Issue 9 - January 2011
Get Ready for SEPA
Facing the Facts in January 2011The EPC Newsletter tracks the progress of SEPA migration
31.01.11 By Gerard Hartsink
Every issue of the EPC Newsletter monitors the latest available data reflecting the rate of SEPA market uptake. Marco Musto tables the facts and the figures.
KEY INFORMATION IN THIS ARTICLE
Data cited in this article represents the latest data available as of the publication date of this issue of the EPC Newsletter (31 January 2011).
As of November 2010, the share of SEPA Credit Transfer (SCT) as a percentage of the total volume of credit transfers generated by bank customers amounts to 10.4 percent (ECB SEPA Indicators).
As of November 2010, the share of SEPA Direct Debit (SDD) as a percentage of the total volume of direct debits generated by bank customers amounts to 0.08 percent (ECB SEPA Indicators).
As of the end of the third quarter of 2010, EMV compliance was 79 percent for cards, 95 percent for POS (points of sale) and 95 percent for ATMs.
As of February 2010, the SCT migration rate for the replying public administrations in the euro area was 2.73 percent (Commission’s Third Survey on Public Administrations’ Preparedness and Migration to SEPA published in October 2010).
The proposal for a Regulation establishing technical requirements for credit transfers and direct debits in euros published by the European Commission in December 2010, states, in part, that credit transfers shall be carried out in accordance with this Regulation twelve months after it comes into force; direct debits shall comply 24 months after it comes into force.
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Percentage of banks in SEPA offering SEPA Credit Transfer services
The European Payments Council (EPC) launched the SEPA Credit Transfer Scheme (SCT) in January 2008. As of January 2011, nearly 4500 banks in 32 countries offer SCT services for euro payments. The payment service providers offering SCT services today represent more than 95 percent of payment volumes in Europe. Due to mergers and acquisitions, the absolute number of SCT scheme participants has slightly decreased compared to previous Single Euro Payments Area (SEPA) market uptake reports featured in this newsletter. The EPC SCT Participant Register, which lists scheme participants (payment service providers offering SCT services), is publicly available at http://epc.cbnet.info/content/adherence_database.
Percentage of SEPA Credit Transfer transactions compared to total volume generated by customers
According to the SCT indicators compiled by the European Central Bank (ECB), the share of SCTs as a percentage of the total volume of credit transfers generated by bank customers amounts to 10.4 percent as of November 2010. The ECB SCT indicators are publicly accessible at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
A figure of 100 percent would indicate that only SEPA services are used and have fully replaced non-SEPA instruments. The SCT indicators are based on aggregated data provided by clearing and settlement infrastructures in the euro area processing SEPA transactions. This data avoids double counting by excluding, for example, SEPA transactions sent via links between infrastructures. The data also excludes "on-us" transactions (SCTs between accounts at the same bank) as well as transactions cleared between banks bilaterally or via correspondent banking. The ECB SCT indicators also show SCT market uptake by country.
Percentage of banks in SEPA offering SEPA Direct Debit services
The EPC launched the SEPA Core Direct Debit Scheme (SDD Core) and the SEPA Business to Business Direct Debit Scheme (SDD B2B) on 2 November 2009. As of January 2011, 3904 banks representing more than 80 percent of SEPA payments volume have signed up to the SDD Core Scheme. Of those, 3374 banks also adhere to the SDD B2B Scheme. The EPC Participant Registers for the SDD Core and the SDD B2B Schemes list scheme participants (payment service providers offering SDD Core and / or SDD B2B services) and are publicly available at http://epc.cbnet.info/content/adherence_database.
All branches of banks in the euro area must be reachable for cross-border direct debits; e.g. SDD Core, since 1 November 2010 as mandated by Regulation (EC) No 924/2009 (Article 8). In April 2010, the Commission services published a "Note on Application of Article 8 of Regulation (EC) No 924/2009 - Reachability for Direct Debit Transactions". This guidance note states that it is the location of the branch of a credit institution (whether it is inside or outside the euro area), and not the location of the parent company, that determines whether the reachability obligation and deadline applies. Furthermore, no distinction should be made between branches with head offices located outside the EU and those with head offices inside the EU.
