the tablet application does not support online banking. The author welcomes that the Euro Retail Payments Board, chaired by the European Central Bank (ECB), has established a working group to identify and address issues representing barriers to the emergence of a pan-European integrated market for electronic mandate services used for direct debits. On consumers’ fear of the complexity involved in securing electronic and mobile commerce payments with multiple personal identification numbers, passcodes and procedures: The ECB’s desire to create a series of recommendations to the industry for the security of internet and mobile payments is a goal PayPal strongly supports with the aim of ensuring that payments are safe. Minimum standards and levels of security should be defined and applied to providers (based on a risk assessment), rather than any sort of proscriptive ‘one size fits all’ technical solution or solutions. To tap the full potential brought by e-commerce’s rapid expansion, payment providers should be encouraged to innovate especially with the proliferation of mobile technology. With the ever growing ‘marketplace in the cloud’, and with global reach, the risk of creating a ‘fortress Europe’ stifling commerce and innovation should be avoided.
 

Background Information on the SEPA Direct Debit (SDD) Mandate: A mandate is signed by the debtor (payer) to authorise the creditor (biller) to collect a payment and to instruct the debtor’s bank to pay those collections. The SDD Rulebooks released by the European Payments Council (EPC) provide the possibility to issue mandates created through the use of electronic channels – often referred to as ‘e-mandates’. The creditor-driven mandate flow: The SDD Schemes, as set out in the SDD Rulebooks released by the EPC, are based on a ‘creditor-driven mandate flow’ (CMF), where the creditor is the biller. In the CMF model, the payer completes and signs a mandate to authorise direct debit collection(s) and sends the mandate directly to the biller. The biller stores the original mandate. In some euro area countries, migration to SDD involved transitioning from a legacy national direct debit model based on the ‘debtor-driven mandate flow’ (DMF) to the CMF. In the DMF model, the payer used to send the mandate to its bank. Consumer protection under the SDD Core Scheme: Consumer organisations, the European Commission, the European Parliament and the European Central Bank have consistently requested to ensure a high level of consumer protection under the SDD Core Scheme. The mandate requirements included in the SDD Core Rulebook reflect these requests. The SDD Core Scheme goes beyond the requirements of the Payment Services Directive (PSD), by granting consumers a ‘no-questions-asked’ refund during the eight weeks following the debiting of a consumer’s account. This means that during this time, any funds collected by SDD will be credited back to the consumer’s account upon request. In the event of unauthorised direct debit collections, the consumer’s right to a refund extends to thirteen months as stipulated in the PSD. Mandate management requirements established by Regulation (EU) No 260/2012: In February 2012 the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, adopted the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation), which makes it mandatory for payer’s banks to perform certain mandate checks upon request of the debtor: Article 5 (3) d of the SEPA Regulation, states that “the payer must have the right to instruct its [payment service provider] PSP:

  • To limit a direct debit collection to a certain amount or periodicity or both.
  • Where a mandate under a payment scheme does not provide for the right to a refund, to verify each direct debit transaction, and to check whether the amount and periodicity of the submitted direct debit transaction is equal to the amount and periodicity agreed in the mandate, before debiting their payment account, based on the mandate-related information.
  • To block any direct debits to the payer’s payment account or to block any direct debits initiated by one or more specified payees or to authorise direct debits only initiated by one or more specified payees.”
For more information on SDD, refer to the ‘related links’ and ‘related articles’ in this and previous issues of the EPC Newsletter included at the end of this article.

Read more

EPC Latest News

EPC Plenary Meeting UpdateMain decisions taken in October 2014

31.10.14 By Javier Santamaría

The Plenary to date is the decision-making body of the European Payments Council (EPC). In this article, EPC Chair Javier Santamaría summarises the main items agreed by the EPC in October 2014. With migration to harmonised SEPA payment schemes in the euro area complete, the EPC resolved to adapt its current structure to further enhance governance and stakeholder involvement. The new EPC governance model will become operational in the first quarter of 2015. The EPC approved modifications to the next generations SEPA Credit Transfer and SEPA Direct Debit Rulebooks. The EPC Plenary approved the manual, entitled ‘Best Practices in ATM Cash Replenishment in Europe’, published by the ATM Industry Association (ATMIA) and the EPC. The manual is the result of a multi-stakeholder project involving ATMIA, the European Intelligent Cash Protection Association (EURIPCA) and the EPC. (The topics mentioned above are addressed in detail in dedicated articles in the October 2014 edition of the EPC Newsletter.) The Plenary also approved the EPC document ‘Guidance for SEPA Direct Debit Business to Business Scheme Mandate Confirmations’, which was subsequently published on the EPC Website.

Key Information in this Article The following main items addressed by the European Payments Council (EPC) Plenary in October 2014 summarised here are described in detail in these articles included in this edition of the EPC Newsletter (see ‘related articles in this issue’ at the end of this article):
  • ‘European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder Involvement’.
  • ‘SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively’.
  • ‘ATMIA and EPC Publish a Manual on Best Practices in ATM Cash Replenishment in Europe’.
The EPC approved the document ‘Guidance for SEPA Direct Debit Business to Business (SDD B2B) Scheme Mandate Confirmations’:
  • Observing the principles reiterated with this EPC guidance document should contribute to reducing the occurrence of R-transactions under the SDD B2B Scheme triggered in the event that the debtor bank, (the bank of the payer), does not obtain the required mandate confirmation from the debtor. (Possible exceptions to the normal execution of a direct debit collection include, for example, returns, rejects, refusals and reversals, commonly referenced as ‘R-transactions’ and described in detail in the SDD Rulebooks.) The link to the document is included at the end of this article.

Read more

Blog Posts

Read us on EPC Blog

09.12.14
Update on Work Items Addressed by the Euro Retail Payments Board (ERPB) Chaired by the European Central Bank: SEPA Credit Transfer, SEPA Direct Debit, Instant and Mobile Payments

Tweets

Follow us on Twitter

#ERPB chaired by @ecb: new ERPB WG on mobile and card-based #contactless #proximity #payments (Annex 3). #SEPA http://t.co/AX6LKKlzzE
19/12/2014
Tweets

Join us on LinkedIn