Percentage of SEPA Direct Debit transactions compared to total volume generated by customers
According to the SDD indicators compiled by the ECB, the share of SDD Core as a percentage of the total volume of direct debits generated by bank customers amounts to 0.08 percent as of November 2010. The ECB SDD indicators are publicly accessible at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
The figures are based on aggregated data from several clearing and settlement infrastructures/systems located in the euro area. As such, SDD transactions which are cleared bilaterally or processed within the same institution are excluded from this indicator.
SEPA for Cards: tracking EMV roll-out
As reported in the previous issues of the EPC Newsletter, good progress is being made in the realisation of a SEPA for Cards, which aims to enable a consistent customer experience when making or accepting payments with cards throughout the euro zone. The EPC's SEPA Cards Framework (SCF) outlines high level principles and rules which will deliver this consistent experience when implemented by banks and card schemes. The SCF recognises the EMV standard for SEPA-wide acceptance of payments with cards at very high levels of security. EMV is an industry standard to implement chip and PIN security for Point of Sale (POS) card transactions. An important indicator on the progress in this area is the number of cards, POS and ATMs in the market that use chip and PIN for the authorisation of a card payment. More specifically, the percentage of EMV-compliant cards, POS and ATMs in SEPA is monitored.
According to latest findings, at the end of the third quarter of 2010, EMV compliance was 79 percent for cards, 95 percent for POS (points of sale) and 95 percent for ATMs. The progress of EMV roll-out based on these EPC findings and other relevant data on the subject are reflected by the ECB SEPA Card indicators at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
Public sector: SEPA ready?
No new or additional information has become available since reporting the following in the previous issue of the EPC Newsletter: The Commission's Third Survey on Public Administrations' Preparedness and Migration to SEPA (October 2010) analyses the situation as of end February 2010 and confirms that public administrations clearly lag behind other users in terms of preparedness and migration to SEPA. The weighted SCT migration rate for the replying public administrations in the euro area was 2.73 percent. This is significantly below the overall SCT migration rate in the euro area (6.2 percent in February 2010).
On the positive side, or so the survey concludes, it should be noted that when compared to the last survey, the SCT migration rate by public administrations has increased (from 1.5 percent in September 2009) and is expected to rise further by the end of 2010, when individual public administrations at central government or federal level in Belgium, Germany, France and Portugal plan to migrate their domestic traffic to SCT. The expected migration of a large share of payments initiated by central and local governments in France (contributing 60 million payments) and the migration of full payments traffic by the Federal Labour Agency in Germany (251 million payments), will substantially increase the public administration migration rate for SCT.
With regard to SDD migration, the results show that with the exception of Belgium and Germany, public administrations have not yet started to migrate to SDD. The weighted SDD rate for the replying public administrations in the euro area was only 0.06 percent. Although this figure is low it exceeds the overall SDD migration rate for the euro area (0.04 percent in February 2010). This figure is, however, expected to progressively increase after 1 November 2010, when the reachability obligation under Regulation (EC) No 924/2009 on cross-border payments in the European Community came into force for euro area banks. On the other hand, it must be recognised that the use of direct debits by public administrations is generally very low or even nil.
Setting a deadline for migration to SEPA
As confirmed by the findings of a study requested by the European Commission in 2007, the benefits for bank customers inherent to the SEPA harmonisation exercise are contingent upon swift migration to a single set of SEPA payment instruments, by both the demand and the supply sides1.The EPC recognises the value of setting a deadline for migration to SEPA services. An end date for phasing out legacy euro payment instruments creates awareness, ensures planning security for all market participants and confirms the commitment to making SEPA a reality. In line with expectations expressed by the EU Finance Ministers, the European Parliament and the European Central Bank, the EPC believes that end dates must be set for the phasing out of existing national euro credit transfer and euro direct debit schemes to ensure that the high costs of running multiple payment schemes in parallel can be eliminated.
In the Seventh Progress Report on SEPA published by the ECB / Eurosystem in October 2010 it is stated that the "Eurosystem expects SCT and SDD to become the credit transfer and direct debit schemes used for euro payments in the EU. After the SEPA migration end date, they will have replaced national legacy credit transfer and direct debit schemes for euro payments". The European Parliament called on the European Commission to set a "clear, appropriate and binding end date, which date should not be later than 31 December 2012, for migrating to SEPA products"2. On 2 December 2009, the Economic and Financial Affairs Council (ECOFIN - comprising the Economics and Finance Ministers of the EU Member States) considered "that establishing definitive end-dates for SDD and SCT migration would provide the clarity and the incentive needed by the market, ensuring that the substantial benefits of SEPA are rapidly achieved and that the high costs of running both legacy and SEPA products in parallel can be eliminated". At its inaugural meeting in June 2010, the SEPA Council - bringing together representatives of both the demand and supply sides including the EPC - endorsed a formal declaration stressing their "strong support for the establishment of end-date(s) for migration to SEPA Credit Transfers and SEPA Direct Debits by means of legislation at EU level".
On 16 December 2010, the European Commission published a proposal for a Regulation establishing technical requirements for credit transfers and direct debits in euros. The explanatory memorandum accompanying the proposal states that "full integration of the payment market will only be achieved once Union-wide payment instruments replace completely the national legacy instruments". The proposal clarifies that the end dates to be established for compliance with the technical requirements refer to the point in time when these requirements "need to be fulfilled by Union-wide credit transfers and direct debits". The proposal states, in part, that credit transfers shall be carried out in accordance with this Regulation twelve months after it comes into force; direct debits shall comply 24 months after it comes into force.
Gerard Hartsink is the Chair of the EPC.
Related links :
Related articles in this issue:
Related articles in previous issues:
So what's in a Name? Explaining payment schemes, instruments and systems. Clarity on payment terms is critical in the debate over the approach to setting end dates for migration to SEPA through EU Regulation (EPC Newsletter, Issue 8, October 2010)
The Quantum Leap for SEPA Direct Debit. From 1 November 2010, all banks in the euro area are reachable for SEPA Core Direct Debit (EPC Newsletter, Issue 8, October 2010)
Preparation for SEPA by Public Administrations in France. France's public administrations are among the country's leading users of cashless payment systems (EPC Newsletter, Issue 8, October 2010).
SEPA Survey 2009: Corporate Readiness on the Rise. The findings confirm that early movers have everything to gain (EPC Newsletter, Issue 5, January 2010)
1SEPA: Potential Benefits at Stake (Capgemini) available at http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=283
2European Parliament Resolutions on the Implementation of the Single Euro Payments Area: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P6-TA-2009-0139&language=EN&ring=B6-2009-0111 (March 2009) and http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2010-0057+0+DOC+XML+V0//EN (March 2010)
Other articles in this issue
31.01.11 SEPA Scheme Change Management 2011 - Call to Stakeholders - Suggestions for changes to SCT and SDD must reach the EPC by end February 2011 By Javier Santamaría 31.01.11 Update EPC Plenary Meetings - Main decisions taken in December 2010 By Gerard Hartsink 31.01.11 Your Points of View - What our readers think of the EPC Newsletter By the EPC Newsletter Editorial Board 31.01.11 Work in Progress - The EPC approves update of the SEPA Cards Standardisation Volume and a new Resolution 'Preventing Card Fraud in a Mature EMV Environment' By Ugo Bechis and Cédric Sarazin 31.01.11 Building a Single Market for e-Commerce Payments*** - The SEPA e-Payment Framework - from design via proof of concept to market By John Holsberg and Javier Santamaría 31.01.11 Happy New Year? - Post-crisis EU financial sector reform: the impact of 'Basel III' on payments By Dermot Turing 31.01.11 The King is Dead, Long Live the King - The EPC repeals the Convention for Cross-border Payments in Euros and the Interbank Charging Principles (ICP) Convention By Ruth Wandhöfer 31.01.11 Reaping the Benefits of Electronic Invoicing for Europe - A summary of the European Commission Communication issued in December 2010 By Charles Bryant 31.01.11 More Market Integration - EPC recommendations regarding proposed Regulation for the professional cross-border road transportation of euro cash By Leonor Machado 31.01.11 The Good, the Bad, the Ugly and a Knight in Shining Armour? - European Commission requests unprecedented powers to determine payment functionalities By Javier Santamaría 31.01.11 The Breakthrough for SEPA? - European Commission publishes proposal for a Regulation establishing technical requirements for credit transfers and direct debits in euros By Gerard Hartsink 31.01.11 Best of Class: the Netherlands - A case study in successful migration to SEPA By Friso Spinhoven 31.01.11 How to Migrate to SEPA - Experience in Belgium: what works and what is difficult? By Jan Vermeulen
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